OECD: Job market recovering but wage growth remains weak

Angel Gurria
Angel Gurría, OECD

Labour markets are continuing to recover from the crisis and employment is set to return to pre-crisis levels in 2017, but wage growth remains weak, according to a new OECD report.

The OECD Employment Outlook 2016 shows that with the global economy stuck in a low‑growth trap, better skills use and further structural reforms are needed to boost productivity, support job creation, improve job satisfaction and raise living standards.

“The job of healing the employment market is only half done: back at work, but out of pocket” said OECD Secretary-General Angel Gurría, launching the report in Paris ahead of next week’s meeting of G20 Labour and Employment Ministers in Beijing, China. “Comprehensive and ambitious policy action is needed to kick start labour productivity growth, raise wages, and reduce rising job market inequalities.” (read the full speech)


The proportion of people aged 15 to 74 in work in OECD countries will be 61% by the end of next year, slightly above the level recorded at the end of 2007. In some OECD countries, notably Chile, Germany, and Turkey, employment rates already exceed pre-crisis levels, while the jobs gap with the end of 2007 remains large in some European countries, notably Greece, Ireland and Spain (at 9, 7.9 and 8.5 percentage points, respectively).



Wage growth remains subdued in many countries. Productivity growth has stagnated over the past years and many of the workers who lost their jobs in manufacturing and construction during the crisis have regained employment in the services sector in jobs that often do not match their skills and are lower-paid.


Real wages fell sharply during the crisis in Greece, Ireland, Japan, Portugal, Spain, and the Baltic States. Comparing real wage growth during 2000-07 with 2008-15, a number of other countries, including the Czech Republic, Estonia, Latvia, and the United Kingdom, experienced a sharp deceleration. By 2015, real hourly wages in these countries were more than 25% below where they would have been if wage growth had continued at the rate observed during 2000-07. This wage gap exceeded 20% in Greece, Hungary, and Ireland.


Job quality, and in particular the situation of certain groups, is also a source of concern. For instance, in the OECD the rate of young people neither in employment nor in education ─ so-called NEETs ─ was still higher in 2015 (15%) than in 2007 (13.5%), with significant increases in several countries. Gender gaps in the labour market also persist, and female workers continue to have worse jobs than men.


While unemployment in the OECD will ease to 6.1% by the end of 2017, 39 million people will remain out of work ─ 6.3 million more than before the crisis. Around one in three unemployed people have been out of work for 12 months or more, a rise of 54.6% since the end of 2007. More than half of this group has been out of work for two years or longer, increasing the risk they will drop out of the labour force.


An adequate skills policy has an important role to play in reducing inequalities in the labour market and boosting productivity and wages. While expanding education and training programmes and improving their quality is critical, the Outlook shows that it is equally important to improve the recognition and use of skills at work: among equally educated and skilled workers, those who use their skills at work are more productive and earn higher wages.


Boosting productivity, wages and job creation also requires further structural reforms to product and labour markets. The Outlook finds that potential short-term labour market costs from structural reforms can be minimised, if not eliminated, by implementing reforms during economic upswings ─ complemented by more effective unemployment benefits ─ when firms are more able to adapt wages and working conditions. Given most countries are on a recovery path, albeit weak, the Outlook concludes that the time is ripe for structural reforms.


Country findings are available for Australia, Canada, France, Germany, Italy, Japan, Korea, Mexico, Spain, Turkey, the United Kingdom and the United States.





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