Tags: OECD | Unemployment | US | Growth

OECD Sees Income Disparities, Long-Term Unemployment as Risks to U.S. Growth

By    |   Wednesday, 27 June 2012 08:38 AM

The U.S. economy will probably grow moderately this year, but will be held back by high income inequality, sluggish wage growth and long-term unemployment, the Organization for Economic Cooperation and Development says in a report.

The U.S. economic outlook could be threatened by a deterioration of the European debt crisis or failure to avert the so-called fiscal cliff of spending cuts and tax increases set to take effect early next year, said the report issued by the Paris-based group of advanced economies.

OECD officials warned that U.S. policy makers should move to solve structural problems impeding growth and shouldn’t be distracted by the immediate risks, The Wall Street Journal reported.

Editor's Note: Sept. 18 Cover-Up Is a Final Turning for America

"Worry about Europe, but fix America’s problems,’’ OECD Deputy Secretary-General Richard Boucher told a press conference Tuesday, the Journal said.

The report showed the U.S. compared poorly against other OECD nations at the end of the last decade, particularly in measures of income inequality.

Only Turkey, Mexico and Chile had higher income inequality than the U.S. among the 34 member nations of the OECD, the Journal reported.

The U.S. also had the fourth highest relative poverty rate, or the share of individuals with income less than half the median income of the entire population after taxes and transfer payments, the report said.

The OECD warned that long-term unemployment for many out-of-work Americans may translate into higher structural unemployment, Reuters reported. About 43 percent of the 12.7 million unemployed Americans have been unemployed for more than six months.

The unemployment rate has held above 8 percent for more than two years, the longest such stretch since the Great Depression.

The OECD urged more job-training programs to avoid the risk of long-term unemployment translating into higher structural joblessness, Reuters reported.

The OECD estimates structural unemployment in the U.S. at 6.1 percent, up from the roughly 5 percent level most economists viewed as natural unemployment before the 2007-2009 recession, according to the report.

The OECD also said many out-of-work Americans had stopped looking for work because of eased eligibility requirements for disability benefits, Reuters reported. The OECD said the share of people age 20 to 64 enrolled in disability programs rose to 6.6 percent in 2010 from 6.1 percent in 2007.

"Efforts are needed to reduce the reliance on disability benefits because few of the recipients ever return to the work force," the OECD said.

Editor's Note: Sept. 18 Cover-Up Is a Final Turning for America

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