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27th Feb 2024

Labour market imbalances 'may be structural' warning

  • 'The erosion of real wages and living standards by high and persistent inflation rates and rising costs of housing is unlikely to be compensated quickly' according to the report (Photo: Unsplash)
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Stagnating productivity and rising inequalities has cast a shadow over the International Labour Organization's (ILO) employment and social outlook for 2024, published on Wednesday (10 January).

2023 saw encouraging employment figures, but the ILO does not expect them to improve much in 2024.

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Despite the economic slowdown, labour markets have shown resilience, says the report, which notes that both the global unemployment rate and the jobs gap rate (the number of people out of employment who want to work) fell below pre-pandemic levels in 2023.

In the EU specifically, the unemployment rate stood at 5.9 percent in November 2023 (the latest data collected by Eurostat), down from 6.8 percent in 2019, with the labour market historically tight.

On the downside, however, labour shortages remain acute, especially in emerging and advanced economies, and the recovery has been uneven across different labour market groups, such as women and young people.

"Deeper analysis reveals that labour market imbalances, unfortunately, are growing, and in time of multiple and interacting global crises, this is quite eroding the progress towards greater justice in the world," ILO director general Gilbert F. Houngbo told reporters on Wednesday.

What's more, these imbalances have been exacerbated by weak labour productivity, which has returned to the low levels of the previous decade, and by a lower total number of hours worked — and worryingly, these imbalances may not be cyclical.

"It is starting to look as if these imbalances are not simply part of pandemic recovery but structural," said ILO director-general.

The average number of hours worked is below pre-pandemic levels, particularly in key sectors and some emerging economies, while the number of sick days has substantially risen.

On the other hand, the increase in part-time employment is contributing to a longer-term reduction in average hours worked due to the difficulties in returning to full-time work, and the high levels of youth unemployment are still one of the key workforce challenges, the report says.

"The workforce challenges it [the report] detects pose a threat to both individual livelihoods and businesses, and it is essential that we tackle them effectively and fast," ILO director general said.

Wages not keeping up with inflation

Income inequality has also increased, says the ILO, noting that lost purchasing power in most G20 countries will not be quickly regained.

"The erosion of real wages and living standards by high and persistent inflation rates and rising costs of housing is unlikely to be compensated quickly," reads the report.

In November 2023, the European Trade Union Confederation (ETUC) warned that real wages (when inflation is taken into account) in some EU countries were failing to keep up with inflation.

According to the union's research, Czech Republic (minus 4.6 percent), Italy (minus 2.3) and Sweden (minus 1.9) saw the biggest decreases in wages from one year to another. By contrast, ETUC highlighted that company profits increased by nearly two percent in real terms.

"Insufficient pay and poor job quality are still too prevalent," Houngbo said.

At the global level, the gap between the highest and lowest income countries remains: while the unemployment rate in high-income countries was 4.5 percent in 2023, it remained at 5.7 percent in low-income countries.

And in-work poverty [those who are employed in households that fall below an accepted poverty line] is likely to continue to be a reality.

In 2023, the number of people living in extreme poverty (earning less than $2.15 [€1.96] per person per day) increased by one million, and the number of workers living in moderate poverty rose to 8.4 million.

For 2024, ILO forecasts that both the labour market outlook and global unemployment will only deteriorate, highlighting that another two million workers are expected to be looking for a job, pushing the global unemployment rate from 5.1 percent to 5.2 percent.

"Falling living standards and weak productivity combined with persistent inflation create the conditions for greater inequality and undermine efforts to achieve social justice," Houngbo said.

"And without greater social justice we will never have a sustainable recovery," he added.

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