Opening Remarks by Angel Gurría, OECD Secretary-General, delivered at the OECD Forum 2011
Paris, 24 May 2011
Ladies and Gentlemen,
It is a great pleasure for me to take part in the discussion of: Exiting from the Crisis: Towards a Model for More Equitable and Sustainable Growth, to which TUAC has contributed greatly.
Thank you, Richard, for offering this volume as a birthday present to the OECD, which I am pleased to accept.
1. A Shared Concern
As we slowly emerge from the worst financial and economic crisis in our lifetime, we need to ask whether our paradigms and models are still appropriate, and update them based on the evidence from the crisis.
This is the driving force behind my Strategic Orientations for the OECD for 2011 and beyond, which I will be discussing with Ministers tomorrow. It is also the motivation behind the book that we are discussing today.
It is true that there is some good news. Hiring has picked up and unemployment has stabilized or begun to fall in the majority of OECD economies. The OECD average unemployment rate in March 2011 was 8.2%, down over half a percentage point from its peak. Our latest projections suggest that this trend will continue.
But even so, there are still major challenges going forward: youth unemployment; long-term unemployment; and widening inequalities.
Let’s start with unemployment: We have undertaken many detailed country reviews of the youth labour market and vocational education and training systems over the past four years. Last year we published the lessons learned in two major synthesis reports: Jobs for Youth and Learning for Jobs. While conditions and policy challenges vary significantly across countries, these reports highlight some common priorities.
These include: focussing on youth most at risk, and emphasising early detection and intervention; investment in effective counselling and job search assistance; strengthening apprenticeship and vocational training programmes; and offering incentives (such as temporary subsidies) for firms to hire low-skilled youth and those who have completed their apprenticeship.
Second, Long-term unemployment: The Economic Outlook and Interim Economic Outlook to be launched tomorrow, as well as the forthcoming Employment Outlook, discusses what can be done to tackle high and persistent unemployment. A number of key messages emerge, including:
Reforms in benefit and activation systems, aimed at broadening coverage, tightening eligibility, increasing conditionality and making work pay, have made a number of countries better prepared to cope with the rapid increase in unemployment, notably by raising the effectiveness of the emergency measures taken in response to the crisis.
But now, with limited resources, it is important to be cost-effective and to focus on the most disadvantaged, including the long term unemployed and those at high risk of exclusion. Our most recent work highlights how the mix of effective active labour market policies should be adapted to cope with this challenge.
In this context let me touch upon the concern that fiscal consolidation is leading to a premature withdrawal of support for recovery and jobs.
We have to find the right balance between supporting the recovery and consolidating public finances. The experience of the recession suggests that targeted measures to support employment in the short term, including measures to protect the weakest in the labour force, are more effective than generic public spending.
But we need to consider that fiscal consolidation is needed to bring debt levels down and ultimately to support job creation. Strong evidence suggests that higher debt levels lower growth and employment.
Third, widening inequalities: The OECD was at the forefront of charting this topic when we published our landmark report Growing Unequal? in 2008. We are now finalising the follow-up for publication later this year. It updates the trends on income inequality and analyses the main drivers. It focuses on trends among the top earners and examines why the redistribution impact of the tax and transfer system has become less important. It also highlights a range of policies which can create greater equality of opportunities in the long run. The 2012 issue of Going for Growth will include two special chapters on distributional issues in recognition of their importance in the current situation.
Let me finish by saying that the OECD’s policy recommendations are not written in stone. They evolve in response to changing circumstances and evidence. Let me cite a recent lesson from the crisis. We now realize that policies which encourage temporary adjustments in working hours as an alternative to layoffs have much to recommend them. Here government policy – in terms of expanding existing short-time work (STW) schemes or introducing them for the first time – and collective bargaining that favoured work-sharing arrangements instead of layoffs often went in the right direction in response to the adverse demand shock.
This lesson from the recent recession provides an important extension to the policy menu set out in the 2006 Reassessed Jobs Strategy.
All in all, we have already started to re-examine our economic models and policy recommendations and reassess their robustness. But we cannot think of going back to business-as-usual. We need to rethink our long-term growth strategy. We need to address increased inequality. We need to measure well-being.
And as I note in my paper on Strategic Orientations for the OECD, “we need a more inclusive and greener model of growth based on sound institutions… And we must focus even more in our relations with social partners to reach such joint goals”.
It is most welcome that the trade unions are contributing actively to this dialogue.