By Dr. Gyan Pathak
Global Labour market outlook for 2025 is increasingly fragile. One the one hand, slower economic growth is expected to reduce global employment growth rate, and on the other unemployment rates in the countries with early 2025 data remain at historic low. Job vacancies are slightly below their long-term trends, and business and consumer sentiment has declined in the first quarter of 2025.
“World Employment and Social Outlook: May 2025 update” of International Labour Organization says that the situation may suggest that employers are more cautious about hiring new workers during this period of uncertainty.
Global GDP growth has recently been revised down by IMF to 2.8 per cent from 3.2 per cent due to persistent geopolitical tensions, recent trade disruptions, and heightened uncertainty that is expected to reduced global employment growth from 1.7 per cent to 1.5 per cent in 2025, which will reduce employment by 7 million. It is important to note that this projection does not imply a comparable rise in unemployment, as slower economic growth may reduce labour force entrants or increase exits.
The estimated shortfall of 7 million workers is especially concerning considering the global jobs gap – defined as the number of people who would like a job but currently do not have one – which is estimated to reach 407 million people in 2025. Slower employment growth also raises concerns if it were to result in a greater share of workers taking lower-quality or more vulnerable jobs.
Across 71 countries, around 84 million workers whose employment is linked to consumer demand in the United Sates face elevated risks of disruption due to higher tariffs and trade uncertainties. That amounts to 4.3 per cent of total employment in these countries. Most of those workers – 56 million – are in Asia and the Pacific.
The labour income share fell from 53 per cent in 2014 to 52.4 per cent in 2024, reinforcing upward pressure on inequality. Had the labour income share remained at its 2014level, global labour income would have been $1trillion (in constant PPP) higher in 2024, and each worker would have earned an additional $290 (inconstant PPP) on average that year.
Generative AI is set to transform the labour market, though its future impact remains difficult to predict. Nearly one in four workers is employed in occupations with some level of exposure to tasks that could be automated by AI. About 16.3 per cent of workers are in roles with medium exposure to generative AI and 7.5 per cent face high exposure – particularly in high-skill occupations –where generative AI could automate most tasks.
Asia and the Pacific remains among the world’s fastest-growing regions, with projected growth of 3.8 per cent in2025 led by strong growth in South Asia. However, headwinds are intensifying as trade tensions are weighing negatively on regional prospects. While employment in Asia and the Pacific region was previously expected to grow by approximately1.9 per cent (or 38 million employed people) in 2025, the current forecasts predict employment will grow by a more modest 1.7 per cent (or by 34 million) in the current year.
The weakening of the global economy in 2025 has important implications for employment prospects worldwide, with lower economic growth likely to translate into slower employment growth in the short term. A key driver of the more pessimistic outlook is the recent shift in trade dynamics, which has heightened uncertainty around global demand.
Employment growth remains a critical priority for many countries, particularly those facing underemployment, as it contributes directly to improved livelihoods and social stability. However, for gains in employment to translate into meaningful improvements in living standards, they must be accompanied by rising labour incomes. This, in turn, depends on sustained productivity growth and, crucially, on how the benefits of that growth are distributed, emphasizes WESO May 2025 update.
It is lamentable that there has been more rapid growth of informal employment over the last decade. As of2024, formal employment worldwide increased by 12.6per cent since 2014, while informal employment grew by 13.7 per cent over the same period.
More than 2 billion people were in informal employment in 2024 – representing 57.8 per cent of all employed workers worldwide. The persistence of informal employment – and in some regions its expansion – highlights the ongoing challenges of translating economic growth into formal and decent job opportunities.
Then there is job mismatch. More than half of workers are mismatched to their jobs, points out the report. At the beginning of the past decade 46.6 per cent workers had education appropriately matched to the requirement of their job, but it is now only 47.7 per cent.
The report says that promoting the formalisation of work and investing in skill development is essential to ensure that economic growth translates into quality employment for workers. Additionally, to ensure that the gains of economic progress are fairly shared, it is essential to strengthen labour market institutions that uphold fundamental principles and rights at work, promote social dialogue, and reinforce collective bargaining. These institutions are not only key to reversing the decline in the labour share of income, they are also fundamental for inclusive, equitable, and sustainable economic growth. (IPA Service)
