Employment levels buoyed by low-paid jobs

30 Apr 19

Low-productivity jobs paying low wages are fuelling the rise in employment levels across OECD countries.

The trend has compounded the impact of weak business investment on productivity growth as firms defer making commitments because of downward pressure on wages.

According to the OECD’s latest Compendium of Productivity Indicators, companies are meeting increased demand by hiring new staff – undermining the potential for productivity growth driven by investment.

The report suggests the wages being paid in new jobs have been creeping down.

In France, Germany and the United Kingdom, for example, the top three sectors with the largest employment gains between 2010 and 2017 accounted for one third of total job creation – but paid below average wages.

In Belgium, Finland, Italy and Spain, industries with above average labour productivity levels saw net job losses.

The OECD data show that wage growth adjusted for inflation has improved in recent years but remains below pre-crisis rates in most countries.

More jobs in lower paid sectors such as accommodation and catering and health and residential care are weighing down average wages as a whole.

The report also shows that over the past 15 years the share of income from economic activity going to labour through wages has continued to fall, most markedly in manufacturing.

By 2017, the sharpest falls were in Ireland, Poland and Portugal but labour income shares have also declined substantially in Australia, Hungary, Israel, Japan and the US.

The report adds that with labour costs now beginning to rise in many countries, companies may start to reconsider their investment decisions.

However, political uncertainties, trade tensions and the erosion of business and consumer confidence may continue to weigh on investment.

The OECD is calling for policies to stimulate investment, capitalise on the efficiencies and economies of scale provided by the digital transformation, and encourage growth in high-productivity activities.

However, it has also warned recently that up to half of all jobs could be wiped out or will “change radically” because of new technology – and that workers with the fewest skills, who tend to be low paid, are most vulnerable.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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