Remarks by Angel Gurría
Strasbourg, Tuesday 10 October 2017
(As prepared for delivery)
Dear distinguished Members of Parliament, Ladies and Gentlemen,
I am delighted to be back in Strasbourg for an annual tradition: the debate of the Parliamentary Assembly of the Council of Europe (PACE) on the Activities of the OECD. I would like to extend my thanks to Mr. Alfred Heer (Switzerland), the author of this year’s report, which provides a solid basis for our discussion today.
This report comes at a critical time.
There are some welcome signs that our economies may finally be escaping the low growth trap. The OECD projects global growth to increase to around 3.5% in 2017 and 3.7% in 2018, up from 3% in 2016. In the Euro area, GDP growth has outpaced expectations in the first half of 2017 and the unemployment rate fell to 9.1%, the lowest since 2009.
But we are not out of the woods yet. Trade and business investment may be increasing, but not fast enough. Global trade growth is projected to average around 4% per annum through 2017-18, which is modest by pre-crisis standards. Employment rates are improving, but wages aren’t picking up: real wages have only grown by 0.2% per year since 2008 on average in OECD countries. We are also faced with vulnerabilities from rapid credit growth in many emerging economies. In China, non-financial sector credit exceeds 200% of GDP, and in Russia and India non-performing loans represent over 9% of gross loans.
And what is also worrying about this outlook is that many people are being left behind.
Our numbers show that people have a reason to be angry. The richest 10% of the population in OECD countries now earn, on average, almost 10 times more than the poorest 10%. A generation ago, it was 7 times. Disparities are even more pronounced in terms of wealth: on average, in OECD countries, the richest 10% own around half of all household assets, while the bottom 40% own a meagre 3%.
Inequalities go well beyond money: They exist in education, skills, health, employment, and also between generations. I want to highlight two key areas where people risk being left behind: youth unemployment and the disruption from digitalisation.
Youth unemployment carries a terrible human and economic cost. In 2016, across OECD countries, almost 14% of youth aged 15 to 29 were not in education, employment or training (NEET). About two-thirds of them were not even looking for work. Long periods of inactivity or unemployment can have scarring effects in their future careers, their capacity to start a family and their pensions.
Digitalisation and New Production Revolution also present challenges, although they bring improvements in productivity and well-being. On average, across the 21 OECD countries in the Survey of Adult Skills (PIAAC), 9% of jobs are at high risk of being automated. Workers with a lower level of education are at the highest risk of displacement: 40% of workers with a lower secondary degree are in jobs with a high risk of job automation, compared to less than 5% of workers with a tertiary degree. These displaced workers often lack the skills and opportunities to find a new job.
All these inequalities and lack of opportunities are fuelling a crisis in confidence: in governments, in corporations, in banks, institutions, frameworks, regulations, even in democracy itself. And, in international organisations like our own. We need to reverse this trend. We need to bridge the divides and recover trust.
We need a more integrated approach in which the low income groups are better prepared to profit from the global system. We need a more inclusive growth model.
We need a state that is more empowering, in which temporary setbacks do not turn into lifelong disadvantages. This means increasing social spending to improve social protection and safety nets in light of the changing work environment disrupted by digital technologies.
Early intervention, and thereafter, at critical junctures throughout life, is essential. Comprehensive policies are required to tackle lifelong educational inequalities – removing barriers to early childhood education and care, as well as investing in skills, at all ages, in all sectors.
At the OECD we are working to stay ahead of the curve. This is why in 2012 we launched New Approaches to Economic Challenges - OLD (NAEC), an initiative to bring our analytical tools in line with the complexity and interconnectedness of the modern world. NAEC gave birth to the project; the Productivity-Inclusiveness Nexus and the new horizontal project on Going Digital: Making the Transformation Work for Growth and Well-being.
The OECD is also updating its Jobs Strategy to adapt to emerging challenges and we are providing targeted support on issues like youth unemployment through the OECD Action Plan for Youth.
We are also doubling our efforts to ensure that the global system which determines people’s well-being and opportunities is a fair one. This means tackling corruption and promoting ambitious standards in responsible business conduct. The OECD’s Anti-Bribery Convention, the OECD Guidelines for Multinational Enterprises and the G20/OECD Principles of Corporate Governance are all vital tools in the global integrity toolbox.
But as your report rightly reflects, it is in global taxation, that we have recently achieved a historic leap forward. The jointly developed OECD and Council of Europe Convention on Mutual Administrative Assistance in Tax Matters has been joined by more than 100 jurisdictions.
Even before the first automatic exchanges of financial account information began last month, close to 85 billion euros in additional tax revenue has been identified as a result of voluntary compliance mechanisms and offshore investigations. Equally, the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project has now expanded to include a full range of over 100 developed, emerging and developing jurisdictions. At our Ministerial Council Meeting in June, 76 countries and jurisdictions signed the OECD’s multilateral convention on Base Erosion and Profit Shifting.
Ladies and Gentlemen,
Let’s use this event one as an opportunity to turn market economies and globalisation into catalysts of inclusive and sustainable growth. That is our vision, that is our ambition, and that is our shared mission: to design, develop and deliver better policies for better lives. Thank you.
OECD Economic Outlook 2017