OECD Employment Outlook 2025: Labour Markets Remain Strong, But Storm Clouds Loom

Job markets across OECD countries remain remarkably resilient, with labour force participation hitting record highs and unemployment rates staying near historic lows. However, the latest OECD Employment Outlook warns of looming challenges as geopolitical tensions, trade uncertainties, and demographic shifts begin to weigh on growth prospects.

Employment at Record Levels, But Growth Slowing

As of May 2025, OECD-wide employment reached 668 million, marking a 26% increase since 2001. Employment rates have climbed to 72.1% in the average OECD country—the highest since at least 2005. Despite these achievements, job growth is slowing. Employment is projected to increase by 1.1% in 2025 and 0.7% in 2026, a modest pace compared to recent years.

Unemployment remains exceptionally low, holding steady at 4.9% in May 2025, after more than three years at or below 5%. However, women face slightly higher unemployment, with rates 0.5 percentage points above men.

Gender Gaps Narrowing

Encouragingly, gender gaps in employment and labour force participation are narrowing. Between Q1 2024 and Q1 2025, the employment rate of women rose by 0.2 percentage points more than men, and the participation gap narrowed by 0.3 points, driven by more women entering the labour market.

Wages Recovering, But Not Fully

Real wages are trending upward across most OECD countries, yet remain below early 2021 levels in about half of them—before the inflation surge that followed the pandemic. The lowest-paid workers have seen stronger wage protection, thanks to increases in real statutory minimum wages in nearly all 30 OECD countries with a national minimum wage.

Demographic Time Bomb: Ageing Populations and Shrinking Workforces

The report underscores a stark long-term challenge: population ageing. The working-age population is expected to decline by 8% across the OECD by 2060, with some countries facing drops of over 30%. Meanwhile, the old-age dependency ratio—those aged 65+ compared to working-age adults—has surged from 19% in 1980 to 31% in 2023, and is projected to hit 52% by 2060.

Without decisive action, annual GDP per capita growth could fall by 40%, from 1% (2006-2019) to 0.6% (2024-2060).

Call for Ambitious Policy Reforms

OECD Secretary-General Mathias Cormann stressed the need for bold policies:
“Population ageing is set to lead to significant labour shortages and fiscal pressures. We estimate that, by 2060, annual public spending on pensions and health will rise by 3% of GDP. Ambitious policy action is needed to improve job opportunities for older workers, unlock the untapped labour market potential of women and young people, and revive productivity growth, including by ensuring workers have the right skills to benefit from new AI tools.”

Proposed measures include:

• Encouraging older workers to remain in the labour force by promoting career mobility and lifelong learning.
• Boosting productivity through digital transformation and responsible adoption of AI.
• Tapping underutilized talent pools, such as women and youth, to counter demographic drag.

Outlook and Full Report

While current labour markets remain strong, the OECD warns that demographic change poses significant structural risks. Governments must act now to sustain growth and social stability in the decades ahead.

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