The latest report from the Organisation for Economic Cooperation and Development (OECD) reveals that job markets within its member countries remain highly competitive, despite a substantial slowdown in the global economy since 2021.
The OECD Employment Outlook 2023 indicates that employment rates have fully recovered since the COVID-19 crisis, reaching their highest levels since the early 1970s. However, the report also highlights a concerning trend of real wages dropping in nearly all OECD countries, as nominal hourly wages fail to keep pace with inflation.
According to the OECD, employment is projected to continue expanding throughout 2023 and 2024 across its member nations.
As of May 2023, the unemployment rate has remained at a record low of 4.8 percent for three consecutive months. Stability in the unemployment rate was observed in 14 countries, including France, Germany, and Japan, while it declined in 13 other countries such as Austria, Colombia, Greece, Italy, and Norway. However, five OECD countries, including Canada and the United States, experienced an increase in unemployment.
How does the future look?
Looking ahead, the OECD predicts a slight rise in the unemployment rate to 5.2 percent by the fourth quarter of 2024. Larger increases, around 0.75 percentage points or more, are expected in Australia, New Zealand, the United Kingdom, and the United States.
The report also highlights the decline in real hourly wages across various industries and OECD member countries, coupled with rising living costs. In the first quarter of 2023, despite an increase in nominal wages, real annual wage growth turned negative in 30 out of the 34 countries with available data, with an average decline of 3.8 percent.
Analysis within the Outlook indicates that corporate profits have often outpaced labor compensation. The report suggests that there is room for companies to adjust profits to recover some of the losses in purchasing power without generating significant price pressures or leading to a decline in labor demand.
The erosion of purchasing power poses a significant challenge for workers in low-income households. To address this issue, the OECD recommends the implementation of measures such as minimum wage adjustments, collective bargaining, targeted support through tax and benefit systems, and the gradual unwinding of broad fiscal support due to the decline in energy prices.
What role can AI play?
Furthermore, the OECD Employment Outlook 2023 examines the impact of artificial intelligence (AI) on the labor market. While the adoption of AI by firms is still relatively low, the report suggests that OECD countries may be on the cusp of an AI revolution due to rapid technological progress, falling costs, and the increasing availability of workers with AI skills.
OECD Secretary-General Mathias Cormann emphasized the resilience of labor markets over the past year but acknowledged that high inflation and the rising cost of living have diminished real incomes. He stressed the need to consider long-term policy frameworks for AI in the workplace and promote international cooperation to maximise benefits while managing potential risks.
The risks of AI
The report also addresses the potential automation risks associated with AI. Occupations classified as having the highest risk of automation currently account for approximately 27 percent of employment. While high-skill occupations are more exposed to recent AI advancements, they are considered to be at lower risk. Conversely, low and middle skilled jobs, including those in construction, farming, fishing, forestry, production, and transportation, face the greatest risk.
The Outlook presents the findings of a cross-country survey examining the impact of AI in the labor market. The survey, which involved workers and companies in finance and manufacturing across seven OECD countries, reveals limited evidence of negative employment effects among firms that adopt AI. In fact, workers and employers report that AI can reduce tedious and dangerous tasks, leading to increased worker engagement and improved physical safety. However, the survey also highlights concerns among workers about job losses and decreasing wages due to AI, as well as increased work pace and privacy issues.
The OECD emphasizes the need for training programs to equip workers with new skills demanded by rapid AI development and adoption. Governments are urged to encourage employers to provide more training opportunities, integrate AI skills into education systems, and promote diversity within the AI workforce.
Additionally, the report calls for urgent policy action to address the potential risks of AI in the workplace, including privacy, safety, fairness, and labor rights. The OECD stresses the importance of accountability, transparency, and international cooperation to foster inclusive labor markets and avoid fragmented efforts that may hinder innovation and create regulatory gaps.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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