Global Employment Resilience Faces Rising Challenges: ILO Report

The ILO's "World Employment and Social Outlook: Trends 2024" report highlights a resilient yet fragile global job market, with declining real wages, rising working poverty, and persistent labor shortages. The report calls for coordinated policy measures to address these challenges and ensure a sustainable recovery.

The International Labour Organization (ILO) recently released its flagship report, "World Employment and Social Outlook: Trends 2024," which presents a comprehensive assessment of global labor market trends. Despite the resilience observed in job growth and labor market participation, the report highlights significant challenges, including declining real wages, rising working poverty, and persistent labor shortages. This article delves into the key findings of the report, exploring the current state and future outlook of the global job market.

Economic Recovery and Labor Market Resilience

The ILO's report paints a complex picture of the global economy in 2023. While ongoing geopolitical tensions and persistent inflation posed significant challenges, job growth remained surprisingly resilient. The global unemployment rate dropped to 5.1%, and labor force participation rates recovered to pre-pandemic levels in many regions. However, the macroeconomic environment deteriorated, with central banks in advanced and emerging economies implementing aggressive interest rate hikes, the fastest since the 1980s.

The resilience in job growth can be attributed to several factors, including stronger-than-anticipated economic growth and robust job creation. However, the report warns that this resilience might not last, as employment is typically a lagging indicator, and weaknesses in job creation are likely to unfold shortly. The ILO projects that global unemployment will rise slightly in 2024, with a modest increase of 2 million unemployed individuals, pushing the global unemployment rate to 5.2%.

Challenges in Real Wages and Working Poverty

Despite the positive trends in employment, real wages have declined in many G20 countries as wage increases have not kept pace with inflation. This has led to an erosion of living standards, with many workers facing financial difficulties. The report highlights that in 2023, the number of workers living in extreme poverty—earning less than $2.15 per day—increased by about 1 million globally. Similarly, the number of workers living in moderate poverty—earning less than $3.65 per day—increased by 8.4 million.

The decline in real wages is particularly concerning in an environment of slow productivity growth and rising price pressures. The ILO notes that only a few countries, such as China and the Russian Federation, experienced positive real wage growth in 2023, driven by high labor productivity growth. In contrast, many other countries, including Brazil, Italy, and Indonesia, saw significant declines in real wages.

Persistent Labor Shortages and Structural Issues

The report underscores the persistence of labor shortages, especially in essential sectors like care, transportation, and retail. Poor working conditions in these sectors have made it difficult to attract workers, exacerbating the imbalances. Additionally, restructured demand across sectors and supportive fiscal policies have created a significant overhang in vacancies that are difficult to fill. This sectoral mismatch is compounded by low geographical mobility, partly due to a lack of affordable housing.

The ILO also highlights structural issues that affect labor market adjustment. Job retention schemes implemented during the pandemic have made workers less likely to switch rapidly to new opportunities, slowing labor market adjustment. Moreover, long-term trends in productivity and population aging in advanced and some emerging economies have further slowed the necessary adjustments.

Technological advancements, particularly the arrival of generative artificial intelligence (AI), have not translated into improved living standards or productivity growth. The report points out that skills deficits and entry barriers created by large digital monopolies have hindered faster technological adoption, especially in developing countries. This has led to widening geographical inequalities, with a small number of conglomerates attracting most of the investment in the digital sector.

Outlook and Policy Recommendations

Looking ahead, the ILO projects that labor market conditions will deteriorate moderately, with global unemployment rates expected to rise slightly over the forecast horizon. The report emphasizes the need for coordinated and proactive policy measures to address the complex and intertwined challenges in the labor market. Governments are urged to strengthen domestic economies through productivity initiatives and international cooperation to address major economic, ecological, and social challenges.

The ILO also calls for improvements in working conditions and rising productivity to address labor market imbalances. A more equitable distribution of job opportunities across countries with severe excess labor could help mitigate the effects of labor shortages. Additionally, targeted skills initiatives are needed to support young people and other vulnerable groups in the labor market.

The "World Employment and Social Outlook: Trends 2024" report provides a nuanced view of the global job market. While job growth has shown resilience, significant challenges remain. Addressing these challenges requires coordinated efforts and proactive policy measures to ensure a sustainable and inclusive global recovery.