Unfolding Global Labor Market Dynamics

Global Labor Market has upended starting in early 2020. The sudden onset of Covid 19 and emerging geopolitical tensions as well as the Ukraine conflict and uneven recovery from the pandemic together contributed heavily to the creation of stagflation. Global Labor market has been one of the very first victims of the crisis with widened global job gaps, rising rates of extreme poverty, deteriorated job quality, and undermined social justice. Although varied, structural changes in labor markets continue to be felt everywhere to date. Rising prices worldwide along with protracted geopolitical tensions weigh heavily on the potential for employment growth.

According to the ILO’s World Employment and Social Outlook 2023, global employment is expected to expand by only 1% in 2023 with no major improvement awaited in 2024. This means that the gaps created by the infamous pandemic are not set to close within the coming two years. The situation is expected to vary across regions with Europe and Central Asia being hit the hardest due to Ukraine Conflict.

Core Inflation Driving Global Labor Market Crisis Further

Throughout the recent three to four years, we have seen asymmetric demand and supply shocks that have pushed inflation rates way up. An instant shift from one type of goods to another observed during the pandemic placed an enormous strain on global supply chains that had limited transportation capacity. Another shock was experienced by the tourism and aviation sectors when things started opening up gradually and consumers started to spend their involuntary savings.

Sadly, Covid 19 has not been the only driver of inflation worldwide. The disruptions as a result of the Ukraine conflict have further exacerbated the rise in food and energy prices affecting the poorest of the world the hardest. Ever since 1990, the global food prices index peaked and reached the level of 159.7 points. The prices in 2022 have been on average 43 percent greater than the ones in 2019. Energy prices were almost triple the same in 2019 aiding the expansion of the cost-of-living crisis for many households worldwide.

The control of inflation has become even harder given the exhausted capacity of central banks and monetary policymaking institutions after the pandemic. Facing substantial accumulation of debts and trying to balance conflicting goals, fiscal policymakers were not left with many options either.

What to Expect in the Global Employment Market?

According to the ILO, the global labor market perspectives are not very bright during the coming years. It is expected that employment growth will stall with real incomes falling and the quality of employment declining.

It can be said that the global labor supply has been reinstated at approximately the same level as in 2019. Although, the population of working age has started to decline in different higher-income states. What’s more, hundreds of thousands of people across the globe have been off work due to the health impacts of the pandemic. The WHO estimates that approximately 20% of those infected shall expect some sort of long-term health consequences.

To retain the standards of living, countries with high old-age-dependency ratios will need to expand their work towards rapid productivity growth. Alternatively, the options of facilitating inward migration can be considered. Some states have already started considering the raise in retirement age limits and providing additional incentives to keep older age workers as active laborers.

On the other side, lower-income countries benefit from old-age dependency ratios. However, many of their young population are deprived of the opportunity to obtain specific skills and expertise via education and training. Such standing affects the number of qualified laborers available. Sadly, young women are twice as likely to face the challenge compared to young men.

What about unemployment?

According to the ILO, global unemployment has declined by 30 million in 2022. However, cumulative global figures are still well above the same in 2019. Labor markets in high and middle-income countries managed to recoup losses and even go lower than 2019 rates of unemployment, unlike low and lower-middle-income states. It is worth noting that overall projections are not pessimistic toward global unemployment with fewer negative trends expected.

Disparities in the global unemployment market persist between males and females. Men are less likely to be unemployed compared to women. Moreover, young people are three times as likely to be unemployed than adults. This rate is higher for upper-income level countries. Although, this trend seems to be declining lately.

Job quality and working conditions

Most of us tend to look more at unemployment rates, sometimes overlooking the quality of the jobs taken. A lot of people worldwide are ready to engage in any type of employment as they are simply unable to afford to be jobless. This way, they are frequently forced to accept lower pay and pushed to work in inappropriate conditions. In addition, their quality of living keeps deteriorating as real income from such employment rarely keeps up with rising prices overstretching household budgets.

Given the crisis drivers discussed above, average real wages fell substantially over the last few years affecting the poorest households the most. Many have slipped into poverty and food insecurity. According to the ILO, by 2022 approximately 214 million workers were estimated to be living in extreme poverty.

Productivity growth for the sustainment of well-being

Rising productivity per hour and per worker implies greater employment growth and a rise in wages. Greater output per worker at a country level can significantly improve the population’s living standards. This is why productivity growth is considered to be one of the key drivers of social and economic well-being.

Speaking from a retrospective point, higher and middle-income countries have been more successful in closing productivity gaps compared to low-income states. At least this trend has been sustained over the last 30 years. According to the ILO’s estimates, in 2021 a worker in a high-income country was approximately 5 times more productive than his peer in a low-income country.

Linking technology and labor markets

Technological progress has been determined to be one of the core drivers of productivity growth in today’s era. Progress in digital technologies including the refinement of AI and labor-saving automation is expected to reinvent the way we see productivity growth. Although, many have indeed raised concerns regarding automation’s ability to replace the need for human labor. Thereby, suiting knowledge and skills to future technological context has made up the list of current trending topics.

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