Work, the engine of the economy, is experiencing a boom in the richest countries. Despite the after-effects of the pandemic, the inflation crisis, the rise in interest rates and the very complicated geopolitical scenario, national unemployment rates are declining or remaining at low levels. This is evidenced by data from the OECD, the club of 38 countries made up of major European nations, Australia, Japan, South Korea and several American states: The average unemployment rate was 4.81% in August, the lowest level on record better this month than before the pandemic (5.39% in 2019), than during the Great Recession (8.58% in 2009) and at the beginning of the century (6.75% in 2001). A similar scenario emerges if one limits the analysis to the European Union, where the unemployment rate has been accumulating at historic lows for several months: in August it was 5.9%, almost a point lower than in 2019.
As the main reason to explain this phenomenon, experts point to public spending during the pandemic, but also cite other reasons: the decline in salaries combined with increasing corporate profits, the aging of the population or the distrust of supplies to third countries in the face of recent problems.
Stefano Scarpetta, Director of Employment and Social Affairs at the OECD, claims that this data is very interesting for two reasons. Firstly, because this minimum unemployment is accompanied by a very high number of employees – 69.4% of the available labor force is used, the highest record in the series. This means that we do not achieve low unemployment figures because there are people who forego participation in the labor market, but on the contrary. The second reason is that this is happening against the backdrop of an economic slowdown. Significantly lower growth is expected and unemployment remains low.”
The strength of the labor market is one of the factors supporting growth so far this year, according to the European Commission. “The severe economic impact on certain sectors, including supply chain disruptions and increased economic uncertainty caused by Russia’s war against Ukraine, has so far not had a significant impact on EU employment levels,” explains Ioannis Virvilis, spokesman for the European Commission Representation in Spain .
The upward trend in rich countries is in contrast to the rest of the planet, which is suffering from the blows of the economic committee. According to estimates by the International Labor Organization (ILO), of 186 countries with available data, the unemployment rate decreases in only 40 compared to 2019, remains at nine and increases in 136. This causes the estimated global unemployment rate to increase slightly by 5.5% in the year 2019 to 5.8% in 2023. “While it is true that some countries and regions have recorded strong growth, it is also true that the recovery at the global level is fragile and clearly inadequate in low-income countries,” explains Roger Gomis, economist in the ILO statistics department.
The positive development in Europe is mainly due to the significant decline in unemployment in the countries that have historically recorded the highest unemployment. That is, Mediterranean countries like Spain, which had the most room for improvement. The biggest decline is in Greece, where unemployment was 17.4% in August 2019 and is now at 10.9%. Also important are the declines in Spain (from 14.1% to 11.5%), Italy (from 9.4% to 7.3%) and France (from 8.3% to 7.3%). Countries with lower unemployment rates remain at similar levels to pre-pandemic levels – some with slight increases – such as Poland (2.8%), Germany (3%) and the Netherlands (3.7%). The same thing happens in Japan (2.7%), South Korea (2.4%) and the United States (3.8%).
The advantage of hardly experiencing any unemployment is usually accompanied by a negative side for companies: they are the countries in which there is a higher rate of unfilled positions. The Dutch share is the highest (4.7%), followed by Belgium, Austria and Germany, also with low unemployment rates. The continent’s unemployment leader, Spain, is one of the countries least affected by this problem, at 0.9%.
What is the reason for this phenomenon?
Ludovic Voet, confederal secretary of the European Trade Union Confederation (ETUC), believes that the main reason for the resistance of employment in rich countries, despite the uncertainty, is that “governments have taken protective measures during the Covid-19 crisis and the energy price crisis.” Workers .” This refers to measures at the expense of public funds, such as the Spanish ERTE during the pandemic, the billions of euros in European funds from the economic stimulus program or aid to companies to combat the price spiral. This specialist points out that the combination of the recovery in activity after the The pandemic and the protections that the authorities have put in place have led to this low unemployment rate.
Scarpetta gives other reasons related to the pandemic: “Many companies are investing more in their countries of origin due to the problems in supply chains.” In addition, it suggests that companies are more open to different forms of work (teleworking, flexible working hours, etc.), which means that The population group that can combine their life with a job is increasing. This change in mentality is also due to the difficulty of finding workers, says Voet: “Employers think twice before laying off people, in a context where they know that for some industries it is not easy to recruit workers.”
Arturo Lahera, professor of the Department of Applied Sociology at the Complutense University of Madrid, cites aging as another factor that is already affecting the labor market: today the proportion of people over 65 in the European Union is 21%, per year In 2035 it will be. In 2050 it will be about 26% and almost 30%. “There will be fewer and fewer workers and companies will continue to need them, no matter how much technology advances.” The forecast is that unemployment in Spain will fall by half in about 20 years. It is something fundamental for the pension system, but also for companies themselves.” In this scenario, despite the foreseeable improvements in productivity, a larger proportion of employees will be required to keep the wheels turning.
This worries Maxime Cerutti, director of social affairs at BusinessEurope, the largest European employers’ association: “The fact that unemployment in the European Union is historically low despite slow economic growth is positive, but does not tell the real story.” “The biggest challenge in the labor market is to address the growing labor and skills shortages.” Virvilis also focuses on job vacancies: “Labor shortages and the mismatch between skills supply and demand remain a concern. “We also need to continue to monitor youth unemployment closely.”
More jobs, lower salaries
Economic theory suggests that this scenario, with full employment in many developed countries and even labor shortages in some, should help workers improve their salary conditions. In theory, the lower the supply of workers and the greater their demand, the better their compensation. OECD data makes it clear that inflation has eliminated this possibility: purchasing power fell in 37 of the 38 countries in 2022, with Spain the hardest hit (real wages fell by 5.3%). The trend continues into the beginning of 2023 with an average decline of 3.8% in the OECD.
“No, salaries are not increasing, although the scenario is favorable for this,” complains Voet. This union member reiterates that there are some high value-added jobs where staff shortages lead to salary improvements, but not across the economy: “There are sectors where there are problems with lack of training, but in many others there are problems.” B .in the hospitality industry, construction or agriculture, recruitment problems are due to poor working conditions. And the employers’ strategy is not to improve wages, but to force more inactive people to work or more immigration.” Gomis points out that this decline in payrolls “disproportionately affects lower-income households because they spend a larger portion of their income on products such as food and fuel.”
Scarpetta emphasizes that business margins have avoided the blow that inflation has dealt to salaries. “Companies have managed to protect and, in some cases, even improve their benefits, without compensation for workers.” Experts point out that this could be another reason for the good employment performance: the better the results, the greater the benefits Hiring capacity. “It’s an interesting hypothesis,” says Lahera, who links wage devaluation to several factors that undermine workers: “There is an increase in underemployment, that is, people who would like to work more hours.” Pending an extension of the Working hours will not mobilize these workers. The cost of living, especially housing, also tempers the protest, which is already weakened by low union membership.”
Lahera believes that the strength of conservative and far-right parties with a pronounced anti-union discourse and the trauma due to successive economic crises – from the 2008 financial crisis to the coronavirus in 2020 – are also not helping workers find better job conditions. “But the case of the United States is interesting,” Lahera continues, “after the phenomenon of the Great Resignation, in which many people realized that they did not want to live to work; We see a second current in the form of very strong protests, such as those of screenwriters, the automotive sector, health workers or the logistics sector. It seems that they are losing their fear of mobilization.”
“I think the reason for this divide in Europe,” continues Scarpetta, “is that working conditions depend on agreements between companies and workers, which are renewed from time to time.” I think that in the coming months We will see a reduction in social benefits and an increase in salaries, without this leading to second-round inflation.” This last aspect worries European employers and calls for caution when it comes to salaries: “It remains important to focus on reducing inflation and at the same time avoid a second inflationary pressure in the form of wage-price spiral effects.”
Future projection
Scarpetta believes that the labor market needs several stimuli in order to continue functioning: “There is no one-size-fits-all solution. We age, but also in better health. It is therefore important to promote participation in the labor market at older ages. There is also room for improvement among women, as they continue to suffer from higher levels of unemployment.” Lahera expects that the retirement age will be gradually raised in developed countries in the coming years.
The head of the OECD working area also advocates retraining and promoting migration flows in view of the skills shortage in some sectors: “Africa is the only continent that will continue to increase in population in 30 years.” We have to help them develop the skills of their workers “The main priority today is to attract more workers by reducing inactivity and improving labor migration. It is also crucial to increase productivity.”
However, analysts warn that the global scenario will have an impact on employment in developed countries, which is already being observed in some of them. “Inflation, monetary tightening and uncertainty are weighing on the labor market. Although employment tends to react late to these factors, they already seem to be having an impact,” says Gomis. “It is very likely that the employment rate for 2023 will have stagnated at the end of the year compared to last year,” he concludes.
The Federal Secretary of the ETUC expresses concerns: “There is a high risk that austerity measures will be taken again at European level.” “We believe that next year there will be cuts that could cost many jobs.” Voet presents the impact of the reaction responded to the financial crisis by controlling public spending and the impact of the pandemic on the labor market and with measures that prevented the destruction of jobs. “There is a risk of a return to neoliberal policies that would destroy jobs. We have seen in these years that jobs can be protected,” says Voet. “For some, increasing debt to protect jobs was crazy, others thought it was what needed to be done,” Lahera adds.
As the impact of these incentives wears off, the labor market will show whether its strength exceeds them and whether it is capable of improving working conditions.
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