Opportunities in the world of work.

 

The international community widely recognizes the centrality of decent work for all to achieve social justice. The Declaration concerning the aims and purposes of the ILO (1944) (Declaration of Philadelphia) explicitly states that the achievement of full employment is one of the solemn obligations of the ILO. The Universal Declaration of Human Rights (UDHR), the International Covenant on Economic, Social and Cultural Rights, the Employment Policy Convention, 1964 (No. 122), and, most recently, Sustainable Development Goal (SDG) 8 all address the importance of freely chosen and productive employment.

Education also serves a critical purpose in decent work. The Preamble to the ILO Constitution and the ILO Declaration of Philadelphia as well as Article 26 of the UDHR affirm the right to education and lifelong learning. These international standards must nevertheless be translated into action in national policies and thereafter into results in employment. This section analyses key employment indicators to assess progress in equal opportunities for decent and productive employment.

 Assessing equal access to opportunities for decent and productive employment requires going beyond a singular focus on the unemployment rate. While the unemployment rate reflects economic conditions in more advanced economies, especially during and following periods of crisis, and is a highly relevant indicator of the challenges young people face in making the transition from school to work,2 it does not fully reveal the broader challenge of creating decent, formal jobs, let alone capturing the different forms of labour underutilization. The trends over the last 20 years show that the greatest challenge globally are persistently high rates of informal employment, which accounts for approximately 58 per cent of total employment (see figures 2.1 and 2.2). As expected, the share of informal employment in the working-age population (aged 15 and over) declines as income rises, with the highest percentage found in low-income countries (53.0 per cent) followed by lower-middle-income countries (46.8 per cent). When much of the population is engaged in informal employment, including as street vendors, in informal workshops, and as domestic workers and agricultural labourers, access to social protection and other benefits is limited or non-existent. Unemployment accounts for just 3 per cent of the working-age population in 2025, down from 4 per cent in 2005. The unemployed population share varies less by income level, implying that the unemployment rate is a limited indicator for capturing labour market dynamics across different country income groups. The potential labour force, which captures people who are currently outside the labour force but ready to join it, accounts for 2.2 per cent of the working-age population globally in 2025. The potential labour force reaches 5.8 per cent in low-income countries (Africa has the largest share of these workers).

 

A job with low pay, an unhealthy working environment, no right to join or form a union, overly long hours, or discriminatory conditions, including violence and harassment, is not decent work and is incompatible with social justice. These kinds of jobs, often of low productivity and informal, limit the ability of workers to fulfil their potential for themselves, their families or society. While some formal jobs fall short of decent work and informal jobs vary widely in quality, no informal job can be fully considered decent work. As shown in figure 2.2, informal employment accounts for the largest share of the working-age population in developing countries. Between 2005 and 2025, the global informality rate – which is the share of informal employment in total employment – declined from 61 to 59 per cent for men, representing a gradual but slow fall (see figure 2.3, panel A). The informality rate for women fell from 57 per cent in 2005 to 54 per cent in 2020, before experiencing a rise of almost 2 percentage points by 2025, during and following the COVID-19 pandemic (a phenomenon most notable in lower-middle-income countries)

Reductions in informality from 2005 to 2025 are evident in all country income groups, but are most notable in upper-middle-income countries, which experienced a decline in the informality rate of 7.5 percentage points. The informality rate is significantly higher in low- and lowermiddle-income countries and has fallen at a slower pace. More concerningly, the decline in the informality rate has slowed down since 2015, including in lower-middle-income countries, which suggests that growth in these countries is failing to deliver formal employment, and thus decent work. Overall, economic growth is less and less likely to deliver formal employment. At the start of the twenty-first century, 1 per cent growth led to a 0.50 per cent rise in formal jobs – faster than overall employment growth. Since 2015, however, this relationship dropped to 0.38 per cent, showing a weaker link between growth and formal job creation (ILO 2025a, para. 18).

Worker educational levels and, to a lesser extent, age are also related to formalization. In all but 2 of the 122 countries for which there are data, the informality rate is higher for workers with a basic educational level than for those with an advanced educational level (see figure 2.4). The gap can be quite large, even in low-income countries (see figure 2.5). But while workers with a higher education level may have a reasonably strong guarantee of better-quality work, they may be unemployed (or in other forms of labour underutilization) more often or for longer than workers with lower educational levels because of the scarcity of such jobs. Importantly, decent work is not a privilege reserved for those with greater educational achievement. If decent work is to be available to all, the focus must also be on creating an enabling environment in which decent work can thrive for workers of all levels of educational attainment.

 

A worker’s employment status – or the nature of the employment relationship – is also strongly linked to informality. In 94 per cent of the 134 countries with reliable data, the informality rate is twice as high among the self-employed, which includes those working on family farms and for themselves as street vendors, as among employees (ILO 2023b). The self-employed (mainly own-account workers and contributing family workers, along with employers) still represent the largest category of workers in developing countries (see figure 2.6). The share of employees in lowincome countries is just 12.9 per cent for women and 25.6 per cent for men, with the difference largely driven by the dominance of women’s role as contributing family workers. The share of employees in total employment rises with income level and only exceeds 50 per cent in upper-middle- and high-income countries.

The persistence of informality and the dominance of self-employment in developing countries are reflections of the same overarching challenge: inadequate creation of salaried jobs. While a proportion of all employment in a healthy labour market includes some entrepreneurs, the lack of wage and salaried employment poses major challenges to providing access to social protection and other benefits in many countries. Another closely aligned indicator is the distribution of employment by economic sector, as differences in productivity across economic sectors can affect working conditions, particularly wages. A central feature of economic development since the Industrial Revolution has   been the shift of workers and capital from low-productivity sectors, namely agriculture, to high-productivity sectors, which has been traditionally manufacturing. However, this classic development path is not being repeated in many regions, particularly as technology has left manufacturing less labour-intensive. Consequently, workers leaving agriculture often end up in the highly heterogeneous services sector, often in its low-productivity segments. An economy in which employment is dominated by low-productivity sectors constitutes an important barrier to decent work. Therefore, promoting structural transformation that enables such work continues to represent one of the main overarching development goals for low- and middle-income countries. Sectoral distribution trends reveal that the global share of employment in agriculture fell from 38.5 per cent in 2003 to 26.1 per cent in 2023 (see figure 2.7). As noted earlier, rather than resulting in a rise in the share in manufacturing employment, which continues to be at around 14 per cent, it led to an increase in the services sector, particularly in trade, transport, accommodation and food, and business and administrative services, which rose from 24.2 per cent in 2003 to 31.6 per cent in 2023. 

Unfortunately, the services sector struggles to create decent and productive employment, particularly in low- and middle-income countries.5 Only upper-middle-income countries have been able to increase manufacturing employment, with a rise from 15.6 per cent in 2003 to 18 per cent in 2023. However, this figure has not moved for several years and remains far lower than the manufacturing employment shares of advanced economies earlier in their development process (including in the first half of the twentieth century). The share in manufacturing in low-income countries has stagnated over the last 20 years from the level achieved in 2003 (5.6 per cent). While not all manufacturing employment comprises high-paying, quality jobs, manufacturing is a sector that provided much decent work during the last century. Loss of these manufacturing jobs combined with the structural difficulties much of the services sector faces in providing decent work have compounded world of work challenges and contributed to the growing lack of trust in institutions. 

The unemployment rate is typically considered the main indicator of labour market conditions, even if it only represents a small share of the working-age population. In advanced economies, the unemployment rate has been seen as an important reflection of economic conditions, along with structural barriers for certain groups, especially youth. The global financial crisis of 2008 to 2009 resulted in a sharp increase in unemployment around the world, which persisted during the post-crisis period, particularly for youth (see figure 2.8). The short-term impact of the COVID-19 lockdowns on unemployment was even more severe than the global financial crisis but was followed by a sharp recovery, supported by large stimulus packages and targeted policies. The youth unemployment rate, more than twice the level for the total population aged 15 and over, persisted at around 14 per cent post-crisis and did not return to a lower rate until after the COVID-19 pandemic. Differences between unemployment rates for men and women are much more modest (not shown in figure 2.8).

While these characteristics of unemployment are well known and much discussed in other reports, one trend has emerged in recent years: a divergence between low- and high-income countries. The unemployment rate has typically been higher in high-income countries, most notably after the global financial crisis, resulting from their greater exposure to the ensuing “Great Recession”. However, the unemployment rate in these labour markets fell sharply preCOVID-19 and, despite a sharp rise in 2020 and 2021, quickly returned to a downward trend, reaching historical lows in 2024 and 2025 (at 4.4 per cent). Two factors have contributed to this trend in high-income countries: increasing labour shortages arising from an ageing population and better policy measures (for example, EU youth employment guarantees and dual education systems) that have helped the jobless, especially youth, find employment. It is also important to note that part of the post-COVID-19 decline in unemployment reflects a reduction in labour force participation, as many workers temporarily or permanently exited the labour market. Conversely, the unemployment rate has historically been lower in low-income countries (4.6 per cent) than in high-income countries (6.8 per cent), reflecting that in these labour markets, most people cannot afford to remain unemployed and thus turn to own-account work in the informal economy. By 2025, however, the pattern reversed with an unemployment rate of 5.2 per cent in low-income countries versus 4.4 per cent in high-income countries. In 2025, the highest unemployment rate is in upper-middle-income countries (5.7 per cent). Disparities in unemployment are also associated with other characteristics. For example, unemployment rates for persons with and without disabilities show a large and persistent gap. Based on data for the 13 mostly high-income countries that have an unbroken series of data from 2004 to 2022, the unemployment disability gap in 2022 was at 9.5 percentage points – a slight downward trend from 2004 to 2022.

Beyond the narrowly defined unemployment rate, labour market underutilization can be better assessed using other indicators, including time-related underemployment and the potential labour force. Time-related underemployment refers to employed people who work fewer hours than they want and are available to work. The potential labour force refers to people out of employment who would like to work but are either not actively searching for a job or not available for work and thus outside the labour force. The LU2 measure refers to time-related underemployment; the LU3 measure refers to the potential labour force; and the LU4 measure combines both concepts.

Figure 2.9 shows that, in contrast to the open unemployment rate (LU1), in which there is not much of a sex disparity, when insufficient working hours are considered, a gap of 1 percentage point opens between men and women (LU2). The gap increases to nearly 3 points when discouraged workers and others in the potential labour force are included (LU3). When both are combined, the gap rises to 3.3 points (LU4), which likely reflects unpaid care work and other structural inequalities.

Labour underutilization rates are highest for lower country income levels (see figure 2.10), which differs from the income-level patterns observed for unemployment, highlighting the importance of considering all forms of labour underutilization. In other words, when all relevant indicators are considered, every country has more work to do in terms of creating productive opportunities that promote social justice.

Gender disparities are a found in labour markets around the world and are affected by a range of supply and demand-side barriers, including inadequate job creation (leading to too few opportunities outside the home), social norms, education and skills mismatches, a lack of childcare facilities and infrastructural gaps that create security issues for women (Verick 2025). These barriers can result in low labour force participation rates, occupational segregation, gender wage gaps and higher rates of labour underutilization – all of which undermine equal access to opportunities. The global labour force participation rate, which is the share of employed and unemployed as a ratio of the working-age population, has fallen among school-age youth due to higher school enrolments (a positive trend for both young men and women). Thus, despite falling female labour force participation rates from 2005 to 2025, the participation gap between men and women has narrowed slightly, from 26 to 24 percentage points from 2005 to 2025 (see figure 2.11). 

Notwithstanding the significant impact of the COVID-19 lockdowns on women’s employment (especially among young women) in 2020, the global labour force participation rate for women bounced back from 2022 to 2024 to a level witnessed more than a decade ago and around a percentage point above the level predicted by the pre-COVID-19 (downward) trend. One broader, widely examined perspective is the U-shaped relationship between economic development and women’s labour force participation.

 The conventional argument is that when a country is poor, women work out of necessity, mainly in subsistence agriculture or homebased production. As a country develops, economic activity shifts from agriculture to industry, which benefits men more than woman. At higher stages of economic development, education levels rise, fertility rates fall and social norms shift, enabling women to apply their advanced education levels to opportunities in the services sector. While such a relationship is (weakly) evident in cross-sectional data, it is not as robust when looking at longitudinal trajectories (Verick 2025). Countries, even at the highest income levels, continue to experience significant gaps between men and women in their labour force participation rates: the experience of high-income countries is not a predetermined path for other economies unless policy measures support that process.

 There is a strong relationship between unpaid care responsibilities and labour force participation rates. Care responsibilities, however, constitute only one factor affecting women’s ability to work and access decent jobs. While labour force participation rates are seen as a higher-level indicator, they do not reflect differences in the quality of employment or other forms of labour underutilization. It is important to keep in mind that the significant disparities facing women in the world of work do not arise solely because of differences in unpaid care work. Occupational segregation – where workers are clustered in certain lower-paying sectors or roles based on sex, age, ethnicity or other characteristics – and the ensuing challenge to ensuring equal pay for work of equal value discussed, undermines efforts to create equitable access to decent work, thereby undermining social justice as well. ILO global estimates of labour force participation rates by household type indicate that the labour force participation rate is the lowest for women in extended family households and in households with a partner and children under the age of six (see figure 2.12). Even in the case of households without children under the age of six, women have significantly lower participation rates than men, who do not experience the same variation across household types. Women who are single parents have the highest labour force participation rates of all women, which reflects the reality that, with few exceptions, employment is the main avenue of generating the income needed to manage a household and raise children. 

About 18 billion hours a day of unpaid work are spent on cooking, cleaning and caring for infants, the sick and elderly persons – on average over 2 hours per person per day. Many of these workers, who are mostly women, are also paid workers. Others are not in paid employment and devote all their working hours to their households, families and communities. Some of these workers might also prefer to work for pay if they had enough time or had jobs that would make it possible to continue with their care work.

The disparity in unpaid care work represents a major barrier to women’s labour force participation. Women around the world perform, on average, 76.2 per cent of the total of hours devoted to care work, dedicating 3.2 times more time than men: 4 hours and 25 minutes per day, against 1 hour and 23 minutes for men (ILO 2018). Over the course of a year, this represents a total of 201 workdays (on an 8-hour basis) for women compared with 63 workdays for men. Differences in unpaid care work means that women are time-poor, which constrains their participation in the labour market.

Policymakers around the world are rightly concerned about heightened and persistent youth unemployment rates, particularly during and following periods of crisis (and as a driver of crisis and weak social cohesion stemming from the frustrations young people experience in the labour market). However, the challenges young people face in gaining a foothold in the labour market go beyond unemployment. For this reason, global and national focus has shifted to a broader indicator, the share of young people not in employment, education or training – the NEET rate — as outlined in SDG target 8.6. Despite the general trend of lengthening educational trajectories, one of the most persistent challenges in the world of work is the stubbornly high NEET rate of young people – in other words, those who are neither engaged in the job market nor preparing themselves for it through education or training. This is typically not by choice (ILO 2024). The global NEET rate has fallen slowly over recent decades, down from 22.8 per cent in 2005 to 20.4 per cent in 2025, despite the rise in 2020 during the COVID-19 pandemic (see figure 2.13). This world average masks two different trends: declining NEET rates in middle- and high-income countries versus rising NEET rates in low-income countries, which now have the highest rates of all country income groups. The latter trend is in line with the rise in the unemployment rate highlighted as outlined in SDG target 8.6.

Despite the general trend of lengthening educational trajectories, one of the most persistent challenges in the world of work is the stubbornly high NEET rate of young people – in other words, those who are neither engaged in the job market nor preparing themselves for it through education or training. This is typically not by choice (ILO 2024). The global NEET rate has fallen slowly over recent decades, down from 22.8 per cent in 2005 to 20.4 per cent in 2025, despite the rise in 2020 during the COVID-19 pandemic (see figure 2.13). 

This world average masks two different trends: declining NEET rates in middle- and high-income countries versus rising NEET rates in low-income countries, which now have the highest rates of all country income groups. The latter trend is in line with the rise in the unemployment rate highlighted earlier and suggests that the extent to which young people are disengaged in the labour market or in education is a much bigger problem in the poorest countries. There is also a significant difference in NEET incidence by sex. In 2025, 28.2 per cent of young women were not in employment, education or training, compared to 13.1 per cent of young men, meaning about two thirds of youth in NEET status are women (see figure 2.14). The gender gap in NEET rates is lowest in highincome countries (0.6 percentage points) and highest in low-income (16.6 points) and lowermiddle-income countries (22.9 points). This gender gap is driven by the complex set of factors that drive disparities in labour force participation rates for men and women, including social norms, care responsibilities and the lack of job opportunities that are accessible to young women.

High NEET rates pose a serious threat to both economic resilience and social stability. When large segments of the youth population remain disconnected from education and the labour market, societies forfeit critical investments in human capital and undermine their long-term growth. The effects are particularly severe when young people are pushed into informal or mismatched employment that fails to reflect their skills and qualifications, leading to underutilized talent and suppressed earnings. The resulting disconnect between aspirations and opportunities can fuel frustration, disillusionment and distrust in institutions – undermining social cohesion and increasing the risk of unrest. The exclusion of young women compounds these challenges by reinforcing gender inequality and squandering the productive potential of half the population.  

Education is one key driver of labour market outcomes that has witnessed positive trends over many decades, especially for girls and young women. Education has an instrumental, as well as intrinsic, value. Individuals with more schooling have higher earnings (Psacharopoulos and Patrinos 2018), live longer and healthier lives (Meara, Richards and Cutler 2008), are less likely to be involved in crime (Lochner 2020) and pass these advantages on to their children (Hu and Qian 2023). Over a person’s lifetime, skills, knowledge and education open the door to the labour market and other opportunities that exist. Their impact is wide, multidimensional and long-lasting. Nevertheless, education and skills development are critical but not enough to guarantee access to decent work to all. In addition to its instrumental value, education is also important for people to be part of an informed society, and for productive and adaptive workforces, as affirmed by both the Preamble to the ILO Constitution and the ILO Declaration of Philadelphia. Article 26 of the UDHR states unequivocally that “everyone has the right to education” and that it “shall be directed to the full development of the human personality” making it clear that education has intrinsic as well as instrumental value and that it is a right of all human beings at all stages of life. Article 28 of the United Nations Convention on the Rights of the Child (1989) calls on States to “recognize the right of the child to education”. Article I of the World Declaration on Education for All (1990) states that “Every person – child, youth and adult – shall be able to benefit from educational opportunities designed to meet their basic learning needs” including lifelong learning. For more than 20 years, there has been steady progress in increasing school completion rates. They have risen by 10 percentage points for primary, 17 points for lower secondary and a full 22 points for upper secondary since 2000. Particularly striking is the completion rate for girls, which has increased by 21, 14 and 25 points for the three education levels, overtaking completion rates for boys in the mid-2010s (see figure 2.15). 

The job market, however, demands more than merely finishing school but also literacy and numeracy proficiency. In global terms, cognitive skill levels were relatively constant from the first Programme for International Student Assessment (PISA) assessment in 2000 until 2018 (see figure 2.16). This relative stability, however, obscures somewhat differing trajectories in high- and middle-income countries. Whereas the median percentage of children achieving basic reading proficiency fell in high-income countries by about 2.3 percentage points per year over this period, it rose by about 6.3 percentage point in middle-income countries. This improvement in performance in middle-income countries was accompanied by rising completion rates – more children were making it to secondary school and learning more. Data on educational achievement in low-income countries remain limited. The COVID-19 pandemic upended these trends, with learning plummeting worldwide. The share of 15-year-olds achieving minimum proficiency in 2022 was the worst since the assessment began in 2000, dropping by almost 10 percentage points. The learning loss might be even larger than suggested by the aggregate data (Haelermans et al. 2022), since those most severely affected are less likely to be tested at all due to increased drop-out rates (Crato and Patrinos 2025). National surveys such as the National Assessment of Educational Progress in the United States (Pinto 2023), the Estudio Virtual de Aprendizajes in Peru (Peru, Ministry of Education 2022) and the Sistema de Avaliação da Educação Básica in Brazil (INEP 2023) show similar results.

Whether this learning shortfall creates a permanent deficit or whether it can be closed later in the educational and labour market trajectories of these children remains an open question (Crato and Patrinos 2025) and is likely to depend on the nature and extent of remedial public policies (Benveniste, Sánchez and Herman 2023). However, since formal academic learning is increasingly important to success in the world of work, this phenomenon may be yet another of the COVID-19 pandemic’s unfortunate legacies. Some degree of vocational, technical or other tertiary education is a key determinant of the ability to find and hold a decent job and thereby to provide for oneself and one’s family (Goldin and Katz 2007). The same trends observed in secondary completion rates can be seen in tertiary enrolment. In 1993, only 13.9 per cent of women and 14.9 per cent of men were enrolled in tertiary education. By 2023, this had increased to 46.4 per cent for women, overtaking men, whose gross enrolment ratio had reached 40.3 per cent. The rise in tertiary education enrolment is evident across all country income groups, with the largest rise in upper-middle-income countries (an increase of 51 percentage points from 1995 to 2021) and high-income countries (30 points from 1995 to 2023) (see figure 2.17). 

Meanwhile, in low-income countries, the tertiary enrolment ratio has also increased but remains below 10 per cent (the latest figure is 9.5 per cent for 2021).

While rising tertiary educational attainment is a positive trend, challenges arise in the matching of graduates with the right jobs due to differences between what employers are looking for and the available skills of jobseekers. ILO estimates show that, between 2013 and 2023, the share of under-educated workers relative to their occupations declined from 37.9 to 33.4 per cent, while the share of over-educated workers rose from 15.5 to 18.9 per cent (ILO 2025b). This shift is partly driven by “degree inflation”, since employers are demanding ever higher educational credentials for jobs that do not necessarily require them. Finally, social justice in the contemporary economy entails extending learning beyond initial schooling to offer lifelong upskilling pathways. Workers should have meaningful opportunities to upskill or reskill throughout their working lives.

Equal access to opportunities in the world of work requires an enabling environment for establishing and running a business, whether large or small. This environment comprises a complex mix of policy, legal, institutional and regulatory conditions that can create an environment for fostering sustainable enterprises that comply with labour standards, national laws and regulations while also promoting productivity. As the private sector accounts for over 80 per cent of employment in most labour markets, promoting sustainable enterprises is crucial for decent work and social justice (ILO 2007a). Enterprises represent a diverse set of economic units, varying widely in size, operational capacity and complexity. These structural differences directly influence the quality and sustainability of the jobs enterprises create, their investment capacity and their value-added, as well as the working conditions and wages offered. Large companies generally outpace smaller firms in productivity and job quality, given their higher productivity and thus resources to invest in training, technology and worker benefits. By contrast, micro- and small enterprises often struggle to achieve even a minimum efficient scale and stability needed for sustained growth and a positive socio-economic impact. In particular, many MSMEs face significant constraints that hinder their expansion and innovation, limiting their ability to generate decent work and competitive output over time.

MSMEs account for roughly 70 per cent of total employment worldwide, but an estimated 80 per cent operate in the informal economy.12 There is a significant productivity gap between MSMEs and large companies, although this varies across countries. Worldwide, large firm labour productivity is 14 per cent higher than for MSMEs (Ciani et al. 2020). MSME gaps also exist for formal training for workers (24 per cent), spending on research and development (16 per cent) and innovation (15 per cent). Many informal MSMEs are characterized by limited capital, smallscale and low-skilled labour – factors which contribute to their low productivity and create a self‐reinforcing “low-productivity trap” that keeps them informal. In effect, low productivity constrains these firms’ capacity to formalize and grow, which in turn keeps them unproductive. This has led scholars and policymakers to emphasize productivity growth as a critical precondition for business formalization and sustained MSME development. Three factors help overcome barriers to quality employment in firms, including MSMEs: credit; access to technology; and investment in training workers. They are all critical to help firms increase productivity and, in turn, improve working conditions. A critical factor in an enabling environment for enterprises, particularly MSMEs, is access to credit and its affordability. The Job Creation in Small and Medium-SizedEnterprises Recommendation, 1998 (No. 189), finds removing these barriers a crucial element of social inclusion and sustainable enterprises because: “Inequality of assets and opportunity hinders the ability of poor people to participate in and contribute to growth” (ILO 2007a, ix). Emerging technologies, including artificial intelligence (AI), are creating both opportunities and challenges through the development and deployment of new applications and tools. AI has the potential to substantially increase productivity through the automation of certain tasks, which can lead to job losses or augmentation of existing roles, depending on the distribution of these tasks (Gmyrek et al. 2025). However, the opportunity for firms to benefit from new technologies depends on their capacity to afford these tools, along with having the necessary infrastructure – most notably, electricity and broadband internet. Access to broadband internet has increased considerably over recent years, particularly through mobile telephony. Fixed-broadband subscriptions have increased from 3.4 per 100 people in 2005 to 19.6 per 100 people in 2024, while it has surged far higher for active mobile-broadband subscriptions, which reached 94.6 per 100 people in 2024. However, costs for faster internet connections remain a barrier in developing countries. While global figures are not available on the deployment of AI, EU data show that more than 41 per cent of larger firms (250 workers or more) in the European Union used at least one AI technology in 2024, compared with approximately 11 per cent for smaller companies (10 to 49 workers) (see figure 2.18). This deployment gap by firm size has the potential to limit theproductivity effects of AI and other related technologies. In addition to access to credit and infrastructure, including technology, a critical factor in driving sustainable enterprises’ growth and longevity is building the skills of workers at all levels through continuing vocational training. Investing in on-the-job training is much greater in large companies, which have the necessary facilities and human resource personnel to support such efforts (OECD 2013). In the European Union in 2015, 69.3 per cent of small enterprises provided training to their staff, compared with 85.6 and 95.3 per cent for medium-sized and large enterprises, respectively (Cedefop 2019). 

To overcome barriers in access to equal opportunities for decent and productive employment, macroeconomic, sectoral and enterprise interventions need to be aligned with policies that improve the quality of jobs, as well as policies that address the supply side, including skills and active labour market programmes. The Employment Policy Convention,1964 (No. 122), recognizes the importance of a coordinated framework that encompasses both economic and social policy, laying the foundation for ILO guidance on national employment policies. Past decades of ILO technical assistance have revealed that policies are much more effective when they work in tandem rather than in opposition to each other. For example, to overcome the barriers to formalized employment, integrated approaches are needed, including expanding access to social protection and developing simplified regulatory and tax systems for enterprises. Without such supporting interventions, growth will not automatically translate into decent, formal employment. To achieve this goal, a broad, pro-employment framework should encompass policies that act both on the demand for and the supply of labour, along with job matching. On the demand-side, economic conditions and the nature of growth are affected by macroeconomic policies, along with sectoral, industrial, investment and trade policies and measures to support a conducive environment for sustainable enterprises. On the supply side, skills and lifelong learning remain critical, together with measures to provide access to social protection and care services, among others. Employment services and active labour market programmes play an important role in supporting, matching and improving transitions in the labour market. In response to the persistence of informality, integrated approaches are needed to promote the transition to the formal economy. Policies affect men and women differently due to persisting gender roles, social norms and unequal access to resources and opportunities that shape labour market participation. For this reason, gender-equality objectives need to be incorporated in policy responses to overcome the structural barriers that hold women back, including gender wage gaps, occupational segregation, a lack of access to quality care services and the unequal sharing of care responsibilities among women and men. As demonstrated by lessons learned from the implementation of youth employment guarantees in the European Union and other integrated policy responses targeting young people, overcoming youth employment challenges requires a comprehensive and multipronged approach.

Macroeconomic policies are foundational to shaping the transformation of economies, and have profound implications for employment, inequality and social justice. Placing employment at the core of macroeconomic strategies is not only feasible but essential for achieving inclusive, sustainable and resilient growth (ILO 2023b). Since the late 1970s, macroeconomic policy – primarily understood as fiscal and monetary policy – has prioritized inflation control, debt reduction and market efficiency. Macroeconomic stability is crucial for an economy to produce good jobs. Uncertainty in interest and exchange rates, high and persistent inflation, out of control debt and unpredictability in monetary and fiscal policy cause businesses to delay or cancel investments and make it harder for both employers and workers to plan for the medium and long term. Nevertheless, policies narrowly focused on price stability are not sufficient to promote jobs and structural transformation. Employment-friendly macroeconomic policies – those that explicitly incorporate the goal of decent work – are essential to address informal employment and other decent work deficits, while supporting transitions to formalization and a low-carbon economy. Fiscal policy plays a particularly vital role. Public investment in infrastructure, health, education, care and social protection systems not only supports aggregate demand, but it also enhances productive capacity of economies and strengthens human capabilities and well-being. Welldesigned fiscal stimuli, targeted at labour-intensive sectors and social spending, can generate strong employment multipliers, particularly in times of crisis. For example, during the COVID-19 crisis, fiscal stimulus packages were implemented at historically unprecedented levels, with a focus on supporting social protection and job retention schemes (Islam, Fedi and Verick 2024). The latter schemes reached 50 million workers in advanced economies during the height of the pandemic in lockdowns in OECD countries, keeping them in jobs and supporting household incomes (OECD 2020). Over the longer term, social protection spending has a documented positive effect on employment and growth, especially in low- and middle-income countries (Arjona, Ladaique and Pearson 2002). However, these countries face major financing gaps, which have been more constraining as debt levels have increased in recent years. In 2024, for low-income countries, building social protection floors required the mobilization of 4 times their annual government expenditure or nearly 28 times their social protection expenditure (Cattaneo et al. 2024), which is out of reach for governments without further development assistance and debt relief. Monetary policy also holds potential for supporting employment objectives. While price stability remains an important goal, it should not result in job destruction or wage suppression. A more balanced approach is needed where central banks consider employment indicators alongside inflation targets. This dual-mandate approach, already institutionalized in some advanced economies, such as the United States, can help prevent prolonged joblessness, especially in times of stagflation or external shock.

Another key contribution of employment-centred macroeconomic policy is its role in correcting regional and social disparities (ILO 2023b). By prioritizing job creation in underserved areas and among marginalized groups – such as women, youth and informal workers – governments can address deep-rooted inequalities that hinder development and social cohesion. This requires coordinated policy action, including progressive taxation, equitable wage-setting mechanisms and targeted subsidies for distressed enterprises and workers. For macroeconomic policies to be truly employment-centred, they must be guided by inclusive governance and social dialogue (ILO 2025c). Tripartite mechanisms involving governments, employers and workers help ensure that policy choices reflect the realities of labour markets and contribute to fairer outcomes. This participatory approach enhances both the legitimacy and the effectiveness of macroeconomic governance.

Sectoral policies aim to shift employment and output towards higher-productivity sectors of the economy that support the creation of decent jobs. As discussed earlier, the transition of workers out of agriculture and into manufacturing has dwindled in most developing regions in recent decades, constraining the ability for the labour market to act as a path to prosperity. Industrial and sectoral policies serve both to expand employment and to diversify production into more employment-intensive and productive sectors, with higher domestic value-added, which consequently support further demand in the economy (ILO 2021, 2023b). Against a backdrop of stalled structural transformation, these policies have regained prominence in countries’ efforts to promote growth of specific sectors and jobs.18 Sectoral policies are not limited to narrowly defined “industrial” policies, since they include all attempts to diversify production of goods and services across agriculture and the minerals sector, manufacturing and services, into higher productivity, higher-value-added production. Employment growth is most sustainable and inclusive when it takes place in sectors that generate employment for diverse groups within populations, including youth, women and persons with disabilities. Recognizing the heterogeneity of enterprises within and across sectors is essential, as differences in business capabilities and productivity levels shape their growth trajectories, affect job creation and influence the overall pace of structural transformation. Sectoral policies should directly target inclusion, while promoting job-rich and fair societal transitions. Sectoral policies can help to support a balanced macroeconomic environment. For example, Africa’s low inflation tolerance, in response to internal and external shocks, is largely due to its insufficiently diversified and productive supply capacity (ILO 2021). An increase in domestic demand, including through macroeconomic policy measures (such as fiscal stimulus), may lead to rising imports and inflation, constraining the growth of employment (Aboobaker and Michell 2022). Sectoral policies aimed at structural transformation can help to lift these constraints, which act as brakes on employment generation when aggregate demand expands too quickly. Sectoral policies should also work in tandem with enterprise policies to help businesses grow and create jobs, along with skills interventions and labour market policies that aim to improve the quality of and access to jobs. Targeted support directed to MSMEs can help address constraints, such as access to technology, markets, skills and finance, to help them onto a path to high productivity. Given that MSMEs are responsible for most employment, policies targeted towards supporting their success help increase social justice to the extent to which they promote productivity, formalization and decent work. Ensuring coherence across macroeconomic, sectoral and enterprise policies is critical. A whole‐of‐government approach – anchored in inclusive social dialogue – can align fiscal, trade, industrial,

education and labour regulations into a unified strategy. An integrated framework not only avoids policy conflicts that arise when one type of policy is at odds with others but also creates synergies between policies to ensure that growth, job creation, labour protection and social protection advance in concert. 

The Committee on Sustainable Enterprises of the International Labour Conference in 2007 established 17 conditions for a conducive environment for sustainable enterprises – especially MSMEs (see box 2.1). These conditions ensure that businesses face a level playing field and can take advantage of technology transformations, including AI development and adoption. However, they require greater investments to ensure they reach their targets. When enterprises operate in an environment of well-designed policies and regulations, they are better able to improve productivity and long-term business sustainability (Cusolito and Maloney 2018), foster innovation and create jobs offering improved working conditions and benefits. As opposed to misleading debates on deregulation, there is widespread recognition that the private sector needs regulations that are easy to implement and provide the right incentives in line with the broader goals of policy. At all levels, identifying and implementing effective regulations requires social dialogue, which includes all types of negotiation, consultation and information-sharing among representatives of governments, social partners or between social partners. Overall, a conducive environment for sustainable enterprises covers myriad policy and regulatory dimensions affecting businesses throughout their life cycle from start-ups to insolvency, including broader economy-wide or sectors-specific factors, such as access to financing, regulatory frameworks and property rights. There are significant variables and country-specific features of the business environment around the world though the constraints and challenges tend to decrease as a country’s level of income increases. Given the importance of MSMEs and the challenges they face, specific interventions are especially helpful in the early stages during start-up to support their growth. Some of the key areas for investment include access to electricity and digital infrastructure (as highlighted earlier). Efforts are needed to overcome barriers to accessing financing, which is typically more constrained for smaller enterprises. 

To promote investment in sustainable businesses, property rights need to be well established, along with enforcement of contracts and safeguarding of assets. Specific interventions are needed to address market concentration, which can lead to greater inequality in both labour and product markets, hurting wages and employment opportunities for workers and negatively affecting small businesses. In labour markets, a monopsony results from the dominance of a few “buyers” of labour in a specific geographic area or industry, which gives such employers market power to set wages lower than what would prevail in a competitive market (Manning 2003). 

In addition to this wage effect, market power can lead to lower levels of employment and restrictions on mobility of workers towards better opportunities. One key policy intervention would be to limit the use of non-compete clauses for workers that prevent them from freely changing employment. Others include regulating market concentration through competition policy, alongside more traditional approaches such as minimum wages and other wage policies. Finally, in today’s globalized economy, ensuring decent work requires extending responsibilities beyond domestic regulation to global supply chains. Support is found in such documents as the United Nations Guiding Principles on Business and Human Rights (UN 2011) and the TripartiteDeclaration of Principles concerning Multinational Enterprises and Social Policy, as amended in 2022, which calls on multinational enterprises and their business partners to uphold labour rights, guarantee safe working conditions and promote decent work throughout their supply chains. In sum, concerted efforts to create an enabling environment for sustainable enterprises are a key contributor to social justice.

Labour markets are being reshaped by technological innovation, changing employment relationships and structural transformations. These shifts highlight the need for workers and firms to develop robust and adaptable skills portfolios that allow them to adjust to change and seize new opportunities. To design effective skills development policies, it is essential to understand not just which skills are in demand, but also which combinations of skills are associated with improved employment outcomes. Indeed, investment in skills is a key component of any effort to overcome barriers to equal opportunities. The ILO Strategy on Skills and Lifelong Learning 2030 (ILO 2023c) outlines a comprehensive approach to developing resilient systems that provide inclusive access to high-quality skills development and lifelong learning opportunities. 

The strategy is built on five pillars: 

▶improved policies, governance and financing 

▶strengthened skills needs intelligence 

▶innovative and flexible learning programmes 

▶inclusive skills programmes for diverse labour market needs 

▶quality apprenticeships and work-based learning. 

These pillars aim to promote human development, full, productive and freely chosen employment, and decent work for all, aligning with the SDGs. While lifelong learning is essential to achieve social justice in a context of a rapidly evolving world of work, recent ILO research (ILO, forthcoming) reveals significant gaps in the coverage of lifelong learning and skills development, particularly within the world of work. These gaps disproportionately affect certain groups and risk reinforcing existing inequalities.

Although traditional data on skills demand andsupply remain limited – particularly in low- and middle-income countries – new insights from online job postings offer a clearer picture. Recent ILO research (ILO, forthcoming), using job vacancy data from selected emerging and developing countries, reveals that skills rarely operate in isolation. Instead, employers increasingly seek bundles of interconnected competencies. Socio-emotional skills are strongly connected among themselves and with cognitive skills, while manual skills show weaker associations. Some skills – particularly core cognitive skills, general computer literacy, customer service, and social and character skills – emerge as foundational, serving as stepping stones to more complex skill sets such as machine learning, AI or managerial competencies. These skill bundles also relate closely to job quality. Higher wages are generally associated with jobs requiring a larger number of high-complexity skills, particularly cognitive and digital competencies. While socio-emotional skills show more varied wage effects – positive in some contexts, neutral or even negative in others – they remain essential complements to cognitive and technical skills, reinforcing their role as foundational. Moreover, vacancies requiring more complex skills consistently offer better non-wage job attributes – such as opportunities for human capital development, teamwork and greater societal impact – suggesting a link between skills to both pay and working conditions. Beyond improving employment outcomes, the right mix of skills also strengthens workers’ and firms’ adaptability to transformation (ILO, forthcoming). For instance, in the context of digitalization, highly complex skills such as machine learning, software development and managerial skills are often rewarded, but they are typically built upon foundational competencies such as general computer skills, core reasoning abilities and even physical coordination skills. Socioemotional skills, particularly social and character traits, further support this foundation and appear consistently across skill networks. As noted earlier, MSMEs invest considerably less in lifelong learning than larger firms (Percy 2021). Yet, when they do invest in skills and training, the effects on firm performance are positive (Rauch and Hatak 2016). Due to their smaller size and the lack of internal resources and capacity, these enterprises need targeted support to invest in training, including through tax incentives and grants, in the context of a broader skills policy frameworks. Preparing for a digital future requires modernizing national skills systems. Institutions must be equipped with the tools and capacities to integrate digital technologies, while workers must have access to foundational and advanced digital skills, including AI. To maximize the benefits of digital transformation, integrated and coherent national digitalization strategies, developed through social dialogue, should address both the demand and supply of skills. These strategies must take a systems-wide perspective, recognizing that digital technologies can transform all aspects of a skills ecosystem – not only the delivery of training, but also how learning is recognized, managed and used in the workplace.

Active labour market policies (ALMPs) can help address deficits in fair opportunities that act as inhibitors to social justice. ALMPs encompass a wide array of interventions aimed at overcoming barriers for the labour market integration of jobseekers and workers (Asenjo, Escudero and Liepmann 2024; ILO 2016). ALMPs operate primarily at the individual level but are important in building a more dynamic and inclusive labour market. 

They consist of five main areas of intervention: 

▶training programmes 

▶labour intermediation services 

▶public employment programmes 

▶employment subsidies 

▶support for entrepreneurship and self-employment. 

There is robust empirical evidence that ALMPs improve labour market outcomes. Several metaanalyses confirm their positive effects on employment and job quality (Card, Kluve and Weber 2018; Escudero et al. 2019; Kluve et al. 2019). In Latin America and the Caribbean, for instance, ALMPs have been associated with increased employment, including transitions into formal jobs (ILO 2016). However, their effectiveness hinges on sound design and operational integration. Successful programmes tend to offer comprehensive services rather than stand-alone interventions, and are adapted to the specific needs of jobseekers and local labour market conditions. For example, training tends to be more effective over the long term when it is complemented by counselling and other labour intermediation services (ILO 2019). Certain design features are consistently linked to better outcomes, including sufficient programme duration, tailored targeting strategies (for example, focusing on disadvantaged individuals), and close alignment between training content and employer demand (Escudero et al. 2019; ILO 2016). For young people, ALMPs in low- and middle-income countries are more likely to be effective when they focus on vulnerable groups and provide the kind of opportunities and resources that participants might not otherwise access (Kluve et al. 2019).

Labour intermediation services, which include services such as job counselling or job search assistance, are aimed at matching jobseekers to available job vacancies. These can play a vital role in improving the functioning of labour markets and reducing search costs for both workers and firms (Nicodemo and García 2015). These services can help individuals without access to networks of informational advantages, enabling them to compete more fairly in the labour market (Autor 2008) and make job searches more effective (J-PAL 2022). Public employment services are central providers of labour intermediation and offer a variety of complementary services, including career guidance, counselling and links to training. In recent years, many public employment services have invested in digital service delivery to improve accessibility and efficiency through online job portals, AI-driven job matching and data analytics (ILO 2023d). These digital services must be accessible to vulnerable populations. Private employment services also play an important role in facilitating job matching and placement and may be well suited to reach specific sectors or emerging forms of employment. ILO standards setting, including the Private Employment Agencies Convention, 1997 (No. 181), focuses on identifying the conditions that foster equitable employment practices in the recruitment and placement activities of private employment agencies, and promote cooperation between both public and private employment services. Effective labour market policies should ensure that public and private intermediation services complement rather than compete with each other, forming a coherent system that enhances job matching, reduces fragmentation and upholds fair standards for all.

Public employment programmes can be an important response to underemployment and unemployment, especially during economic downturns or in areas with persistent labour market issues such as rural or undeserved regions. These government-funded initiatives create jobs through infrastructure projects, environmental services or community activities, aiming to provide immediate income support and short-term employment for vulnerable groups such as youth, women and informal workers. Well-designed public employment programmes can improve public assets, strengthen local economies and foster social cohesion. Their effectiveness depends on careful planning, ensuring job quality, offering training and support, linking participants to long-term employment and integrating public employment programmes into broader employment and social protection strategies. Examples include India’s Mahatma Gandhi National Rural Employment Guarantee Act (NREGA), which provides 100 days of paid work to rural workers, and Ethiopia’s Productive Safety Net Programme, which created over 8.3 million jobs between 2010 and 2014 (ILO 2023d).

Employment subsidies, such as wage subsidies and hiring incentives, can help facilitate access to jobs, particularly for groups facing systemic barriers to labour market entry, by reducing hiring costs for employers and encouraging the integration of unemployed or underemployed individuals into formal, decent work. These subsidies can play an important role during economic downturns or recovery periods (for example, job retention schemes), along with tackling labour market discrimination, supporting youth transitions from school to work and addressing long-term unemployment. Evidence from the global financial crisis shows that hiring subsidies and short-time work schemes can help sustain employment during crises (Cahuc 2019). However, poorly targeted subsidies can create windfall gains for firms that would have hired regardless of the subsidy. They may also lead to substitution effects, where subsidized workers displace unsubsidized ones without increasing overall employment. If not properly monitored, these interventions risk reinforcing patterns of temporary and lowpaid employment (ILO 2019). To avoid this, employment subsidies must be time-limited and linked to sustainable, quality employment, offering social protection, sufficient wages and opportunities for skills development and upward mobility. Combining subsidies with skills development services increases their effectiveness and better positions beneficiaries for longterm success (ILO 2016).

Economic growth is a required ingredient in the recipe for robust, inclusive economies. While critical, growth on its own does not guarantee social justice. In order to ensure equal access to opportunities for decent and productive employment, policy and investment decisions must align with broader social objectives. Informal employment represents one of the most important challenges to decent work and social justice, with the overall structural transformation process stalling in many developing regions and not providing an easy path for jobseekers, workers and enterprises to move to higher-productivity sectors. While unemployment rates have reached record lows, especially in high-income countries, other measures of labour underutilization have increased in low-income countries. Furthermore, low unemployment masks a deeper concern: job quality has eroded in many contexts, as underemployment, insecure and precarious forms of employment have proliferated and are undermining economic security, protection and rights. Similarly, there has been real progress in educational attainment for women and girls, and some improvement in youth NEET rates in more advanced economies. However, NEET rates remain alarmingly high in low- and lower middle-income countries – especially among young women – creating a danger of lasting social exclusion for today’s young people. Impressive progress has been made on enrolment in education, including at tertiary levels, although there are skill mismatches and deficits in learning outcomes following the COVID-19 pandemic. Educational improvements are not always translating into jobs to which people aspire – a reminder that education and skills training policies, no matter how effective, are insufficient in isolation to increase the availability of decent work. For these reasons, a comprehensive pro-employment policy approach is needed to overcome barriers that prevent workers from equal access to opportunities for decent and productive employment. In practice, this means ensuring that policy measures at macro, meso and micro levels are well aligned and comprise a broader, transformative approach to jobs, including linkages to other areas addressed in this report, such as rights and social dialogue.