Opening Remarks by Angel Gurría, OECD Secretary-General, Conference of Montreal
Montreal, Canada, Monday 9 June – 16.30
Minister Ba, Mayor Coderre, Ladies and Gentlemen,
I am delighted to co-host this roundtable with the International Economic Forum of the Americas. We are meeting at a time of encouraging signs in the global economy. But the recovery remains hesitant: more than 46 million people are still unemployed in the OECD area, and the four cylinders of the global growth engine – credit, investment, employment and trade - are not yet firing at a full speed.
The crisis has left us with a number of challenging legacies, with OECD long-term projections suggesting that mediocre growth and high unemployment are likely to stay with us for some time. And despite the myriad of problems we face today, one issue stands out in the international policy agenda: widening inequalities!
The numbers speak for themselves. Twenty five years ago the average income of the richest 10% in the OECD was 7 times higher than that of the poorest 10%; today, it is 9.5 times higher: an increase of more than 30%!
This ‘income capture’ is even more pronounced among top earners: here in Canada, 37% of total income growth between 1976 and 2007 went to the top 1% of the population. In the US, the figure reaches 47%!
By contrast, in several Latin American countries inequality is much higher, but it is falling, which is encouraging. In Mexico and Chile the richest 10% still earn 27 times that of the poorest 10%, and in Brazil the difference is more like 50 times!
But inequality is not just about incomes! The rich have been racing ahead in employment prospects, job quality, health status, education, and opportunities to build wealth over time. We are no longer talking about inequality, but inequalities.
Here in Canada, our latest Survey of Adult Skills (PIAAC) revealed huge disparities in the skill levels of Canadian workers, highlighting that socio-economic background is an important determinant of literacy. In terms of health outcomes, the average life expectancy of someone living in a poorer downtown district of Hamilton, Ontario, is some 30 years lower than another individual living in the wealthier suburbs.
Growing Unequal Undermines Growth
Quite apart from their implications for well-being and social cohesion, inequalities come at a profound economic cost. New work from the OECD has highlighted how rising inequalities have negatively impacted economic growth, thwarting opportunity and cutting vulnerable groups off from the heartbeat of our economies. The result is stifled economic growth over the long term.
We need ‘All on Board’ to ensure a future built on inclusive growth! Work from the OECD’s Inclusive Growth initiative has pinpointed a number of areas where policies can promote greater inclusion and boost long-term growth. Allow me to share a few with you:
Achieving More Inclusive Outcomes
First, central to the inclusive growth equation is human capital. One clear-cut lesson from OECD work is that investing in the education and skills of people at the bottom of the income distribution will pay long-term dividends for the economy as well as enhancing individual well-being: reaching excellence through equity! In OECD countries this means placing greater emphasis on in-work training, up-skilling the workforce to take advantage of opportunity and boost productivity.
Second, we need policies to promote entrepreneurship and business development for all. This means, in particular, reforming the financial sector so that it better serves the real economy. There was an almost 60% drop in newly listed companies in OECD economies between 2000 and 2010 . SMEs and growth companies find it ever more challenging to finance themselves on public equity markets. We can start by changing banks’ business models to separate risky securities activities from retail banking. This will help normal lending services to businesses to resume.
Government policy can also help to open up finance to groups excluded from economic life. An initiative from Finland’s state-owned risk financing company, Finnvera Plc., saw subsidised loans offered to female entrepreneurs between 1997-2008, creating around 17 000 jobs!
Third, local governments have a key role to play making cities competitive places to locate and invest, whilst ensuring that they develop in an inclusive manner. Locally-driven strategies can spur Inclusive Growth by addressing the skills of the regional workforce, investing comprehensively in public transit, regenerating distressed neighbourhoods, and ensuring access to affordable housing.
We do not have to look very far to see examples of this. The report we will be releasing later this week, Employment and Skills Strategies in Canada, highlights the 2002 Quebec strategy to combat poverty. That plan introduced a number of pro-inclusive innovations and, as of 2013, Quebec was one of the OECD regions with the lowest number of people living in poverty.
Public meets Private: Working together towards Inclusive Growth
Last, but not least, we need to ensure that public policy and the private sector are working in partnership to promote Inclusive Growth.
The onus is on the private sector to ensure that responsible business conduct is observed in the treatment of staff, but the public sector also has a role to play! OECD Guidelines for Multinational Enterprises, with 46 adhering governments, have built-in grievance mechanisms that provide citizens with direct access to remedies for alleged harm. Today, I call on business, trade unions and civil society to join forces to promote these Guidelines.
More generally, the role of public policy should be to create the right environment for more inclusive practices in the private sector. International initiatives, such as the OECD’s work with the G20 on Base Erosion and Profit Shifting, help to make sure that businesses contribute fairly to government coffers: ensuring that taxes on profits are paid, where they are generated.
Minister, Mayor, Ladies and Gentlemen,
To tackle rising inequalities we need to reassess the way in which our economies grow. By placing inclusiveness at the heart of the growth debate we can open up opportunity so that every citizen can realise their potential, to contribute to, and benefit from, more equitable economic growth. Government action is essential to make a difference, but it is not sufficient. We need to move in lock-step with the private sector every step of the way.
The OECD stands ready to work together with all actors, both public and private, to advance this debate, to promote more inclusive economies and more equal societies, and to prove beyond any doubt that it pays to “go inclusive”!
Mr. Angel Gurría, Secretary-General of the OECD, in Montreal, 9-11 June 2014