OECD: Millions of workers face poverty trap despite recovery

Millions of workers in developed countries such as Ireland risk being trapped in poverty, despite the economic recovery becoming widespread, according to the OECD.

OECD: Millions of workers face poverty trap despite recovery

The organisation, which helps governments tackle the challenges of a globalised economy, says time is running out for those at the bottom of the economic ladder.

In the latest OECD Employment Outlook, the group focuses on minimum wages and cites Ireland as among those countries where minimum pay levels have not kept pace with the average industrial wage.

“In many OECD countries statutory minimum wage levels have risen relative to median (average) wages during the recovery... In a few other countries, however, the value of the minimum wage has fallen relative to the median wage (Ireland, Spain, and Turkey, for example) and in some cases, the nominal value of the minimum wage was cut (for example, Greece).”

This finding accords with the recent poll conducted by the independent think tank Tasc, which found that Ireland has one of the highest rates of low pay in the EU and OECD.

In its report, the OECD says minimum wages can promote a number of social objectives, among them operating as a key labour standard for ensuring fair pay, an instrument for making work pay, a tool to boost tax revenue, and an anchor for pay negotiations.

“At reasonable levels, increases in the minimum wage are unlikely to cause substantial jobs loss,” the OECD report states.

However, it describes minimum wage levels as a “blunt tool” for tackling poverty. “Many poor families have no one working and minimum wages do not guarantee that workers will be able to work a sufficient number of hours to lift them out of poverty,” it says.

The report shows that unemployment remains significantly above pre-crisis level in the majority of OECD countries. In Greece, unemployment soared from just over 7% in 2007 to 25% by the end of 2014.

In Ireland, unemployment rose from less than 4% to just under 10% over the same period. In contrast, some countries experienced little variation. Austria’s unemployment level, at just under 5%, was higher than Ireland’s during the boom but barely crept beyond that figure when recession struck.

Youth has been among the hardest-hit groups and may experience long-term scarring, the OECD says.

“Youth have been one of the groups whose employment has fallen most in recent years,” it says. “The rise in youth unemployment is of great concern, particularly in those OECD countries where it has risen to dramatic levels.”

It cites youth jobless levels in Greece and Spain at more than 50% but also notes that some countries have been more successful in combating it, including Ireland.

“Whilst this is encouraging, youth unemployment is still above the pre-crisis level in the large majority of countries. The persistence of high unemployment among youth risks compromising their long-term career prospects,” the report states.

The OECD also expresses concern at the persistently high level of the so-called NEET rate — youths neither in employment, education, nor training. “Countries hit hard by the global crisis — Greece, Ireland, Italy, Slovenia, and Spain — have seen particularly large increases in the NEET rate,” it says.

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