Employment rises in OECD countries, but not wages

Organization for Economic Co-operation and Development (OECD) countries are recording an increase in employment rates and a decrease in the proportion of the economically inactive population, which indicates the recovery of national labor markets after the coronavirus pandemic, despite the macroeconomic shocks of 2022. At the same time, the level of wages, although increased in nominal terms, is declining in real terms due to high inflation. In addition, the indicator of hours worked in the countries of the organization has not yet reached the pre-pandemic value, which may indicate “structural changes” in employment.

In the first five months of this year, a number of labor market indicators in OECD countries showed positive dynamics, including the number of employees, the proportion of the economically inactive population and the unemployment rate. However, the increase in nominal wages cannot yet overtake inflation, follows from the report of the organization’s analysts.

Thus, according to their data, the employment rate in the OECD countries continued its growth after a pause during the second half of 2022, caused by a slowdown in GDP growth, and now exceeds the pre-pandemic indicator (December 2019 is taken as 100%) by 3%. At the same time, the authors of the report note, far from always those countries where the largest drop in this indicator was recorded during the pandemic are now showing the maximum growth. Thus, among the key economies, Mexico and the United States faced this in 2020, but now Australia is the leader in the growth in employment, which was much less affected by the pandemic. The recovery in the gender-adjusted employment rate turned out to be symmetrical – during the pandemic, women lost their jobs more often than men, but now their employment rate is 1 percentage point (p.p.) higher than that of men.

The share of the economically inactive (not working or studying), who could have been part of the labor force, whose increase due to the pandemic threatened, according to a number of forecasts, to become permanent, nevertheless fell to pre-pandemic levels in most countries of the region (31 countries). This indicator showed a similar trend only in Colombia, Costa Rica and Latvia (on average, 1 p.p. above the pre-pandemic level). Again, contrary to expectations, the proportion of the inactive population decreased faster in older ages than among young people (by 2.5 p.p. and 0.6 p.p., respectively), which allows, as analysts note, to abandon the hypothesis of “ pushing the elderly into retirement. At the same time, hours worked in most OECD countries are still below pre-pandemic levels, suggesting, according to the authors of the report, “structural changes in national labor markets” associated with automation or robotization of workplaces. However, they stipulate that the difference between these levels is not so great – in the first quarter of 2023, the indicator was equal to the pre-pandemic or below it within 2% in 22 out of 30 countries that collect such statistics.

It should be noted that the dynamics of labor market indicators, including the unemployment rate, which amounted to 4.8% in May this year, turned out to be slightly better than the OECD labor market forecast, which was given by the International Labor Organization in January 2022. According to its analysts, only because of the ongoing coronavirus pandemic, employment and the number of working hours should have been restored to pre-pandemic levels no earlier than mid-2023 (for more details, see Kommersant of January 19, 2022). However, according to the OECD data, this happened a little earlier, even despite the macroeconomic instability in 2022 due to the conflict in Ukraine and Western sanctions against the Russian Federation. At the same time, as the authors of the OECD report note, despite the recovery of the main employment indicators, the situation with the level of wages in the countries of the region does not look so positive. In the first quarter of this year, the level of real wages in most of them fell by 3.8%, as the increase in inflation outpaced the rate of increase in nominal terms (5.2%).

Anastasia Manuylova