Business

Unprecedented wage stagnation in OECD

The OECD warns that there is unprecedented wage stagnation in member countries despite a growth in employment.

Wealthy countries are suffering from unprecedented wage stagnation despite falling unemployment, the Organisation for Economic Co-operation and Development warns.

The group of 35 mostly industrialised countries reported that unemployment rates in most member states were now below or close to their levels before the world economic crisis of 2008.

Unemployment across the OECD is predicted to reach 5.3 per cent at the end of 2018 and 5.1 per cent in 2019, the organisation said in its annual employment outlook.

But nominal wage growth in the last quarter of 2017 was only 3.2 per cent, compared with 5.8 per cent in the second quarter of 2007, when unemployment rates were about the same as now.

Usually in low unemployment scenarios, so many people have jobs that there aren't many workers competing for open positions, meaning companies sometimes have to boost wage offers to entice suitable workers.

But that is not happening now. Wage stagnation was affecting median and low-paid workers much worse than high earners, and the slowdown could undermine "public belief in the recovery," the organisation said.

Low inflation, a major slowdown in productivity, and a rise in low-paying jobs had all contributed to slow wage growth, the OECD said.

A decline in unemployment benefit coverage could also be a factor, it suggested.

The OECD called for co-ordinated collective bargaining systems with "strong and self-regulated social partners and effective mediation bodies".

New evidence showed that those systems contribute to high employment levels, a better quality work environment, and greater resilience of the labour market to shocks, the group said.

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