A new post-pandemic labor market

It seems like another age, but the start of 2020 had marked a decade of decline in the unemployment rate of the world’s advanced economies. But when the COVID-19 pandemic struck, the unemployment rate in OECD (Organisation for Economic Co-operation and Development) countries increased by an unprecedented 3.6 percentage points between February and April, to 8.8 percent—the highest rate in a decade. The OECD unemployment rate has since fallen, but is expected to remain above pre-crisis levels throughout 2022.

As the health crisis continues, its effects on employment risk becoming long-lasting. In addition, accelerated technological adoption risks creating a “double disruption” in labor markets, with many jobs unlikely to return. At the same time, the overall projections for job creation in the next five years are still higher than those of job losses. New jobs are expected to emerge due to shifting demand patterns and the use of new technologies in sectors such as the green economy, care economy, and the education sector, as well as new roles in Data and AI across all industries and sectors.

How, then, should government and business leaders begin to shape a new labor market in 2021 and beyond, and support workers to thrive in the jobs of tomorrow?

Public sector support for income, skills, and jobs. The immediate response to the economic challenges posed by the pandemic was unprecedented. Governments around the world pumped trillions of dollars into the global economy, providing the necessary short-term support for businesses and workers in sectors that could not operate at full capacity. The use of short-time work schemes peaked at almost one in five employees across countries in the OECD for which data are available.

As the pandemic continues to unfold, governments must continue some of the urgent measures. They can make income-protection schemes more responsive to the changing situations of people, promote adequate occupational safety and health in all workplaces to ensure a safe return to work, and enhance social protection for those workers who are least covered, such as “gig work” and those in informal employment.

At the same time, they must lay the foundations for a more resilient and inclusive recovery, and governments must also turn their attention to preparing workers and reallocating talent to new, growth jobs and professions in the medium-term.

Government policies can support this agenda with retraining and job creation through subsidies, targeted tax cuts, and investment programs, while social protection provisions can be reshaped to ensure better coverage of workers in nonstandard forms of employment. Public and private employment services will also need to be expanded to support unprecedented numbers of jobseekers in their reskilling and job transition from declining occupations to emerging or growing occupations.

Urgent task: reskilling and upskilling. It is estimated that 50 percent of currently employed workers will need reskilling by 2025 to meet the needs of a changing labor market. This will demand a significant expansion of mid-career reskilling and upskilling. For businesses, there is a clear return on investment in doing so; two out of three employers expect to see a return within a year.

Employers’ commitments to quality work, fair wage practices, and merit-based management practices can further incentivize and complement the learning agenda. Workers in OECD countries whose jobs are at high risk of automation remain 30 percentage points less likely to participate in adult learning than their counterparts in low-risk jobs.

The crisis led to a five-fold increase in employer provision of online learning opportunities to their workers, and a fourfold increase in the number of individuals seeking online learning on their own initiative. However, these efforts must be further accelerated and coordinated, both to support workers and to ensure adequate talent is available as businesses and economies bounce back. The Reskilling Revolution platform brings together leaders from governments, business, and society to collaborate on providing better education skills and jobs to 1 billion people by 2030.

Ensuring that no one is left behind. The crisis has not affected everyone equally. Women, youth, ethnic minorities, and low-income workers are among those hit hardest. Young people have faced disruption to planned assessment and university closures. In addition, as hiring has slowed, young people entering the labor market are facing a reduction in entry-level opportunities, internships, and apprenticeships. Top-earning workers have been able to work from home, while low-earning workers have less opportunity to do so.

There is no time to waste to put in place comprehensive policies to avoid creating a lost generation and greater disadvantages for those who were already impeded from full access to learning and earning. Both public and private sector efforts must ensure that as we rebuild, the post-pandemic labor market embeds justice and fairness for all segments of society.

Resilience, inclusion, and sustainability must be at the heart of international collaboration in 2021. To that extent, better alignment of public and private policies and actions is crucial. By joining forces to address these issues, the OECD and the World Economic Forum will help build a future of work that works for all.

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Angel Gurría is secretary-general of the Organisation for Economic Co-operation and Development. Klaus Schwab is founder and executive chairman of the World Economic Forum, and the Author of “Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet” (Wiley). This article was part of the Davos Agenda, a virtual event that occurred Jan. 25-29, 2021.