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OECD report admits profits allow room for wage increases

11 July 2023

The OECD’s 2023 Employment Outlook sets out in admirable clarity the facts that

  • real wages are falling in virtually all OECD countries,
  • profits have increased more than labour costs in many OECD countries, and that
  • there is room in several sectors and countries for profits to absorb some further increases in wages.

In setting out how to deal with falling wage the Employment Outlook describes collective bargaining as a “tool to ensure fair and tailored responses to inflation cost”.

The Employment Outlook reports that “In many countries, profits have increased more than labour costs, making an unusually large contribution to domestic price pressures, and leading to a fall in the labour share”.

It goes on to say that “In Q1 2023, despite the pick-up in nominal wages, real annual wage growth was -3.8% on average across the 34 OECD countries with available data, with a decline observed in 30 countries.”

It also states “Several policy levers can be activated to limit the impact of inflation on workers and ensure a fair share of the costs between governments, companies, and workers. The most direct way to help workers is via an increase in their wages”.

“there is room for profits to absorb some further increases in wages to mitigate the loss of purchasing power''

— OECD Employment Outlook 2023

The Employment Outlook also takes an in depth look at artificial intelligence and states “there is an urgent need for policy action to address the risks that AI can pose when used in the workplace – in terms of privacy, safety, fairness and labour rights – and to ensure accountability, transparency and explainability for employment-related decisions supported by AI”

Like the section on wages and inflation it acknowledges the contribution that can be made by unions, and says “Policies and social dialogue will play a key role” and that “Collective bargaining and social dialogue have an important role to play (..) in supporting workers and businesses in the AI transition.”

“The OECD’s Employment Outlook is crystal clear. Workers’ wages are losing value while profits are playing a major role in inflation with the result that inequality is rising”

— Veronica Nilsson, General Secretary, TUAC

“The OECD acknowledges that the profits being generated allow for wage increases. Collective bargaining is rightly presented as the way to achieve a fair share for workers and employers” said Veronica Nilsson, General Secretary of TUAC, the Trade Union Advisory Committee to the OECD.

‘’The Employment Outlook also presents a clear analysis of the risks and potential benefits of AI, highlighting the need for urgent policy action and the importance of social dialogue and collective bargaining in managing AI.”

For a full TUAC analysis of the OECD Employment Outlook see the downloadable pdf on this page.