Remarks by Angel Gurría,
7 July 2016
(As prepared for delivery)
Ladies and Gentlemen:
I am pleased to launch the OECD’s 2016 Employment Outlook, the 34th edition in our annual series.
Let me start with some good news. Labour market conditions are improving in OECD countries! In the fourth quarter of 2015, the employment rate was 0.6 percentage points below its pre-crisis rate, representing a deficit of 5.6 million jobs. This deficit is projected to narrow further this year, and close completely in 2017. We’re on the right track!
But ─ as always ─ we need to dig a bit deeper to see the full picture.
First, the recovery has been uneven: for example, while employment rates already exceed pre-crisis levels in Chile, Germany, and Turkey, the jobs deficit remains large in Greece, Ireland, and Spain. Among the unemployed in OECD countries, one third have been out of work for a year or more.
Second, certain groups ─ including low-skilled youth neither in employment nor in education or training (the so-called “NEETs”) ─ risk being left behind. In 2015, 15% of 15-29 year-olds in the OECD area were NEETs, up from 13.5% just before the global crisis in 2007. Over the same period, the NEET rate has increased in nearly three quarters of the 33 OECD countries for which data are available, with significant increases in Greece, Ireland, Italy, and Spain. Gender gaps in the labour market persist, and are particularly pronounced in emerging economies. The Outlook shows that while the proportion of jobs held by women has increased, female workers continue to have worse jobs than men!
Third, wage growth remains subdued. After the crisis, wages fell sharply in the hardest-hit countries such as Greece, Ireland, Portugal, Spain, and the Baltic States. But, in fact, wages stagnated or barely grew almost everywhere. If we compare real wage growth during 2000-07 with that during 2008-15, we observe a sharp deceleration in several countries, including the Czech Republic, Estonia, Greece, Hungary, Ireland, and the United Kingdom. By 2015, real hourly wages in these countries were more than 20% below where they would have been had wage growth continued at the rate observed during 2000-07. Many workers are out of pocket!
Finally, most people don’t feel that they are doing as well as they were before the crisis. They worry about unstable employment and poor job quality. They are losing their trust in politicians’ ability to act in their best interests. These feelings feed populist sentiments that are sweeping across many countries and undermining our progress towards more inclusive, liberal, and open societies and economies. And this is a cost that we simply cannot afford to bear.
The 2016 edition of the OECD Employment Outlook identifies concrete policy actions that can make labour markets more dynamic and inclusive while promoting productivity, even in the face of persistent economic headwinds.
Skills policy has a particularly important role to play in boosting wages and productivity. In the past, we have prioritised building the right skills. The Outlook shows that we must shift our focus to ensure skills are effectively recognised and used at work, looking at both firm‑level factors ─ such as work organisation and management practices ─ and external factors ─ including the institutional settings of labour markets, and broader structural trends such as globalisation, technological change, and ageing. Workers who make better use of their talents on the job are more productive, earn higher wages, and have greater job satisfaction.
There are large cross-country differences in effective on-the-job skill use. For example, Japanese workers have better literacy skills than their US counterparts, but use their reading skills significantly less at work. The benefits of strengthening skill use are clear. If Japan raised skill use to the US level, each Japanese worker would earn 680 US dollars more per year. If Italy lifted skill use to Australia’s level, Italian workers would earn 2,000 US dollars more per year.
Alongside measures to boost skills use, we also need to step up our structural reform efforts. I know these reforms are difficult and many worry about their short-term distributional effects, as shown by public opposition to recent labour market reforms in France. But the Outlook shows that well-designed labour market reforms ─ implemented during economic upswings and complemented by measures to support both jobseekers and promote internal adaptability of firms ─ can have positive effects not only in the long-term but actually also in the short-term. For example, Italy has created over 250,000 jobs since the adoption of the Jobs Act in early 2015 ─ substantially higher than one would have expected given the pace of its recovery.
Ladies and Gentlemen:
Investing in skills and implementing structural reforms must be at the top of the action lists of today’s leaders. We need more jobs. But we also need higher wages, and better jobs ─ those that give workers dignity and status. We have recently seen the consequences of people feeling that they have too little stake in the economies in which they work. They vote for change ─ any change, even if it seems improbable that they can benefit economically.
More inclusive labour markets are the first step in reconnecting the benefits of our economic model with those who work in it. The 2016 Employment Outlook demonstrates that we have the tools to break down labour market duality and give people the opportunities they need to use their talents and be rewarded for them. We will all be better off if we deploy these tools wisely.