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OECD Secretary-General

G7 Finance Ministers and Central Bank Governors Meeting: Session 3: Fighting Inequalities Between and Within Countries

 

Remarks by Angel Gurría

OECD Secretary-General

18 July 2019 - Chantilly, France

(As prepared for delivery)

 

 


Dear Ministers and Governors,


For the third time, after Bari and Whistler, the OECD is proud to support the Presidency of the G7 in examining and discussing the challenges that high levels of inequality are raising for our economies, their pace and potential of growth, their productivity and stability. You have in your dossier an OECD note that provides an overview of economic performance and inequality in G7 countries and takes stock of concrete measures that G7 governments have taken in the recent past to address the more specific challenges of their countries in the areas of tax and transfer policies, labour market inclusion and skills development.


Addressing inequalities in income, well-being and opportunities is one of the greatest challenges we face, including for all G7 countries. The top 10% of income earners take home about ten times more than the bottom 10% across OECD countries, up from seven times a generation ago. Inequalities are fracturing communities, hurting economies and undermining democracy.


In the OECD only 43% of citizens trust their government and the trust deficit is bigger among the most disadvantaged. What is worse is that social mobility has stagnated in many countries. Currently, in an average OECD country, it would take a child born into a low-income family about 5 generations – or up to 150 years – to reach the level of income of a middle class family. Among G7 countries, child poverty is particularly high in Canada, Italy, and the USA.


The OECD has focussed on helping countries address these worrying trends. We have developed a Framework for Policy Action on Inclusive Growth, which aims to support governments in sustaining and ensuring a more equitable distribution of the benefits from economic growth through policy action and a set of indicators to track progress. Its three principles are: 1) Investing in people and places left behind; 2) supporting business dynamism and inclusive labour markets; and 3) building efficient and responsive governments. On time for this G7 meeting, we have also launched the 2019 edition of our flagship publication “Going for Growth”, based on a framework that looks, in a holistic manner, at productivity, labour utilisation and inclusiveness, and, starting this year, also at environmental sustainability.


This report calls for reforms to create a more level playing field for disadvantaged people and firms. Increased investment in education, particularly at an early age, would create more equal opportunities for disadvantaged children. All G7 countries have scope to improve their education systems. France, Italy and the United Kingdom for example, would benefit from strengthening vocational training and Canada from increasing access to post-secondary education for the disadvantaged.


Equally important is improving the labour market inclusion of women, migrants and older workers. Improved child-care provision, parental leave and removal of disincentives to work in the tax system are all high on the agenda in many OECD and G7 countries. Opening up markets to entry, competition, foreign trade and investment are essential to level the playing field among different firms. This is the role of governments, including subnational ones.


With 69% of the population in the OECD living in cities , inequality needs to be addressed at that level too. To respond to that challenge, the OECD launched the Champion Mayors for Inclusive Growth Initiative, which brings together a coalition of willing mayors who have committed to tackling inequalities and promoting more inclusive economic growth in cities. This initiative has helped governments analyse rising inequalities, monitor material living standards and broader well-being, and design policy packages that promote equity and growth.


But fostering the inclusiveness of our economies hinges, also, on a vibrant business sector. The corporate sector, through its own conduct, decisions and actions, has a direct role to play in engineering a more inclusive market economy. This is why inclusive growth agendas need to be anchored on coalitions of actors including the corporate sector. The OECD Business for Inclusive Growth platform (B4IG) is catalysing the efforts of governments and companies towards inclusive growth. Leveraging this platform, the OECD is working with the French G7 Presidency to launch a coalition of companies in Biarritz that will pledge to work against inequalities.


In a world of weak growth, high uncertainty and rising levels of inequality, policy makers need to provide strong guidance and take firm action. The OECD will continue tracking and analysing inequalities in G7 countries.  Thank you.

 

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