Inflation impact sees real wages decline for workers across OECD
High inflation and the rising cost of living is driving down real wage growth across most OECD countries, recent data shows.
Nominal hourly wages are failing to keep pace with inflation despite the tight job market and a rise in wages, according to recent data from the Organisation for Economic Co-operation and Development (OECD).
In the first quarter of 2023, real annual wage growth was negative in 30 of the 34 countries with available data, with an average decline of 3.8 per cent, the OECD Employment Outlook 2023 stated.
The data in the outlook revealed that real wages in Australia had declined by around 3 per cent compared with the previous year due to the impact of inflation.
The average level of decline was around 3.8 per cent, according to the research.
“The loss of purchasing power is particularly challenging for workers in low-income households,” the outlook stated.
“To support low-paid workers, minimum wages and collective bargaining can help mitigate losses in purchasing power. Governments can also provide targeted support through the tax and benefit system to raise low-income households’ net income.”
The outlook stated that company profits have risen more than labour costs in many countries and sectors, suggesting that the cost-of-living crisis has not been shared equally by everyone.
Labor markets stabilising
While labour markets remain very tight across most OECD countries, the number of vacant positions per job seeker has declined in many countries.
“Employment has stabilised at a level slightly higher than before the COVID crisis, while unemployment rates across the OECD remain historically low,” the outlook stated.
“Labour market participation has increased as well, with fewer working-age people inactive than before the COVID-19 crisis, and the average hours worked per employed person above or just below pre-crisis levels in most countries.”
Across the OECD overall the unemployment rate at May 2023 was 4.8 per cent. Australia has one of the lowest unemployment rates at 3.6 per cent.
AI yet to impact employment levels
The outlook also examined the impacts of AI on the labour market across OECD countries.
“So far there is little evidence of negative employment effects among firms adopting AI,” the outlook stated.
“What is more, workers and employers reported that AI can reduce tedious and dangerous tasks, leading to greater worker engagement and physical safety.”
They survey did however find that a significant share or workers, approximately three in five are worried about losing their job entirely to AI in the next 10 years.
A similar share worries that wages in their sector would decrease because of AI.
“Rapid AI development and adoption means that new skills will be needed, while others will become obsolete. Low-skilled, older workers, but also higher skilled workers, will need training,” the outlook said.
“Governments should encourage employers to provide more training, integrate AI skills into education, and support diversity in the AI workforce.”
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