Economic growth is picking up and unemployment has reached record lows in some OECD countries but wages continue to stagnate. Unless countries can break this cycle, public belief in the recovery will be undermined and labor market inequality will widen, according to a new report, published in July 2018 by the Organization for Economic Cooperation and Development (OECD).
The OECD Employment Outlook 2018 states that the employment rate for people aged 15-74 in the OECD area reached 61.7% at the end of 2017. For the first time since the 2008 recession, there are more people with a job than there were before the crisis. The employment rate in the OECD is expected to reach 62.1% by the end of 2018 and 62.5% in the fourth quarter of 2019.
“More worryingly,” the study says, “wage stagnation affects low-paid workers much more than those at the top: real labor 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 does not bode well for group insurance and group pensions, leaving the lion’s share of workers unable to afford to take part in either supplementary insurance or pension programs. In many OECD countries, Social Security alone cannot serve pensions that allow for a decent standard of living. In the U.S., for example, fewer workers can get access to retirement savings plans, which are still highly dependent upon employers. The report states that poverty has grown among the working age population, reaching 10.6% in 2015 compared to 9.6% a decade earlier.
It should be added that lower disposable incomes translate into lower consumer spending, especially on non-essential goods and services, slowing down economic growth. Whilst this would not apply to the high-income bracket, it certainly does for the growing number of households hovering around the poverty line.
A complete copy of the report is available for download here. [1]
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