Jobs recovery has 'only just begun' says OECD

While the OECD expects this gap to narrow to 1.5 percentage points by the end of 2015 amid a strengthening US recovery and "modest improvements in the euro area," it warned that just seven of OECD countries, including Poland and Germany had more people in employment now than before the financial crisis. Many others, including most of the eurozone, had seen little or no increase in employment rates since start of the financial crisis.

"In most euro area countries as well as Denmark, the employment rate is currently at, or close to, its lowest level since the start of the crisis and the jobs recovery has yet to begin," the report said.

"To a large extent, the economic recovery has remained too weak to generate a significant improvement in employment. GDP (gross domestic product) is still well below potential in most countries and the number of job vacancies relative to the numberof unemployed jobseekers remains depressed."

The OECD expects unemployment fall from 7.7pc in the final quarter of last year to 7.1pc by the end of 2014. The jobless rate in the UK is also expected to continue to fall over this period.

The report also showed that British workers suffered the steepest decline in their pay in the developed world in the wake of the Great Recession, even as unemployment has fallen rapidly.

High inflation eroded the pay packets of two thirds of British workers in 2010, the OECD said, while half of these workers also experienced a nominal pay cut, mainly via or reduced overtime or bonus payments.

Mark Carney, the Governor of the Bank of England, said last month that he was surprised by the resilience of the UK labour market. He said history would suggest financial crises left "semi-permanent" scars on the labour force. "That hasn't been what the British worker has done," he said. "What we have seen is that unlike some other major economies, [there has been] a higher attachment to the labour force, people have gone out and looked for work ... We have learned [from that]." However, the Bank slashed its wage forecasts in half at the latest Inflation Report. It now expects average weekly earnings to grow by just 1.25pc this year.

The OECD data showed half of all workers suffered some sort of pay cut suring the crisis. The data for the UK were compiled using administrative figures, which define nominal pay freezes in a slightly different way. Using household data, UK wages still suffered some of the biggest declines, with the falls only surpassed by bailed-out nations Portugal and Greece, as well as Spain and Estonia.

By contrast Finland saw the fewest wage cuts, followed by workers in the Netherlands.

"Many of those who kept their jobs have seen their real earnings grow more slowly or even fall because of the crisis," the report said. "A persistent increase in unemployment in many OECD countries has exerted considerable downward pressure on real wage growth. This has helped to curb unit labour costs and thus promote external competitiveness in a number of countries, particularly in the euro area. Further wage adjustment, especially given low inflation, would require painful wage cuts and could increase the number of working poor."

The OECD called for countries to press ahead with structural reforms while protecting those on low pay.

"A range of policies are needed to promote competitiveness, growth and job creation. In addition to sound macroeconomic policies to promote the recovery, these include: reforms to increase competition in the markets for goods and services; helping displaced workers shift to new areas of employment; and shoring up incomes of low-paid workers."

"Labour market performance should be assessed in terms of both the number and quality of job opportunities, i.e. policies should seek to promote more and better jobs."

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