By IMFBlog

John Evans is Head of the Trade Union Advisory Committee to the Organisation for Economic Cooperation and Development, which represents some 65 million organized workers worldwide. In this podcast, he says that the labor market works much like any other market, driven by supply and demand, and the latter is very dependent on how well the economy is doing. 

“On the demand side, the labor markets globally haven’t fully recovered from the Great Recession after the [U.S. investment bank] Lehman Brothers crash in 2008. We still have 200 million people unemployed. We still have very sluggish growth. On the income side, what we’ve seen globally, but particularly in certain countries, is a generalized rise to greater inequality of labor incomes in the last 30 to 35 years.”

Is this only a problem for developing countries?

“I think it affects everyone,” says Evans. “The Gini coefficient increased very significantly in some of the industrialized countries. The post-World War II years was a period of falling income inequality, whereas now we’ve seen a jump back to some of the levels that existed in the 1920s.”

Evans says the IMF’s analysis of advanced economies shows that half the increase in inequality between the top decile and bottom decile is due to weaker unions and declining unionization. As such, there’s a strong case for advocating more broadly-based inclusive growth, which is what most institutions now say is their key policy.

“Sixty percent of people globally work outside formal employment. So, how the labor market institutions re-attach them to the labor force is crucially important.”

While technology is transforming the labor force, Evans says technology will have less impact in the short term on increasing jobs, but more impact on the quality of work, and potentially on income distribution.

“If we look at past waves of technological change in different countries—trying to make sure workers have new skills, that there are policies to help them move to new jobs, and that they have a sense of security and protection in that change process—it’s sometimes been managed well, and sometimes badly. But it’s certainly a feature of history.”

Evans believes governments are looking at labor markets as crucial to delivering jobs and reducing inequality. Research by institutions like the IMF and World Bank has found new results about labor markets, and policymakers are listening. “The models we’ve seen in some countries of good social dialogue, social partnerships, and high levels of trust between both management and workers and their unions, and also a recognition of that by governments, is making the process better.”

Listen to the podcast:

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