Remarks by Angel Gurría,
Moscow, 16-19 June 2013
Colleagues, Ladies and Gentlemen,
It is an honour to be present once again at the L20 Summit to provide the OECD’s perspective on “confronting the jobs crisis in the G20”.
Indeed, I cannot think of a more important topic on which to focus international efforts.
Unemployment is set to remain high, in particular among the youth
According to our Employment Outlook launched this week, over 48 million people are out of work across the OECD area. This is a staggering number. The corresponding unemployment rate of 8% is only half a percentage point down from its peak of 8.5% in October 2009 and according to the latest OECD projections it is likely to remain at 8% well into 2014.
Across the G20 as a whole, we see a number of diverging trends. Unemployment is gradually declining in the United States, Mexico and Japan; while there have been further increases in the Euro area. In emerging economies, labour markets remain relatively resilient, but tackling a high incidence of informality, employment in low-paid, insecure jobs with little social protection remains a key challenge.
The impact of the crisis has been extremely harsh for youth. In fact, youth unemployment has risen to alarming levels: exceeding 60% in Greece, 55% in Spain, and between 30% and 40% in countries like Italy. Of particular concern is the group of youth who are not in employment or in education and training (the so-called NEETs).
To compound things further, growth is still sputtering. Trade and investment have not recovered, and the economic forecasts are frankly bleak. Besides, as countries shift their fiscal stance from stimulus to tackling unprecedented deficits, pressure on social spending continues to increase. Declining job prospects, rising unemployment, diminished social spending and rising inequalities - never has it been more important to focus our policy efforts on promoting inclusive growth and jobs.
Comprehensive strategies for inclusive growth and jobs
The bad news is that there is no one magic formula. Comprehensive policy strategies tailored to the needs of each country’s circumstances are required. At the OECD we are working to provide the analysis and policy recommendations that will allow this to happen. We have just developed an Action Plan for Youth at our Ministerial Meeting. And we are feeding much of this into the G20 process.
Of course, macroeconomic policies – supportive monetary policy, sound fiscal policies, and banking sector reform – remain vital. But they are just one part of the solution to re-ignite and strengthen economic growth and job creation. Let me cite one example. Only 10% of the fiscal adjustment in Europe remains to be done. This is great news. But we are still not seeing the benefits in terms of growth. Why?
First because, as I said, global recovery is sluggish and there are still many pending actions required to strengthen growth prospects in many parts of the world.
Second, it is also true that growth-enhancing structural reforms are lagging behind. The OECD has been called to monitor progress on this front in the G20 Framework for Strong, Sustainable and Balanced Growth, and the simple fact is that G20 countries need to be more ambitious in their structural commitments to the St. Petersburg Action Plan and, most importantly, deliver on them. This includes reforms in competition, innovation, education, labour, and many others.
These policies need to be chosen wisely, in particular in the context of considerable fiscal consolidation. Governments should take account of the circumstances of jobless individuals and other vulnerable groups. Since 2011, by far the greatest number of consolidation measures among all public spending areas was targeted towards spending on social transfers. With increasing long-term unemployment, assistance benefits and publically provided goods and services are becoming crucial to prevent steep rises in poverty and inequality.
Activation strategies are also central to these efforts
This week I will present a paper to G20 Finance and Labour Ministers on “Activation Strategies for Stronger and more Inclusive Labour Markets in G20 Countries”. These strategies are the most effective way to help and encourage the unemployed and other people excluded from the labour market to find quality jobs. There are two particular areas where lessons can be learned from G20 countries in developing and implementing activation strategies.
First, the responsiveness and effectiveness of activation policies can be improved by overarching institutional reforms. Reforms to improve coordination and coherence in the provision and delivery of both social protection measures and employment services are required. The effectiveness of these initiatives requires careful performance management and evaluation, particularly where services are being outsourced. In countries where these services are still in their early stages, it is important to speed up their full development.
Second, measures should be designed in a way that is responsive to the specific needs of different groups. For example, the long-term unemployed require measures to find paid work based on skills and work experience. For women, opportunities to work, and to return to work after child-related career breaks need to be strengthened. For informal workersstuck in low-productivity, low-paid jobs, further extensions of social safety nets may be required, but in combination with financial incentives for employers to fully declare their employees and greater efforts to strengthen tax and labour inspections.
Finally, Inclusive growth and jobs needs a crucial focus restoring trust
Policies to promote employment must go hand in hand with tax policies that restore public trust, not only in the tax system, but in governments, markets and the private sector. Under the current tax regime, multinational enterprises are often able to artificially shift their profits out of the countries where they are earned, resulting in very low taxes or even double non-taxation. We refer to this as base erosion and profit shifting, or “BEPS”.
Working with all G20 countries, the OECD has developed an ambitious plan to put an end to BEPS. I would like to thank the Trade Union Advisory Committee (TUAC) to the OECD, for coordination your input into this process.
The BEPS action plan, which will be released shortly, sets forth 15 actions to end double non-taxation and artificial profit shifting. These actions are ambitious, and will result in fundamental changes to the international tax rules, including in the area of tax treaties and transfer pricing. Fundamentally new standards will be developed that address the gaps between different countries’ tax systems, while still respecting the sovereignty of each country to design its own rules. For employment policies, the additional revenue that may be generated could be well spent in strengthening support systems for the unemployed to find a job or to continue honing their skills.
Ladies and gentlemen,
There is no one-size-fits-all solution to restoring inclusive growth, jobs and trust. Macroeconomic, structural policies and labour activation strategies are all required. The G20 process can play a pivotal role in helping countries identify effective policies and implement them. The OECD will continue to listen to and draw on the expertise of the social partners to assist the G20 in this process.
Tackling the social tragedy of unemployment
OECD & G20