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OECD recommends enhancing job mobility to reduce labour markets frictions

The OECD Employment Outlook 2022 looks at the situation of labour markets post-Covid, analysing the challenges of labour shortages, wage inequality and changing working conditions. Enhancing job mobility – notably through better cooperation between public and private employment services – is put forward as one key area of action to build back more inclusive labour markets.

Published on 13th September 2022

Labour markets bounced back strongly from the COVID-19 pandemic, but the global employment outlook is now highly uncertain, according to the OECD Employment Outlook 2022 released on 9 September 2022. The OECD unemployment rate stabilised at 4.9% 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.

Looking at individual countries however, the unemployment rate in July remained higher than before the pandemic in one fifth of OECD countries, the report says. In a number of countries, labour force participation and employment rates are also still below pre-crisis levels. In addition, the OECD flags that Russia’s war of aggression against Ukraine is causing lower global growth and higher inflation, meaning that employment growth is also likely to slow.

One key policy response identified by the OECD to ensure recovery from the COVID-19 crisis, but also to reduce between-firm wage gaps and mitigate labour shortages, is the promotion of job mobility. The Employment Outlook 2022 points to strengthening adult learning and taking a more comprehensive approach to activation policies as ways to enhance job mobility, and advises on a better co-ordination between public and private providers of employment services to make job-search assistance, training and career counselling available to workers who seek to progress in their careers.

“The private employment services sector, through its agency work and career management services, is dealing on a daily basis with optimising employment, labour transitions and skilling opportunities,” explains Bettina Schaller, President of the World Employment Confederation (WEC). “The potential for further cooperation between public and private employment services is tremendous and we have many examples across our membership of how to implement this.”

Enhanced cooperation between public and private employment services, further use of career support services, increased access to training and broader access to labour markets are amongst the solutions identified by the private employment services industry to reduce labour shortages. As analysed in a recent Strategic Paper by the World Employment Confederation Europe, current labour shortages arise from a mismatch between supply and demand, rather than from workforce unavailability.

When it comes to its analysis of the evolution of wages, the OECD Employment Outlook 2022 points out a situation of monopsony and concentration in the labour market and establishes how this leads to inefficiently low employment and wages level. According to the report, labour market concentration tends to increase the use of flexible contracts. The World Employment Confederation disagrees with the observation that flexible contracts automatically equal to poor job quality. There are many factors to be considered when assessing the quality of jobs (salary, development, training, etc). Besides that, it also does not reflect the increasing trend of people to search for flexibility in the labour market, in particular among younger generations. The Social Impact Reports, published annually by the World Employment Confederation since 2019, documents how diverse forms of work contributes to offering different pathways to decent and fulfilling employment.

The Employment Outlook is the OECD’s annual report on jobs and employment in OECD countries. Each edition reviews recent trends, policy developments, and prospects. The 2022 edition entitled “Building Back More Inclusive Labour Markets” reviews the key labour market and social challenges for a more inclusive post-COVID‑19 recovery. It also examines the policies to address these challenges and the outlook ahead. Particular attention is given to frontline workers and groups lagging behind in this recovery (young people, workers with less education, and racial/ethnic minorities).

Get further insights from the OECD on the current labour market challenges in this interview of Stefano Scarpetta, Director of the Employment, Labour and Social Affairs Directorate, with our Managing Director, Denis Pennel.

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