OECD labor markets have rebounded strongly from the COVID-19 pandemic, but the global job outlook is now highly uncertain according to a new OECD report.
Russia’s war of aggression against Ukraine has led to lower global growth and higher inflation, with negative effects on business investment and private consumption.
The OECD Employment Outlook 2022 indicates that while labor markets remain tight in most OECD countries, weaker global growth means that job growth is also expected to slow, while d he significant rises in energy and commodity prices are generating a cost of living crisis.
Since the low point of the pandemic in April 2020, OECD countries have created around 66 million jobs, 9 million more than those destroyed in a few months at the start of the pandemic. The OECD unemployment rate stabilized at 4.9% in July 2022, 0.4 points below its pre-pandemic level recorded in February 2020 and at its lowest level since the start of the series in 2001.
The number of unemployed in the OECD continued to decline in July and reached 33.0 million, down 2.4 million from before the pandemic.
However, looking at individual countries, the unemployment rate in July remained higher than before the pandemic in a fifth of OECD countries. In a number of countries, activity and employment rates are also still below pre-crisis levels. Moreover, employment is growing most strongly in high-paying service industries, while it remains below pre-pandemic levels in many low-paying, contact-intensive industries.
“Rising food and energy prices are weighing heavily, especially on low-income households,” said OECD Secretary-General Mathias Cormann. “Despite widespread labor shortages, real wage growth is not keeping pace with current high rates of inflation. In this context, governments should consider well-targeted, means-tested and temporary support measures. This would help cushion the impact on households and businesses that need it most, while limiting the impacts on inflation and the fiscal cost of this policy support,” he said.
Tight labor market conditions mean that businesses across the OECD face unprecedented labor shortages. In the European Union, nearly three in ten manufacturing and service companies reported production constraints in the second quarter of 2022 due to a lack of manpower.
Nominal wages are not keeping pace with rapidly rising inflation. The real value of wages is expected to decline over the course of 2022 as inflation is expected to remain high and generally well above the level expected at the time of the relevant collective bargaining agreements for 2022. The cost of living crisis is affecting low income households significantly. disproportionate. They have to spend a significantly larger share of their income on energy and food than other groups and have also been the lagging segment of the population in the job recovery from the COVID-19 pandemic. .
In these circumstances, it is essential, according to the report, to support the real wages of low-paid workers. Governments should consider ways to adjust statutory minimum wages to maintain the effective purchasing power of low-wage workers. Targeted, means-tested and temporary social transfers to those most affected by energy and food price increases would also help support the living standards of the most vulnerable.
In the current circumstances, active discussions between governments, workers and companies on wages will also be essential. None of them alone can absorb all of the costs associated with rising energy and commodity prices. This requires giving a new impetus to collective bargaining and rebalancing the bargaining power between employers and workers, allowing workers to negotiate their wages on an equal footing.
Countries should step up their efforts to reconnect low-skilled and other vulnerable groups to available jobs. About two-thirds of OECD countries have increased their budget for public employment services since the beginning of the COVID 19 crisis. However, more funding is not enough: employment and training services must be integrated, comprehensive and effective in reaching employers and job seekers.
Improving the quality of frontline jobs should be an urgent priority for governments. More than half of OECD countries have implemented one-off rewards to compensate workers in the long-term care sector for the extra work during the pandemic. Yet less than 30% of countries have continuously increased wages.