Remarks by Angel Gurría
OECD, Paris - Wednesday 4 July 2018
(As prepared for delivery)
Ladies and Gentlemen,
I am delighted to launch the 35th edition of the OECD’s Employment Outlook.
This comes hot on the heels of our latest Economic Outlook, which projects economic growth in the OECD of 2.6% in 2018, and 2.5% in 2019. While not at a record high, growth appears stronger. Job gains in particular have been impressive.
Unemployment across the OECD was as low as 5.4% in the first quarter of 2018.
For the first time since 2008, there are more people with a job today than before the crisis. At the end of 2017 the employment rate was almost one percentage point above its pre-crisis level (i.e. 61.7% in Q4 2017 compared to 60.8% in Q4 2007).
More significantly, some of the strongest improvements occurred among disadvantaged groups, such as older workers, mothers with young children, youth and immigrants, cutting across all skill groups. The average gap in the employment rate of these groups compared to prime-age men was 25% in 2016, down from 29% in 2006.
This is welcome news. Yet, for most people across the OECD, this is not leading to a fatter paycheck. Wage growth is still missing in action.
At the end of 2017, nominal annual wage growth in the OECD area was 2.1% - only half of what it was just before the Great Recession, for comparable levels of unemployment. Real wage growth decreased by 1 percentage point, to 1.2%, over the same period.
So with job vacancies reaching record highs in Japan, the Euro area, the United States and Australia why aren’t wages increasing? This year’s Employment Outlook has identified three main reasons.
First, a low-inflation environment and a slowdown in productivity have contributed to stagnant wages. Inflation decreased from 2.6% before the crisis to 0.8% in the recent period, while hourly labour productivity growth slowed by more than one percentage point (from 2.3% to 1.2%).
Moreover, in contrast to previous decades, the limited productivity gains do not fully translate into wage gains. If the growth in real median wages had perfectly followed the productivity growth over the 1995 to 2013 period, real median wages would have been 13% higher.
However, this average hides different trends. Data suggests that productivity growth diverged between leading firms at the technological frontier and other firms. While in leading firms wages increased, although they still lagged behind productivity, in non-leading firms wage growth remained constrained by the very limited productivity growth.
Secondly, changing skills demand has also affected wages. Globalisation and technological change have put highly qualified individuals with high-level cognitive skills and social intelligence in high demand. These workers have benefitted from wage growth. But many workers are not equipped with such skills; for example, almost one in four adults lack even basic information-processing skills. These are the individuals who can get left behind on low wages.
Third, long-term unemployment after the crisis may have held down wage growth. The recovery has been slow and the jobs that have been created are not the same as those that disappeared during the Great Recession. Jobseekers with inadequate skills have found it difficult to find jobs matching their expectations and previous wage levels. As a result, during the early recovery period, long-term unemployment more than doubled in many countries.
The Employment Outlook shows that in 2016, only a minority of jobseekers received unemployment benefits, fewer than one in three on average across OECD countries. This lack of coverage relates to wage growth because jobseekers may accept jobs not matching their expectations in terms of hours worked, or, especially, wage levels when nearing the exhaustion of their benefit rights.
At the same time, there has been a rise in involuntary low-pay part-time employment in a number of OECD countries, which has also contributed to wage stagnation.
So where do we go from here?
Some of these trends were in progress well before the crisis, driven by technological and demographic change and globalisation. Bringing jobs back to the economy was the priority for the recovery, but now it’s imperative to address these structural challenges. Without policy action, we may be headed towards a future of wageless growth.
Building on our Inclusive Growth work, as well as the new OECD Jobs Strategy, Future of Work and Going Digital projects, the Employment Outlook recommends the following priorities for policy action.
First, we must build the right skills to reduce the risk of people becoming trapped in low-wage, low-quality jobs or in joblessness. We need to put in place an effective system for lifelong learning; one that offers opportunities also to the low-skilled who are the most at risk from automation. Recent OECD research has shown that about 14% of jobs in OECD countries are highly automatable and another 32% face substantial change in how they are carried out.
Yet, across the OECD countries, low-skilled adults are about a third as likely as the high-skilled to receive training. We also need to improve systems to assess and anticipate skill demand and supply as highlighted in our new Framework for Policy Action on Inclusive Growth.
Second we need to develop national activation strategies that specifically address the needs of workers who lose their jobs to economic change. These strategies should focus on prevention, provide early support to workers and help them make an efficient and effective transition to the best possible job, including in terms of pay.
Lastly, social partners are a key element of the solution. The pay and working conditions of 1 in 3 workers in the OECD are governed by a collective agreement. The Employment Outlook shows that co-ordinated collective bargaining systems, with strong and self-regulated social partners and effective mediation bodies, contribute to better employment outcomes. They can also help with the implementation of training and activation strategies.
Ladies and Gentlemen,
The French writer George Sand once wrote that “work is not man's punishment. It is his reward and his strength and his pleasure.” We hope that this Employment Outlook can help governments empower workers with opportunities and quality jobs. Prompt policy action is needed to ensure that everyone is able to feel the benefits of renewed economic growth. The OECD stands ready to help . Thank you.