Wage growth 'at virtual standstill' for past five years

Real wage growth in the developed world has come to a “virtual standstill” since 2009 and has fallen in some countries, according to a new report.

Wages fell by between 2% and 5% a year in Ireland, Greece, Portugal and Spain, resulting in “real hardship” for low-paid workers, the Organisation for Economic Cooperation and Development (OECD) said.

The Paris-based think tank, which covers 34 countries, added that unemployment would remain well above pre-crisis levels next year in most countries.

Average jobless rates will fall slightly over the next 18 months in the OECD area, from 7.4% this year to 7.1% at the end of 2015, the report said.

“While wage cuts have helped contain job losses and restore competitiveness to countries with large deficits before the crisis, further reductions may be counter-productive and neither create jobs nor boost demand,” OECD secretary-general Angel Gurria said.

“Governments around the world, including the major emerging economies, must focus on strengthening economic growth and the most effective way is through structural reforms to enhance competition in product and services markets.

“This will boost investment, productivity, jobs, earnings and well-being.”

Long-term unemployment is likely to have peaked but remains a major concern, the report concluded.

Just over 16 million people – more than one in three of the unemployed – had been out of work for 12 months or more in the first quarter of 2014, almost double the number at the start of the economic crisis.

In countries hardest hit, notably in Southern Europe, this had led to a rise in structural unemployment which would not be automatically reversed by a pick-up in economic growth, the OECD warned.

Unemployment has decreased in the Republic of Ireland by 35,500 in the past year.