Job markets across OECD countries (Organisation for Economic Co-operation and Development) remain tight even though the global economy has slowed substantially since 2021. In May 2023, the OECD unemployment rate remained at its record low of 4.8% for the third consecutive month.

The OECD also noted that employment has fully recovered since the Covid-19 crisis and unemployment is at its lowest level since the early 1970s. However, while nominal hourly wages have risen, to date they have not kept up with inflation, leading to a drop in real wages in almost all OECD countries.

According to the OECD Employment Outlook 2023, employment across OECD countries is projected to keep expanding in 2023 and 2024.

In May, the unemployment rate was stable compared with April 2023 in 14 OECD countries including France, Germany and Japan, while it declined in 13 including Austria, Colombia, Greece, Italy and Norway. However, it rose in five OECD countries including Canada and the US.

The OECD-wide unemployment rate is expected to increase slightly to 5.2% by the fourth quarter of 2024, though with relatively larger rises of around 0.75% or more expected in Australia, New Zealand, the UK and the US.

Real hourly wages have fallen in many industries and OECD countries, and the cost of living has risen. In the first quarter of 2023, despite the pick-up in nominal wages, real annual wage growth was negative in 30 of the 34 countries with available data, with an average decline of 3.8%.

“Analysis in the Outlook indicates that profits have often risen more than labour compensation,” the OECD stated. “Going forward, evidence suggests there is some room for profits to absorb further wage adjustments to recover some of the losses in purchasing power gradually without generating significant price pressures or resulting in a fall in labour demand.”

Meanwhile, the report also found that the loss of purchasing power is particularly challenging for workers in low-income households. To support low-paid workers, minimum wages and collective bargaining can help mitigate losses in purchasing power, the OECD stated.

Further research from the report found that while firms’ adoption of AI is still relatively low, rapid progress in the technology, falling costs and the increasing availability of workers with AI skills suggest that OECD countries may be on the brink of an ‘AI revolution’.

“Labour markets have shown remarkable resilience over the past year and remain tight, though high inflation and the rising cost of living has eroded real incomes,” OECD Secretary-General Mathias Cormann said. “The recent acceleration of generative AI related developments and tools marks a technological watershed with material implications in many workplaces. There is a real need to consider longer term policy frameworks on the use of AI in the workplace and to continue to foster international cooperation to maximise the benefits while appropriately managing the downside risks.”

Taking the effect of AI into account, occupations classified to be at highest risk of automation account for about 27% of employment. High-skill occupations, despite being more exposed to recent progress in AI, are still at least risk of automation. Low and middle skilled jobs are most at risk, including in construction, farming, fishing, and forestry, and to a lesser extent production and transportation.