The global outlook for labour markets deteriorated significantly during 2022. Emerging geopolitical tensions, the Ukraine conflict, an uneven recovery from the pandemic, and ongoing bottlenecks in supply chains have created the conditions for a stagflationary episode, the first period of simultaneously high inflation and low growth since the 1970s. Policymakers face a challenging trade-off as they deal with elevated inflation in an environment of incomplete jobs recovery.
Most countries have not yet returned to the levels of employment and hours worked seen at the end of 2019, before the outbreak of the COVID-19 health crisis. Yet, a series of supply shocks, predominantly in food and commodities markets, have raised producer prices, causing spikes in consumer price inflation and pushing major central banks into a more restrictive policy stance. In the absence of corresponding increases in labour incomes, the cost of-living crisis directly threatens the livelihoods of households and risks depressing aggregate demand. Many countries have accumulated a significant amount of debt, in part to address the severe fallout from the pandemic. The risk of a global debt crisis therefore looms large, jeopardizing the fragile recovery in many frontier markets.
In the midst of these challenging circumstances, major decent work deficits persist around the world, undermining social justice. Hundreds of millions of people lack access
to paid employment. Those who are employed all too often lack access to social protection and fundamental rights at work, the majority of workers being informal or unable to express their interests through social dialogue. Incomes are distributed highly unequally, such that many workers fail to escape poverty. Labour market prospects are highly unequal, not only across but also within countries. Gender gaps exist in all areas of the world of work, and young people face particular challenges.
Informality and working poverty rose further with the COVID-19 crisis. Despite the recovery that started in 2021, the ongoing shortage of better job opportunities is likely to worsen with the projected slowdown, pushing workers into jobs of worse quality and depriving others of adequate social protection. Real labour incomes fall when prices outpace nominal incomes. The resulting downward pressure on demand in high-income
countries impact low- and middle-income countries through global supply chain (GSC) linkages.
In addition, persistent disruptions to supply chains threaten employment prospects and job quality, especially in frontier markets, further reducing their prospects of a swift labour market recovery.
In sum, an environment of high and persistent uncertainty has emerged globally, depressing business investment, especially of small and medium-sized enterprises, eroding real wages and pushing workers back into informal employment.
Progress in poverty reduction achieved over the previous decade has largely faltered and convergence in living standards and work quality is coming to a halt as productivity growth slows worldwide, making decent work deficits more difficult to overcome.
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