Economic growth is picking up and unemployment has reached record lows in some OECD countries with the rate expected to fall further but wages continue to stagnate, according to the OECD’s Employment Outlook 2018.

The OECD (Organisation for Economic Cooperation and Development) says that unless countries can break the cycle of sluggish wage growth, public belief in the recovery will be undermined and labour market inequality will widen.

According to the OECD’s Employment Outlook, the employment rate for people aged 15-74 in the OECD area reached 61.7% in the OECD area at the end of 2017.

“For the first time there are more people with a job today than before the crisis,” the report stated.

The employment rate in the OECD is expected to reach 62.1% by the end of this year and 62.5% in the fourth quarter of 2019. The report added that some of the biggest improvements occurred in groups such as older workers, mothers with young children, youth and immigrants.

Unemployment rates are below, or close to, pre-crisis levels in most countries. Job vacancies have also reached record highs in Japan, the euro area, the US and Australia, according to the report.

“The OECD unemployment rate is predicted to continue falling, to reach 5.3% at the end of 2018 and 5.1% the following year,” the report stated. “Yet the picture continues to be mixed in terms of jobs quality and security, while poverty has grown among the working age population, reaching 10.6% in 2015 compared to 9.6% a decade earlier.”

Wage growth remains remarkably more sluggish than before the financial crisis. At the end of 2017, nominal wage growth in the OECD area was half of what it was ten years earlier: in Q2 2007, when the average of unemployment rates of OECD countries was about the same as now, the average nominal wage growth was 5.8% vs 3.2% in Q4 2017.

OECD stated that wage stagnation affects low-paid workers much more than those at the top: real labour incomes of the top 1% of earners have increased much faster than those of median full-time workers in recent years, reinforcing a long-standing trend.

“This trend of wage less growth in the face of a rise in employment highlights the structural changes in our economies that the global crisis has deepened, and it underlines the urgent need for countries to help workers, especially the low-skilled,” OECD Secretary-General Ángel Gurría, said. “Well-targeted policy measures and closer collaboration with social partners are needed to help workers adapt to and benefit from a rapidly evolving world of work, in order to achieve inclusive growth.”

The OECD’s outlook said that low inflation and the major productivity slowdown have contributed to wage stagnation, as well as a rise in low-paying jobs. It also noted a significant worsening in the average earnings for part-time workers relative to full-time workers. Declining coverage of unemployment benefits in many countries and persisting long-term unemployment may also have contributed. Fewer than one-in-three jobseekers receive unemployment benefits on average across the OECD, and the longer-term downward trend of benefit coverage has continued in many countries since the crisis.

The OECD suggested that countries should develop high-quality education and training systems that provide learning opportunities throughout the life course, says the OECD. The Outlook also stated that evidence shows co-ordinated collective bargaining systems, with strong and self-regulated social partners and effective mediation bodies, contribute to high levels of employment, a better quality work environment, including more training opportunities, and greater resilience of the labour market to shocks.