Firms Across OECD Nations Face Unprecedented Labor Shortages
- Though labor markets in the countries belonging to the Organisation for Economic Cooperation and Development (OECD) strongly bounced back from the COVID-19 pandemic, the global employment outlook is now highly uncertain, according to the OECD Employment Outlook 2022. Companies across the OECD are confronted with unprecedented labor shortages.
- Russia’s war of aggression against Ukraine has caused lower global growth and higher inflation, with negative impacts on business investment and private consumption.
- While labor markets remain tight in most OECD countries, lower global growth means employment growth is also likely to slow, while major hikes in energy and commodity prices are generating a cost of living crisis, the report said.
- Since the low point of the pandemic in April 2020, OECD countries have created about 66 million jobs, 9 million more than those destroyed in a few months at the onset of the pandemic.
- The OECD unemployment rate stabilized at 4.9 percent 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 workers in the OECD continued to fall in July and reached 33 million, 2.4 million less than before the pandemic, an OECD press release said citing the report.
- The unemployment rate in July was higher than before the pandemic in a fifth of the OECD countries. In a number of these, labor force participation and employment rates are also still below pre-crisis levels.
- Moreover, employment is growing more strongly in high-pay service industries, while it remains below pre-pandemic levels in many low-pay, contact-intensive industries.
- In the European Union, almost three in ten manufacturing and service firms reported production constraints in the second quarter of 2022 due to a lack of labor.
- Nominal wages are not keeping pace with the rapid rise in inflation. The real value of wages is expected to decline throughout 2022, as inflation is projected to remain high and generally well above the level expected at the time of relevant collective agreements for 2022. The cost of living crisis is affecting lower-income households disproportionally, the report noted.
- In these circumstances, supporting real wages for low-paid workers is essential, according to the report. Governments should consider ways to adjust statutory minimum wages to maintain effective purchasing power for low-paid workers.
- Targeted, means-tested, and temporary social transfers to people most affected by energy and food price hikes would also help support the living standards of the most vulnerable, it added.