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The OECD Employment Outlook calls for stronger collective bargaining to protect workers against the “cost-of-living” crisis

20 September 2022

In brief

  • This year’s OECD Employment Outlook calls strongly and explicitly on strengthening collective bargaining in order to improve working conditions and labour market performance at large. An analysis of labour market concentration leads the OECD to conclude that at least one in six workers is employed in a monopsonistic market, in which employers benefit from having significant power to unilaterally set wages and working conditions. This translates into low employment and wages, as well as decreased job quality. TUAC welcomes the OECD’s emphasis on the need to counteract this trend and to protect worker’s living standards in the current “cost-of-living” crisis by strengthening collective bargaining and expanding its coverage, in particular to vulnerable and non-standard workers.
  • OECD labour markets have been recovering quicker than expected since the peak of the COVID-19 crisis, but the war in Ukraine weakened the process.
  • The average OECD unemployment rate has returned to below pre-pandemic levels, but important differences persist between countries and sectors.
  • Most worryingly, while there seem to be not enough workers for the number of job openings, wages are not rising. There are currently no signs of a wage-price spiral, an argument often used by employers and governments to oppose wage increases.
  • Inflation pressures, first triggered by supply-chain bottlenecks during the recovery from COVID-19, have increased because of the war in Ukraine, with food and energy prices driving the spike. Real wages are expected to take a major hit in 2022, with low-income households struggling the most, since a higher share of their income goes towards food and energy bills.
  • Beside labour market monopsony, excessive firms’ wage-setting power has important consequences on wage inequality. One third of overall wage inequality does not stem from differences in workers’ skill but rather from firms’ power to bargain and impose lower wages. Similarly, such power accounts for ¼ of the gender wage gap. Collective bargaining is an important tool to strengthen wages, reduce inequality and force less productive firms to move away from cheap labour as primary source of competitiveness.
  • Overall, the 2022 Employment Outlook builds a strong case in favour of collective bargaining and the urgency to re-balance bargaining power between employers and workers. It represents an important call for governments to improve working conditions. The OECD should work on mainstreaming such important message, while governments should act in defence of workers and reversing decades of policies that dismantled their rights.