ILO report reveals potential of green, digital sectors; highlights youth unemployment

The latest International Labour Organisation’s (ILO)  World Employment and Social Outlook: Trends 2025 (WESO trends) report, reveals the potential of green and digital sectors while addressing persistent labour market issues such as informality, exclusion, and youth unemployment, especially in low-income countries.

Ekkehard Ernst, chief of the macroeconomic policies and jobs unit at  ILO’s research department shared these insights. He also noted that labour markets are under strain due to unresolved debt issues, the rising costs of climate change, and geopolitical instability.

He also shed light on the significant impact of geopolitical tensions, climate change, artificial intelligence, and economic inequalities on global labour markets.

Labour market stagnation: A lack of momentum

At the start of 2025, the global employment outlook appeared uncertain. Ernst explained that while global unemployment remains steady at 5 per cent, the broader picture reveals stagnation rather than progress.

“The situation isn’t necessarily worsening, but we are not seeing the improvements we had hoped for,” he noted. Many low-income countries, in particular, continue to struggle with slow economic growth, persistent informality, and working poverty.

According to Ernst, these nations are failing to move towards the Sustainable Development Goals (SDGs) for 2030, with no significant shifts expected in the coming years.

Structural barriers and economic disparities

One of the key challenges facing the global workforce is the lack of investment and structural change, particularly in developing economies. “We expected a post-pandemic recovery that would go beyond 2020 levels, but instead, investment has slowed, and economic transformation has stalled,” Ernst explained.

Structural change, where workers transition from low-productivity sectors such as agriculture to more advanced industries, has largely failed to materialise. Alarmingly, in some low-income countries, workers are even returning to agriculture, further diminishing their economic prospects.

Trade barriers and restrictions on migration have exacerbated these difficulties, preventing countries from fully integrating into the global economy. “Rather than benefiting from international trade, many of these economies remain isolated, unable to export elsewhere,” Ernst said.

The impact of geopolitical tensions and climate change

The report also underscores the dual threats of climate change and geopolitical instability.

Climate-related disasters are increasingly damaging infrastructure in vulnerable nations, further hindering economic development. “Most low-income countries lack the resources to protect themselves from climate change or to recover from its effects,” Ernst warned.

Similarly, growing trade tensions and restrictive migration policies are impeding economic growth. “Protectionist measures and barriers to movement are shutting down opportunities for countries that need them most,” he added.

The youth employment crises

One of the most concerning findings in the report is the precarious situation of young workers, particularly in low-income countries. The Not in Employment, Education, or Training (NEET) rate remains worryingly high, with many young people dropping out of the labour market entirely.

“Globally, youth unemployment is about 12 percent more than twice the overall unemployment rate,” Ernst stated. However, beyond these figures, there is a growing trend of economic inactivity among young people. Many who struggle to find stable employment also lack access to education and training, creating a vicious cycle of exclusion.

This problem has been especially pronounced since the COVID-19 pandemic. “In many countries, the NEET rate has stabilised, but in low-income nations, it continues to rise due to a lack of opportunities,” he observed. The inability of these economies to generate sufficient jobs is not only harming young people but also discouraging investment, further slowing economic activity.

Addressing these challenges requires a multi-pronged approach. Ernst identified three key areas for action:

Encouraging local economic growth

Many low-income countries experience economic success concentrated in a few major cities, while rural areas remain underdeveloped. Expanding infrastructure, education, and job opportunities to a wider population is crucial.

Greater integration into global markets

Restrictive trade policies have prevented many countries from capitalising on global economic opportunities. “If developing economies are unable to export, they will struggle to grow,” Ernst emphasised.

Facilitating legal and regulated migration

Labour shortages in many advanced economies could be alleviated through targeted migration policies. “With proper legal frameworks and training, migration could be a win-win for both sending and receiving countries,” he suggested.

With many of these issues on the agenda at the World Economic Forum, Ernst urged global leaders to reconsider policies that may be hindering economic recovery. “The first priority should be to avoid creating further barriers to global trade and migration,” he said, warning that protectionism could ultimately harm both developing and advanced economies alike.

He also highlighted the need for greater collaboration on labour mobility and skills development. “There are already agreements in place that facilitate migration and employment, but they need to be scaled up to have a real impact,” he noted.

Ernst pointed to the green transition as an opportunity for low-income countries to achieve energy independence and economic resilience. “By investing in renewable energy and sustainable industries, these nations can reduce their reliance on volatile oil prices and create long-term employment opportunities,” he concluded.