March 6, 2023
ILO World Employment and Social Outlook Trends 2023
The global outlook for labour markets deteriorated significantly during 2022. Emerging geopolitical tensions, the Ukraine conflict, an uneven recovery from the pandemic, and ongoing bottlenecks in supply chains have created the conditions for a stagflationary episode, the first period of simultaneously high inflation and low growth since the 1970s. Policymakers face a challenging trade-off as they deal with elevated inflation in an environment of incomplete jobs recovery. Most countries have not yet returned to the levels of employment and hours worked seen at the end of 2019, before the outbreak of the COVID-19 health crisis. Yet, a series of supply shocks, predominantly in food and commodities markets, have raised producer prices, causing spikes in consumer price inflation and pushing major central banks into a more restrictive policy stance. In the absence of corresponding increases in labour incomes, the cost-of-living crisis directly threatens the livelihoods of households and risks depressing aggregate demand. Many countries have accumulated a significant amount of debt, in part to address the severe fallout from the pandemic. The risk of a global debt crisis therefore looms large, jeopardizing the fragile recovery in many frontier markets.
In the midst of these challenging circumstances, major decent work deficits persist around the world, undermining social justice. Hundreds of millions of people lack access to paid employment. Those who are employed all too often lack access to social protection and fundamental rights at work, the majority of workers being informal or unable to express their interests through social dialogue. Incomes are distributed highly unequally, such that many workers fail to escape poverty. Labour market prospects are highly unequal, not only across but also within countries. Gender gaps exist in all areas of the world of work, and young people face particular challenges.
Informality and working poverty rose further with the COVID-19 crisis. Despite the recovery that started in 2021, the ongoing shortage of better job opportunities is likely to worsen with the projected slowdown, pushing workers into jobs of worse quality and depriving others of adequate social protection. Real labour incomes fall when prices outpace nominal incomes. The resulting downward pressure on demand in high-income countries impacts low- and middle-income countries through global supply chain (GSC) linkages. In addition, persistent disruptions to supply chains threaten employment prospects and job quality, especially in frontier markets, further reducing their prospects of a swift labour market recovery.
In sum, an environment of high and persistent uncertainty has emerged globally, depressing business investment, especially of small and medium-sized enterprises, eroding real wages and pushing workers back into informal employment. Progress in poverty reduction achieved over the previous decade has largely faltered and convergence in living standards and work quality
is coming to a halt as productivity growth slows worldwide, making decent work deficits more difficult to overcome.
The ongoing impact of the COVID-19, cost-ofliving and geopolitical crises is weighing heavily on labour market prospects. Supply and demand shocks have triggered price increases, leading
to the highest inflation rates in decades. The Ukraine conflict and other geopolitical conflicts are worsening supply shortages and raising uncertainty. The ensuing cost-of-living crisis is eroding the
purchasing power of household disposable income and reducing aggregate demand. Tightening of monetary policy is squeezing financing conditions not only in advanced economies but also through spillovers to emerging and developing economies. In the absence of proper policy coordination, the risk is that the dominant economies will pursue a policy agenda primarily catering to their domestic challenges without due regard for the potential collateral impacts. Job vacancies have started to fall sharply in those countries that have reported them; however, they are falling from record levels and in October 2022 remained high from a historical perspective.
Beyond these immediate challenges, longerterm structural changes in global labour markets are increasingly being felt. For example, climate change is contributing to a higher incidence of natural disasters and extreme weather events, including flooding, drought, land degradation, soil erosion, heatwaves and unpredictable rainfall. Adjusting to these new realities will require major adaptation initiatives, including significant infrastructure investment in highly affected regions. Yet, these adaptation measures also present opportunities for job creation, particularly in some of the poorest areas of the world, including in Africa. Meanwhile, population ageing in almost all advanced and many emerging countries has accelerated, causing a depression of labour supply that is unlikely to be offset by outward migration from demographically more dynamic regions. At the same time, technological change, pertaining especially to new digital devices and tools such as artificial intelligence, has yet to live up to earlier optimistic projections about its potential to increase productivity growth and alleviate much of the drudgery of work, but such innovations are needed to address some upcoming labour shortages resulting from demographic shifts.
The interaction of macroeconomic factors, longterm trends and institutional settings varies and affects employment growth differently across country income groups. First, the macroeconomic outlook is pessimistic for high-income countries, whereas many other countries are likely to see a normalization of growth after the higher growth rates of 2021 and 2022. Second, low social protection coverage in low-income and lower-middle-income countries means that many workers won’t stop working but will be forced into the informal economy as economic activity slows. By contrast, countries with triedand-tested employment retention schemes – most of which are high income – will make use of them again, thereby limiting employment losses. Third, enterprises in high-income countries could face labour shortages in an ensuing upswing because of an ageing and contracting labour force, which will motivate them to hold on to their workers if they can.
Source: International Labour Organization
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