Labour Market Recovery Goes Into Reverse: ILO

Multiple global crises are causing a marked deterioration in the global labour market recovery, with increasing inequalities within and between countries, according to a new report from the International Labour Organisation (ILO).

The 9th edition of the ILO Monitor on the World of Work, finds that after significant gains during the last quarter of 2021, the number of hours worked globally dropped in the first quarter of 2022, to 3.8 percent below the pre-crisis benchmark (fourth quarter of 2019).

This is equivalent to a deficit of 112 million full-time jobs.

This represents a significant downgrading of figures published by the ILO in January 2022.

Multiple new and interconnected global crises, including inflation (especially in energy and food prices), financial turbulence, potential debt distress, and global supply chain disruption – exacerbated by war in Ukraine – means there is a growing risk of a further deterioration in hours worked in 2022, as well as a broader impact on global labour markets in the months to come.

The report also finds that a great and growing divergence between richer and poorer economies continues to characterise the recovery.

While high-income countries experienced a recovery in hours worked, low-and lower-middle-income economies suffered setbacks in the first quarter of the year with a 3.6 and 5.7 percent gap respectively when compared to the pre-crisis benchmark.

These diverging trends are likely to worsen in the second quarter of 2022.

In some developing countries, governments are increasingly constrained by the lack of fiscal space and debt sustainability challenges, while enterprises face economic and financial uncertainties and workers continue to be left without sufficient access to social protection.

More than two years after the start of the pandemic, many in the world of work are still suffering from the impact on labour markets.

Labour incomes have not yet recovered for the majority of workers. In 2021, three in five workers lived in countries where labour incomes had not returned to the level seen in the fourth quarter of 2019.

The gender gap in hours worked also grew during the pandemic. In the first quarter of 2022, the global gender gap in hours worked was 0.7 percentage points greater than the pre-crisis benchmark (fourth quarter of 2019) when a large gender gap was already present.

Women in informal employment have been worst affected. And in terms of income groups, low and middle-income countries saw the largest increase of the gender gap.

The sharp rise in job vacancies in advanced economies at the end of 2021 and beginning of 2022 has led to a tightening of labour markets with a growing number of jobs available relative to job seekers.

But overall, there is no strong evidence that labour markets are generally overheated, given the considerable pool of unemployed and underutilised labour in many countries.

Driven by disruptions in production and trade exacerbated by the Ukraine crisis, the increase in food and commodity prices is badly hurting poor households and small businesses, especially those in the informal economy.

"The global labour market recovery has gone into reverse. An uneven and fragile recovery has been made more uncertain by a self-reinforcing combination of crises.

The impact on workers and their families, especially in the developing world, will be devastating and could translate into social and political dislocation," said ILO Director-General Guy Ryder. "It is now more essential than ever that we work together and focus on creating a human-centred recovery."

The report spells out a series of measures as a way forward, which are in line with ILO’s Global Call to Action for a human-centred recovery, and the ILO-led UN initiative, the Global Accelerator for Jobs and Social Protection.

The measures include: Timely and effective support to maintain the purchasing power of labour income and the overall living standards of workers and their families; Urgent tripartite dialogue to support appropriate and fair wage adjustments; Careful adjustment of macroeconomic policies so that they address pressures related to inflation and debt sustainability while supporting a job-rich and inclusive recovery, and assistance for hard-hit groups and sectors, particularly vulnerable workers and those making the transition from the informal to the formal economy; Long-term, well-designed sectoral policies that promote the creation of decent and green jobs, support sustainability and inclusiveness, and assist enterprises, especially micro, small and medium-sized enterprises (MSMEs).