Labor shortages have pushed up wage growth, benefitting low-wage workers but adding to inflation risks. Bringing more workers back into the labor force would ease these pressures while making the recovery more inclusive.
With supply constraints likely to persist, the challenge for policymakers is to support recovery without allowing high inflation to become entrenched.
A proposed $50-billion trust fund could help low-income and vulnerable middle-income countries build resilience to balance of payments shocks and ensure a sustainable recovery.
In the US and UK, the recent labor market puzzle can be partly explained by mismatch, the pandemic’s effect on women (in the US) and older workers leaving the work force.