Remarks by Angel Gurría, OECD Secretary-General
Strasbourg, Wednesday 5th October 2011
Mr. President, Members of Parliament, Ladies and Gentlemen:
The Parliamentary Assembly of the Council of Europe has been a key partner for the OECD for 50 years. Let me thus first thank you, Mr. President, for the invitation, and Ms. Birute Vesaite, the rapporteur of the Committee on Economic Affairs and Development, for the hard work in preparing the report on our activities.
This year has been an important one for the OECD, as we marked our 50th anniversary. This anniversary comes at a very significant moment for the world economy and provides an opportunity to reflect on our future. The OECD is expanding its core membership, but also aims to live up to its mission to deliver “better policies, for better lives”. In the current economic climate, this mission is of utmost importance.
You have raised a number of urgent issues in your report. Let me highlight the most important ones and inform you on the mandates we received from Ministers.
Go social - tackling the employment challenge
The world economy is in a dire situation. Economic growth is faltering in advanced economies and slowing in many emerging economies. World trade stagnated over the summer, and business and consumer confidence have dipped alarmingly. Uncertainty has thus reached new highs and financial markets have become increasingly turbulent. Credible long-term strategies are needed to tackle debt and fiscal challenges in Europe and elsewhere. In this scenario of tight budgets and high unemployment you have two policy options: Go structural with new sources of growth like innovation and green, labour and product market reforms and go social to give the people hope, confidence and perspectives. Let me start with the latter today.
High unemployment is the big elephant in the room. After a period of anaemic job creation, we have seen some further weakening in the past few months. Unemployment in the OECD is still stubbornly above 44 million, over 13 million higher than its pre-crisis level. Moreover, there is now a serious threat that this unemployment becomes entrenched. And it already has a disproportionate impact on youth, with the danger that we are breeding a whole generation with very little experience with the jobs market.
This job crisis is the human face of the crisis and should be at the top of the political agenda. To face this situation, new economic strategies are imperative.
It is first and foremost necessary to rebuild confidence and renew the basis for sustained growth, which is the only real solution to the job crisis. Then, for countries that still have fiscal space, investment should be prioritised, including in infrastructure. For most countries, the focus should be put on cost-effective measures and on the most vulnerable groups. Net hiring subsidies can in particular boost job creation in the short-run. At the same time, income support for the unemployed should be maintained, combined with effective re-employment programmes.
However, these short-term measures need to be part of a comprehensive reform package to improve the functioning of the labour market. The success of countries like Germany in limiting the rise in unemployment points to the importance of structural reforms, even if they take time to feed through to a more resilient labour market.
But youth deserve special attention. They must be given a better start in their working life. Youth unemployment rate is more than twice the one for adults, at 17.4% against 7% in the OECD area. Worse, the ones who are not in employment or in education and training, the so-called “NEETs”, account now for 12.6% of their age group in 30 OECD countries. They face a high risk of labour market and social exclusion.
The good news is that we can, you can make a difference, with wise and prompt policy changes. For sure, there are no quick fixes and governments will face difficult trade-offs. But some countries have weathered the labour market storm relatively well. This is not down to luck. It only demonstrates that policies and institutions matter.
Avoiding the “désastre annoncé” of a lost generation requires a two-pronged approach. First, job-search assistance, hiring subsidies and remedial assistance should focus on the most disadvantaged youth. Opportunities for “study and work” could also be expanded in many countries, with apprenticeships and other dual vocational education and training programmes.
Second, it is imperative to overcome the long-term failure to give all youth a better start in the labour market. This requires improving early childhood education and development and ensuring youth do not drop out from school. It also means achieving a better match between the skills acquired at school and those needed in the labour market. In addition, barriers to the employment of youth need to be removed.
Another dramatic issue raised in your report is the rise in inequality. We first raised this issue with the publication “Growing Unequal” in 2008 and, in December, we will be issuing a new report. Inequality was indeed one of the contributing factors to the crisis. The loss of millions of jobs is now generating further inequality and is putting pressures on middle-income workers. In OECD countries, the richest 10% earn nine times more than the poorest 10%. In Mexico and Chile, this ratio is more than 25 to 1.
Such inequality is not only ethically unacceptable. It is also economically and socially unsustainable. Here again we must and can tackle this challenge, as Brazil did, thanks to an impressive social effort. We must “go social”. This is a strong OECD message to policy makers.
To do so it, it is first necessary to revisit the redistributive impact of taxes. But it is not only about income. It is also about publicly-provided services, such as health, education, housing or care services. Within current budgets, these policies could be made more efficient, by using more in-work benefits, for example, or improving equal access and quality of education and training.
OECD priorities going forward
A social policy strategy is the natural complement to a structural policy strategy with a focus on new sources of growth. Therefore, our Ministerial Council Meeting in May focused on measures to promote sources for inclusive growth and employment. It was chaired by the United States, with the active participation of Secretary of State Clinton. To celebrate our 50th Anniversary, the OECD week gathered 26 Heads of State and Government, and Deputy Prime Ministers, over 86 Ministers and State Secretaries, 126 high-level speakers and close to 2,000 participants.
More particularly, the OECD presented its Green Growth Strategy, which encompasses both policy recommendations to make economic growth “greener” and a set of indicators to monitor progress. Since the Rio Earth Summit almost twenty years ago, we know that green and growth must go together. This Green Growth Strategy is about making it happen. And we will continue to provide our members with specific tools to do so.
To put our economies back on a growth path, the MCM also gave us the mandate to continue work on a number of key fronts. Let me mention a few.
We will first deliver an OECD Skills Strategy in 2012, to identify which skills are needed to ensure a shift from lifetime employment to lifetime employability, and to underpin this with the right labour market and education policies to avoid skills’ mismatch.
We will also come up with concrete policy recommendations to tackle another fundamental aspect of inclusive growth, gender equality and women economic empowerment, focusing on the three Es: Education, Entrepreneurship and Education.
We have also embarked on developing a Development Strategy, another critical but fundamental endeavour for the OECD. Let us not forget that development was at the heart of our founding mission – in fact, the “D” in OECD. It was at the OECD that the groundwork was done for the Millennium Development Goals, we pioneered the work on aid effectiveness and we contributed to the G20 Seoul consensus for development. We aim now at sharing our knowledge, our best practices and our recommendations with countries at different stages of development in fulfilling our mandate and our mission – better policies for better lives. We will focus on innovation, investment and trade, as well as resources mobilisation. This requires in turn fostering a good investment climate, fighting corruption, instilling good governance and establishing strong public institutions and services, including fair tax systems.
Finally, measuring the Progress of Societies will continue to be one of the OECD’s key priorities in the coming years. Economic resources, while important, are indeed not the only determinants of a good quality of life. Also vital are living conditions of our citizens, their satisfaction, feelings and expectations. New initiatives such as the “My Better Life Index” and “How’s Life” will strengthen public recognition of the OECD’s pre-eminent role in redefining progress and well-being for the 21st century.
Our future cooperation
In this year’s report, you indicate that the crisis represented something of a “perfect storm”, with a number of interacting forces producing a unique event, a very difficult one to foresee. You also indicate that ahead of the crisis, the OECD repeatedly warned of risks posed by growing global imbalances, a decline in lending standards, and concern with so-called financial innovation.
As I said last year, we could have done better before the crisis if there had been more connectivity, cross-fertilisation and co-operation both among countries and international organisations. We thus need to strengthen multilateralism, and create an expanded network of countries and partners to improve policy making, implementation and oversight worldwide.
I find that there are many interconnections between our areas of expertise and the current focus on your work, such as youth unemployment, gender, and tax havens. It would be good to be able to share expertise on a more continuing basis, with our experts presenting their finding in hearings before the relevant committees, for example. We are also working on setting up an OECD Parliamentary Network, building on the existing partnerships with your Assembly and other parliamentary assemblies and networks.
Ladies and gentlemen,
Before concluding, let me thank the Committee on Economic Affairs and Development for its hard work and engagement. Its members have been instrumental in building up the working relation between the OECD and the Assembly.
We look forward to discussing with you how to strengthen our relations even further. We want to ensure that OECD data and reports reach you and inform the parliamentary policy debates that are so crucial to democracy. We very much appreciate your continued feedback on our work. This is necessary to keep us sharp.
Thank you very much!