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A new report published by the Organisation for Economic Co-operation and Development (OECD), shows that it is necessary for governments to reform employment laws in order to reduce the difference between workers on permanent contracts and those on temporary contracts.
Pier Carlo Padoan, the OECD's Chief Economist and Deputy Secretary-General, said "we need to look at the gap in job protection between permanent and temporary contracts, and our general recommendation is that the gap should be reduced."
In countries such as France, Italy and Spain, where there is a high level of job protection for workers on permanent contracts, workers on temporary contracts are the first to become unemployed when there is an economic slowdown.
According to Padoan, restrictive labour laws could also act as a disincentive to employers and prevent them from taking on new workers when the economy starts to grow again.
He said "we know that two-tier systems have generated high unemployment turnover and insecurity again concentrated in some segments: young people and women."
Padoan explained that targeted measures could be used to encourage the employment of specific groups, such as younger workers. These could take the form of fiscal incentives for employers, or a reduced minimum wage for those below a certain age.
Responding to the report, a European Commission spokesperson told specialist publication EurActiv that the EU executive fully supports the OECD's analysis.
Cristina Arigho, the Commission's Spokesperson for Employment, Social Affairs and Inclusion, commented "unemployment is the EU's number one problem in terms of the economic and social challenges currently facing us."
"The need to tackle youth unemployment is especially pressing. The younger generation has been hardest hit by the crisis with youth unemployment rocketing to over 40% in some countries."
"Addressing imbalances and segmentation in labour markets, in particular reducing the gaps between permanent and temporary contracts, will be an important factor in bringing youngsters into work."
"This is vital if the EU is to reach its employment target of 75% by 2020."
The European Confederation of Private Employment Services (Eurociett) claims that the countries with more flexible labour markets, such as Denmark, Germany and The Netherlands, have proven themselves to be more resilient during the crisis and are now recovering more quickly, also in terms of job creation.
According to Eurociett, private employment services have played a valuable role in enabling these countries to adjust their labour markets to economic fluctuations and helping to keep unemployment rates lower than in other comparable countries.
Denis Pennel, Managing Director of Eurociett, said "a variety of contracts is necessary to meet the needs of workers and employers and to ensure effective matching. Promoting only the open-ended contract only leads to lower participation in the labour market and to high levels of unemployment."
To read the full report please click here