Record low unemployment: a seismic shift in labour markets?
Participants in the Bureau conversation discussed recent developments in the labour market and medium-term prospects, with some considerations devoted to the specific Austrian situation. The lead speaker briefly summarised the main labour market trends since the onset of the pandemic; he then zoomed in on the record low unemployment at the current juncture associated with high vacancies and relatively widespread reports of labour shortages. He noted that difficulties to fill jobs are not necessarily and exclusively related to skills gaps but seem to be indicative of a more generalised phenomenon.
He acknowledged that the pandemic may have given a temporary push to labour reallocation away from certain sectors, but he also stressed that more persistent underlying factors are likely to be at play. In particular, he suggested that demographic trends are likely to further accentuate the problem of severe labour scarcities in the medium-term. Moreover, preference shifts regarding work-life balances and the quality of jobs in general will become more relevant for job-matching, employers` competitiveness in hiring, and the war for talent at the regional, national, and international level. As a result, the bargaining power of workers will be significantly strengthened, and downward wage pressures which characterised recent decades will be a thing of the past. In a worst case scenario, the production of essential goods and services could be impaired, pricing poorer segments of the population out of the (high-quality) market, with the health and care sector mentioned as specific examples.
While participants broadly agreed with the observations by the lead discussant, several speakers disputed any general claim that the power pendulum has structurally swung from capital to labour, pointing inter alia to to a large potential for mobilising unused labour reserves in both advanced and emerging economies and the immense capital needs arising from the green transition. However, regional imbalances were seen at risk of further widening, in particular where adverse demographic developments will be confronted with the gravity pull of dynamic agglomerations elsewhere. Participants argued that better migration management will be helpful, but can only provide a relatively small contribution to address the problem. The Chairman concluded that we may indeed have to carefully re-evaluate whether employers or workers sit on the short side of the market, and what this implies for the functioning of our societies.