The long depression

Via Michael Roberts

"Back in work, still out of pocket: Labour market recovery since the Great Recession - the jobs gap will not be closed until 2017 at the earliest AND the wages gap may never be closed. Some countries have real wages over 20% below where they would have been without the Great Recession and subsequent weak recovery. The UK scores worse than Greece on this relative measure.

According to a study by the OECD, the labour market recovery in OECD countries has been steady but slow since the Great Recession. More worrying is the fate of wage growth over the same period. 

The jobs recovery has been underway since the first quarter of 2010, when the OECD average employment rate reached its post-crisis trough, with only 58.6% of the population (ages 15-74 years) employed. This was 2.2% lower than the employment rate in 2007, corresponding to 20.3 million missing jobs. Despite the slow and uneven nature of the economic recovery, the jobs deficit had fallen to 5.6 million by the end of 2015 and the OECD Employment Outlook 2016 (OECD 2016) now projects that the jobs gap in the OECD area will close during the course of 2017. While this is welcome news, the fact that the Great Recession depressed employment for nearly ten years testifies to its severity and the price workers have paid.

The jobs deficit is still large in Greece, Ireland, and Spain (where the jobs gaps are currently 9%, 7.9% and 8.5% respectively, and projected to remain sizeable, albeit smaller, by the end of 2017). 

The crisis also adversely affected earnings and the resulting wage gap may be difficult to close. The Great Recession was characterised not only by severe job losses but also by widespread and often deep wage adjustments. 

Real wages fell sharply during the crisis in hard-hit countries such as Greece, Ireland, Portugal, Spain, and the Baltic States, but wages stagnated or barely grew almost everywhere. Comparing real wage growth between 2000-07 with that between 2008-15 suggests a sharp deceleration in a number of countries, including the Czech Republic, Estonia, Latvia, and the United Kingdom. By 2015, real hourly wages in these countries were more than 25% below where they would have been if wage growth had continued at the rate observed during 2000-07, and this wage gap exceeded 20% in Greece, Hungary, and Ireland. "