The Strategist

Employment in the OECD will return to pre-crisis levels in 2017

07/07/2016 - 16:33

Employment in the developed countries will return back to the 2007 level near the end of 2017. However, recovery of wages, which declined due to the financial crisis, will take some more time, said the Organization for Economic Cooperation and Development (OECD).

Ildar Sagdejev
Ildar Sagdejev
The OECD prepared the biggest part of its annual report on the prospects for job creation prior to the referendum in the UK. The document urged governments to "make full use of all tools" to stimulate economic growth and support creation of more high-paying jobs.

The OECD estimates that in the 34 member countries (the 35th member of the OECD became Latvia, data cover the period until Latvia's accession to the OECD in June 2016), the share of employed people aged 15 to 74 years was 60.2% at the end of 2015 compared with 60.8% in 2007. it is expected that the "gap", which is 5.6 million workers, will be overcome by the end of 2017, upon almost ten years after the crisis. 

The OECD said that the labor market is recovering "painfully slow", reflecting a much slower growth than was expected immediately after the crisis. At the same time, the OECD noted that even restoration of employment will still keep wages well below pre-crisis levels.

Labor markets of several European countries, hardest hit by the financial crisis and its consequences, need more time to recover. In particular, employment rates in Greece, Spain, Ireland, Portugal and Finland will remain below the levels of 2007 even after 2017. It is expected that the US employment rate will also remain lower than the pre-crisis level, and will amount to 63.4 % compared to 65.3% before the crisis by the end of next year.  

However, there are countries that have even exceeded their pre-crisis levels of employment, including Germany, Hungary, Poland and Chile, according to the OECD report.

Prior to UK residents voted for withdrawal from the EU, the OECD estimated that the level of employment in the country will be higher than before the crisis at the end of next year. Now, however, the OECD expects an economic downturn since the exit from the European Union will lead to a decrease in employment by 500 thousand jobs over the next four years.

"The short-term prospects of the British labor market are likely to be adversely affected by results of the recent referendum on withdrawal from the EU", - said Stefano Scarpetta, Director for Employment, Labour and Social Affairs at the OECD.

"End result of the negotiations on the withdrawal from the EU would make the UK less attractive for companies that are most involved in international trade and investment. Accordingly, this would have long-term negative effects on wage growth. This is due to the fact that these companies have higher productivity and faster growth performance than companies that are not so much involved in the international economy ", - said Scarpetta.