Wages are growing only half as fast as they should given low rates of unemployment across the developed world, and that is unlikely to change soon, the Organization for Economic Cooperation and Development said Wednesday.
In its annual report on the jobs market, the Paris-based research body said sluggish wage growth wasn’t largely driven by international trade or the movement of jobs to developing economies.
Instead, it pointed to low rates of productivity growth, a shortage of skills to meet rapidly changing demands and the willingness of workers coming out of a long period of unemployment to accept low pay as the main factors holding back pay.
“We could expect some pickup in wages, but some of the fundamental factors holding wages back are going to stay,” said Stefano Scarpetta, the OECD’s director for employment.
The world economy grew at its fastest pace in six years in 2017 and the OECD noted that more people were in work than before the financial crisis. However, it said “wage growth is still missing in action,” with pay rising only half as quickly as it has done in the past at the same, low rates of unemployment.
The research body said there were big differences in the rates at which pay was rising for different income levels, with those already enjoying the highest incomes seeing the fastest growth.
“This…is contributing to a growing dissatisfaction by many about the nature, if not the strength, of the recovery: while jobs are finally back, only some fortunate few at the top are also enjoying improvements in earnings and job quality,” said Mr. Scarpetta.
The research body said pay per hour worked had grown by 2.1% annually over recent years, down from 4.8% in the period leading up to the global financial crisis. Even allowing for lower inflation, real wage growth has been 1 percentage point lower than it was before the crisis.
The U.S. is no exception to this overall pattern, with real wages unchanged in 2017, a weaker outcome than the 0.5% rise recorded across the OECD’s 35 members, which are mostly rich countries.
The OECD said a number of factors contributed to weak wage growth, including the return to employment of many people who have been without work for a long period, are desperate to earn again, and will therefore accept low pay. The OECD said there has been a “significant worsening” of the earnings gap between part-time and full-time workers linked to the rise of “involuntary” part-time employment. These drags on wages should ease over coming years as the number of long-term unemployed falls and more people get full-time jobs.
What is unlikely to change quickly is a deficit in skills among lower paid workers, which can only be remedied through better education and training over a worker’s lifetime that would raise their productivity and earnings.
“The jobs destroyed during the crisis are not the same as those created in the recovery,” said Mr. Scarpetta, noting that “high-level cognitive skills…are in short supply.”
Mr. Scarpetta pointed to OECD surveys that suggest almost half of adults have “very limited digital skills,” adding that fixing that problem “is a pretty massive endeavor.”
Write to Paul Hannon at paul.hannon@wsj.com
