OECD: Covid jobs crisis is far from over and vaccinations are key to boosting employment

Paris-based organisation says job creation must be at the heart of the recovery

The jobs crisis caused by the Covid-19 pandemic is “far from over”, the Organisation for Economic Co-operation and Development said on Wednesday, as new coronavirus variants cause uncertainty.

While the economic rebound across the OECD area – which includes eurozone countries, as well as the US, Australia, Japan and the UK – indicates a brighter future, it is not being matched by job creation, the organisation said in its 2021 employment outlook.

Economic and labour market recovery will remain precarious while vaccination rates are uneven, because of new Covid-19 variants of concern, said Mathias Cormann, the OECD’s secretary general.

“We need more jabs for more jobs. The jobs creation policy priority is to get people all around the world vaccinated as soon as possible,” Mr Cormann said.

“Beyond that, it will be very important to get policy settings right to encourage business investment and job creation, as well as to drive the necessary upskilling, re-skilling and skills matching required to ensure everyone has the best possible opportunity to participate and to benefit from the record recovery.”

Job creation must be at the heart of the recovery, the OECD said, with many nations unlikely to regain pre-Covid employment levels until the end of 2022.

“At the end of 2020, about 22 million jobs had vanished in the OECD compared with 2019, and globally 114 million jobs have disappeared,” the organisation said in its Employment Outlook 2021.

“In the OECD area, despite a gradual recovery, there are still over eight million more unemployed than before the crisis, and over 14 million more inactive people. At the end of 2020, OECD countries were only halfway towards a full employment recovery.”

With governments in most OECD countries unveiling plans for recovery, this provides a “once-in-a-lifetime opportunity to address the main longstanding structural challenges that have been exacerbated by Covid-19”, the organisation said.

Economies must ensure they support jobs that are viable and offer the right incentives for job creation and resuming work.

“The pathway to employment recovery is going to be businesses around the world investing in future growth and success because they have confidence about the opportunities in front of them,” Mr Cormann said.

The labour market is vulnerable to a rapid build-up of unemployment, the OECD said, with many people who lost their jobs at the start of the pandemic still unemployed and struggling to compete against those protected by job retention schemes.

At the height of the crisis, employment retention schemes supported 60 million jobs, more than 10 times the number protected during the global financial crisis. They saved up to 21 million jobs, according to the OECD.

The organisation said that withdrawing support too soon to those still in need risks generating mass bankruptcies and job losses in sectors still deeply affected by containment measures, making the recovery more uncertain.

To help prevent this, the OECD urged governments to promote job creation and the reallocation of workers towards expanding job opportunities.

It also urged policymakers to address structural issues affecting the labour market to help them withstand future shocks, such as threats from climate change and to invest in effective skills policies to reduce inequalities in the jobs sector.

The unemployment rate in OECD countries decreased slightly in May to 6.6 per cent from 6.7 per cent in April, with the number of unemployed workers at 43.5 million, 8.1 million higher than in February 2020. Meanwhile, the OECD youth unemployment rate was at 13.6 per cent in May.

The OECD said Covid-19 has accentuated economic and social divides, amplifying existing inequalities in labour markets, skills and opportunities.

While the crisis has accelerated the digital transformation and automation, providing opportunities for many to work remotely, it also widened the gulf between workers.

Teleworking became mainstream for many high-skilled workers but remained peripheral in many low-skilled occupations.

“Teleworking became mainstream for many high-skilled workers but remained peripheral in many low-skilled occupations,” the OECD said.

While low-skilled workers were more likely to lose their jobs at the beginning of the crisis, high-skilled workers, in comparison, reduced their working hours.

Earlier this week, IMF managing director Kristalina Georgieva warned global policymakers of a “dangerous divergence” between advanced and developing economies in the recovery from Covid-19.

Ms Georgieva said strong growth in wealthy countries such as the US was “good news”, but that developing countries were being held back by slow vaccination rates.

“That is danger for the coherence of growth and it is also a danger for global stability and security,” she said.

In low-paying economies, the OECD said one in 10 jobs were destroyed as the Covid-19 crisis took hold, while for higher-paying roles in most countries the shock was simply absorbed by reductions in working time, generous job retention schemes or by switching to remote working.

At the peak of the crisis, half of the top earners were able to work from home, compared with only 29 per cent of low-paid workers.

Hours worked in low-paying occupations fell by more than 28 per cent across the OECD last year, 18 per cent more than the fall seen in high-paying occupations.

Meanwhile, the number of young people not in employment, education or training rose by almost three million.

However, the OECD said the unprecedented scope and scale of state support for reviving and reinvigorating economies is a source of hope.

“Now we have a unique opportunity for bold labour market and social policies to avoid locking in inequality and exclusion as a legacy of the crisis,” the organisation said.

“There is a real risk that the depth of the Covid-19 crisis will entrench inequality and exclusion unless governments put jobs at the heart of the recovery. That recovery must focus on the most vulnerable – youth, women, the low skilled and some self-employed – to ensure a transition from exclusion to inclusion.”

Updated: July 7th 2021, 2:13 PM