OECD employment recovers amidst slow global economy

13 Jul '23

3 min read

Pic: Shutterstock/Anel Alijagic

Insights

OECD job markets remain resilient despite economic slowdown, with employment recovering since the pandemic and unemployment at a record low of 4.8 per cent.
However, real wages have dropped in most OECD countries due to inflation.
The OECD predicts an AI revolution that could affect labour markets, noting high-skill jobs are least at risk of automation.

The Organisation for Economic Co-operation and Development (OECD) job markets remain tight even though the global economy has slowed substantially since 2021. Employment has fully recovered since the COVID-19 crisis and unemployment is at its lowest level since the early 1970s. While nominal hourly wages have risen, to date they have not kept up with inflation, leading to a drop in real wages in almost all OECD countries.

OECD-wide employment is projected to keep expanding in 2023 and 2024. In May 2023, the OECD unemployment rate remained at its record low of 4.8 per cent for the third consecutive month. The unemployment rate was stable compared with April 2023 in 14 OECD countries including France, Germany, and Japan, while it declined in 13 including Austria, Colombia, Greece, Italy, and Norway. However, it rose in five OECD countries including Canada and the US, according to the OECD Employment Outlook 2023.

The OECD-wide unemployment rate is expected to increase slightly to 5.2 per cent by the fourth quarter of 2024, though with relatively larger rises of around 0.75 percentage point or more expected in Australia, New Zealand, the UK, and the US.

Real hourly wages have fallen in many industries and OECD countries, and the cost of living has risen. In the first quarter of 2023, despite the pick-up in nominal wages, real annual wage growth was negative in 30 of the 34 countries with available data, with an average decline of 3.8 per cent.

Analysis indicated that profits have often risen more than labour compensation. Evidence suggested there is some room for profits to absorb further wage adjustments to recover some of the losses in purchasing power gradually without generating significant price pressures or resulting in a fall in labour demand.

The loss of purchasing power is particularly challenging for workers in low-income households. To support low-paid workers, minimum wages and collective bargaining can help mitigate losses in purchasing power. Governments can also provide targeted support through the tax and benefit system to raise low-income households’ net income. Broad fiscal support should be unwound given the decline in energy prices from their 2022 peaks.

This year’s Outlook edition also analysed the impact of artificial intelligence (AI) on the labour market. While firms’ adoption of AI is still relatively low, rapid progress in the technology, falling costs, and the increasing availability of workers with AI skills suggest that OECD countries may be on the brink of an AI revolution.

“Labour markets have shown remarkable resilience over the past year and remain tight, though high inflation and the rising cost of living have eroded real incomes,” said OECD secretary-general Mathias Cormann. “The recent acceleration of generative AI-related developments and tools marks a technological watershed with material implications in many workplaces. There is a real need to consider longer term policy frameworks on the use of AI in the workplace and to continue to foster international cooperation to maximise the benefits while appropriately managing the downside risks.”

Taking the effect of AI into account, occupations classified to be at the highest risk of automation account for about 27 per cent of employment. High-skill occupations, despite being more exposed to recent progress in AI, are still at least risk of automation.

Fibre2Fashion News Desk (NB)

More Textiles News - Global...