Labour and Employment Ministerial Meeting

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The state of play...

Seizing the moment to build a more inclusive labour market

Sixteen months after the outbreak of a global health crisis which caused a massive shock to economies and societies, the future of labour markets remains uncertain. Many countries are accelerating their pace of vaccination, but there remain significant downside risks, including the spread of new variants of the COVID-19 virus. Many OECD countries will not re-gain their pre-COVID GDP level before 2022, and for emerging and developing countries this target is further down the road. As of July 2021, the labour market shock has not been re-absorbed in the OECD area: despite the gradual recovery there are still over 8 million more unemployed than before the crisis, and 14 million more inactive. According to current projections, the OECD area will not be able to regain its pre-pandemic employment levels by the end of 2022

The toll of the crisis has not been equally spread 

The COVID-19 crisis has further deepened socio-economic divides in OECD labour markets and societies. Some sectors – including accommodation, food services, arts – bore the brunt of the confinement measures. In low-paying occupations, one in ten jobs were destroyed across the OECD as the COVID-19 crisis hit, while in high-pay occupations the shock was largely absorbed through reductions in working time, supported by generous job retention schemes, or by switching to teleworking. At the peak of the crisis, half of workers in the top earnings bracket were able to work from home, compared to only 29% among the low-paid workers. Workers on non-standard contracts and youth have been hit hard by job and earnings losses and were often weakly covered by earnings replacement benefits and job retention support. 

Reversing increasing inequalities will be a challenge for governments 

The crisis accelerated the digital transformation of labour markets, which even before the crisis was biased towards those with higher skills and in ICT-related occupations. During the crisis, hiring in occupations involving routine and physical abilities, which were already losing ground before the crisis, plummeted. By contrast, occupations involving cognitive and digital skills that were projected to expand resisted the downturn in hiring better. Ageing of the working population may hinder the speed of job reallocation towards growing sectors and firms, since such reallocation often require both occupational and geographical mobility, as well as the acquisition of new skills. In short, the COVID-19 crisis risks further amplifying the longstanding trend towards increasing economic inequalities in many OECD countries. Failing to address inequality and exclusion now could result in deeper social divisions and have negative ramifications for productivity and the recovery itself. There is a real risk that the crisis will entrench inequality and exclusion; unless governments put jobs at the heart of the recovery. 

Taking up the challenge: bold job policies needed to avoid locking in inequality and exclusion 

Governments in most OECD countries and beyond have announced unprecedented plans for the recovery from the crisis. This will provide a once-in-a-lifetime opportunity to address the long-standing structural challenges that have been exacerbated by the COVID-19 crisis, and to prepare labour markets to withstand other future shocks, including pandemics, but also shocks linked to climate change. In previous recoveries, most countries rather quickly tightened the belt of public finances. This time, an unprecedented amount of resources will be made available in the next 5 to 10 years. Now is the time to think big and seize this unique opportunities to build more inclusive labour markets. 

Read more about the labour market situation in the 2021 Employment Outlook.