G20 Leaders Summit
Preparatory L20 Meeting
Remarks by Angel Gurría, Secretary-General, OECD
Cannes, 2 November, 2011
As prepared for delivery
Ladies and Gentlemen,
This G20 Leaders Summit is taking place against a worrying backdrop for the world economy and job prospects. Economic growth is faltering in many advanced G20 economies and there has been some pegging back of rapid growth in major emerging economies. This was confirmed by our preliminary economic indicators; we will have definite numbers by the end of the month and I am not expecting major changes.
The short-term outlook is now more uncertain than usual, even if we are all somewhat relieved about the EU Summit last week.
This uncertainty is bearing heavily on consumer and business confidence and thus, in turn, is affecting negatively consumption and investment decisions and the short-term growth prospects. We therefore cannot expect any significant easing in unemployment before 2013 and this should take center stage at the Summit discussions as Juan and I have insisted for long.
The jobs crisis has three particularly worrying aspects. First, the risk of unemployment becoming entrenched is more and more real in a number of G20 countries. Second, the crisis impacts disproportionately on youth. Finally, growing inequality threatens to affect social cohesion and the living standards of vulnerable families and individuals. To deal with these threats, job creation must be restarted quickly, accompanied by stronger and more effective social safety nets. This is the key message of the OECD to G20 Leaders.
The threat of unemployment becoming entrenched
One of the most worrying features of the present situation is the steep rise in the number of people who have been unemployed for a year or more. Today, this concerns one out of three unemployed workers in the US and even 40% in Spain. This will take many years to unwind, compounded by the fact that long-term unemployed are at high risk of exclusion and poverty.
How should governments respond to this difficult labour market situation? The OECD’s message is clear. Renewed job creation is essential for bringing down unemployment.
First and foremost, this is about rebuilding confidence through credible plans that combine growth-enhancing structural reforms with fiscal consolidation in countries where the latter is needed.
It also means taking cost-effective measures to boost job creation that focus on the most vulnerable groups. Hiring subsidies which support companies that decide to expand their workforce can be a cost-effective way to boost job creation in the short-run.
Greater investment in training would facilitate the re-employment of jobseekers, especially those with low or obsolete skills, and help to maintain an effective labour supply.
The universal challenge of tackling youth employment
The second major challenge is to give youth a better start in the world of work. This was the central message in the OECD Employment Outlook 2011 released by us in September.
Young people have borne a disproportionate share of job losses from the global crisis and many of them are facing significant barriers to finding worthwhile employment. Improving the labour market situation of youth requires a two-pronged approach. First, action needs to be directed at tackling the rise in youth joblessness that took place during the crisis. Labour market programmes, including effective counselling, job-search assistance and even temporary hiring subsidies for low skilled youth, can make a difference in facilitating the transition to productive and rewarding jobs for young jobseekers.
Second, policies must be put in place to give all youth a better start in the labour market. Equipping youth with basic skills relevant to the labour market is a key responsibility of the education system. A successful transition from school to work can be facilitated through well-designed vocational education and training programmes. Youth unemployment rates are lower in countries with successful apprenticeship systems, such as Germany.
I welcome wholeheartedly the decision of the Labour and Employment Ministers to recommend setting up an Intergovernmental Task Force on Employment, with a first focus on youth. We stand ready to provide all required support to the Mexican Presidency in its endeavour to develop and implement such an initiative, closely collaborating with the ILO and other relevant international organizations.
Tackling growing inequality
The final issue I would like to highlight is the OECD’s continuing preoccupation with high and growing disparities in income. In December we will launch a new flagship publication on income inequality entitled Divided We Stand: Why Inequalities Keep Growing. The main message of this report is that inequality is on the rise in most advanced and emerging G20 countries. Inequality was rising before the global financial crisis, and it has further increased in some countries during the crisis, especially those where long-term unemployment has risen sharply.
The tax and social protection systems play a key role in reducing inequalities, but their redistributive effect has weakened in many countries over the past 10-15 years. The challenge is to redesign our tax and benefit systems and our labour market, education and training systems in ways that will help reduce inequality and poverty while sustaining growth and employment. This task is made more difficult in today’s environment of tough fiscal constraints.
But action must be taken. The OECD’s message is simple: be selective! Good-quality social policies, particularly those addressed to the most vulnerable, should be seen as sound social investment to improve well-being. During past recessions, across-the-board social cuts inevitably increased inequality as low-income groups are those who depend most on social benefits. Tax cuts which have often tended to favour the rich have exacerbated this trend.
Expanding the coverage of basic social protection programmes is also a challenge for many emerging economies in order to reduce the risk of poverty and exclusion without harming work incentives. Conditional cash transfers that combine income support, generally paid to the mother, with the requirement to maintain investment in human capital and health of children have proven effective in this respect. We also encourage promoting self-insurance based on individual savings accounts among those who can afford it. To be fully effective, these measures will need to be part of a broader strategy to improve organisational administration and tackle problems of high informality.
Ladies and Gentlemen,
Policies are crucial for helping the millions who are still struggling to find jobs and should be seen as a vital social investment for the future, to help move our economies onto a path of sustainable economic growth and well-being.
Social dialogue can play a major role in developing and implementing policies that promote job creation, better job opportunities and well-functioning social safety nets. I therefore welcome the initiative to organise a L20 meeting. We look forward to discussing with you the measures that need to be taken to address the serious concerns of the many workers and families who are still struggling with the aftermath of the crisis.
OECD Employment Outlook 2011
OECD and the G20