The Irish labour market is not expected to recover from the pandemic until 2024 at the earliest, one of the slowest rebounds of any country, the Organisation for Economic Co-operation and Development (OECD) has warned.
This raised the prospect of long-term unemployment and possible economic “scarring”, with some workers finding it more difficult to return to full-time work, it said.
In its latest employment outlook report, the Paris-based organisation said labour markets in developed nations have recovered only half of the loss of employment they suffered due to the pandemic, with the young and low-skilled impacted most.
While economic growth was accelerating on the back of vaccine rollouts, a full recovery to pre-pandemic levels of employment may take several years, it said.“In many ways, there is light at the end of the tunnel. But this light burns more brightly for some than others,” it said, noting the pandemic has deepened existing social and economic divides.
“Unemployment is high and jobs are not expected to make a rapid recovery,” it said.
In relation to the Irish labour market, it predicted it would take 4½ years following the outbreak of the pandemic to return to pre-pandemic levels of unemployment, ie not until the middle of 2024.
This compared with a euro zone average of 2¾ years and an OECD average of 3¾ years.
Only Chile, Czech Republic, Iceland and Israel were expected to have a slower labour market rebound than the Republic.
The Republic’s Covid-adjusted unemployment rate fell to 18.3 per cent in June, down from 21.9 per cent the previous month, as outdoor hospitality reopened after months of lockdown.
Despite the decline, the headline unemployment rate is a multiple of the sub-5 per cent rate that pertained prior to the pandemic.
In its report, the OECD warned that a slow rebound in jobs increased the risk of long-term unemployment in OECD countries.
“With increasing numbers of unemployed, large numbers still working reduced hours or on temporary layoff, and elevated inactivity, the labour market remains vulnerable to a rapid build-up of longer-term unemployment,” it said, noting many unemployed workers had put their job search on hold while Covid restrictions are still enforced.
“As these individuals return to the labour force (alongside those currently working reduced hours and on temporary layoff who find their jobs no longer exist), current levels of labour market tightness – the ratio of job openings relative to individuals searching for employment – may well be expected to deteriorate,” it said.
“This could lead to lower job-finding rates and, potentially, long-term unemployment. Over a year into the crisis provoked by the Covid-19 pandemic, long-term unemployment is becoming an increasingly urgent concern,” it said.
Stefano Scarpetta, the OECD's director for employment, labour and social affairs, said: "Failing to address inequality and exclusion now is likely to result not only in deeper social divisions but will have negative ramifications for productivity and economic recovery."