Opening remarks by Angel Gurría, OECD Secretary-General, delivered at the High-Level Policy Forum on Tackling Inequalities
Paris, 2 May 2011
(As prepared for delivery)
Minister von der Leyen, Minister Kast, Ministers, Ladies and Gentlemen,
It is my great pleasure to welcome you to the OECD’s Policy Forum on Tackling Inequality.
Income and earnings inequality has been on the rise over the past two decades in most OECD countries and emerging economies. In 2008, the income of the richest 10% was, on average in OECD countries, almost nine times that of the poorest 10%. But there are, of course, large differences between countries. In Austria, Denmark, Finland, Slovenia, the Czech and Slovak Republics, this ratio is only about 5:1 while in Mexico and Chile the top 10% have 25 times as much income as the bottom 10%. In emerging economies, greater economic integration and policy reforms have produced impressive growth and absolute poverty reduction. In some of these countries, income inequality, however, has increased from already high levels.
We know that the recovery is underway. But what a recovery?
Not yet one that will be strong enough to bring the millions of new unemployed back to work. Low income households have been hardest hits by job losses and the persons unemployed in the OECD are still 14.4 million more than the number of jobless immediately before the crisis.
If in the decade of the strongest economic expansion inequality increased, what will happen now? What will we do with long term unemployment increase and youth unemployment? Concerns also stem from the framework of fiscal consolidation in many countries and the related possible effects on income inequalities.
Halting the scary outlook of increasing inequality is more urgent tha ever. It requires enlightened policies and strong political commitment. We need your wisdom to put priorities in the right order. This is exactly the goal of the OECD in organising this Social Forum and the Social Policy Ministerial.
I am proud to say that the OECD has been at the forefront of the international policy debate on inequality. In 2008, we launched our flagship publication Growing Unequal?, an analysis of long-term inequality trends in OECD countries. This fall we will publish a major new study that updates this analysis, reviews the evidence on the causes for rising inequality and discusses possible policy measures to reverse the trend.
Among its findings a very worrisome one is that in many OECD countries the deficiencies of the tax and benefit systems have palyed a major role in determining the market income inequalities since the 1990s. Unlike what is often claimed, globalisation is not the culprit of growing inequality. Technical progress, which has increased demand for high-skilled workers at the expense of workers with lower or no skills, has also contributed to widening earnings inequality. Regulatory reforms, such as lower barriers for entrepreneurship, less state control of companies and lower employment protection for temporary workers were also important drivers. At the same time, workers’ skills also improved, which helped offset some of the rise in earnings inequality.
The causes for rising inequality are different for emerging economies where there is a high share of labour in the informal sector. Informal workers are generally concentrated in low-paid, low-productivity jobs and excluded from formal social protection schemes. There are also often disparities between different ethnic groups or regions, rural and urban populations and migrants and non-migrant workers which result in income inequality. But Brazil and some other Latin American countries have been able to reverse this trend and I am particularly pleased that Secretary Paes de Barros is with us today to tell us about Brazil’s successful strategy.
Is rising inequality an inevitable trend? The answer is no.
We need better equality of opportunities and policy makers can make a real difference here. The answers lie in better labour market and social policies for both men and women, also by helping families combine work and family responsibilities and in investing more in children, and in tackling the monumental challenge of youth unemployment. We also need to invest in better tax and benefit policies and better skills and training strategies to ensure access to good jobs.
I am looking forward to our discussions and hearing your experiences and practical policy suggestions on this important challenge.
Growing income inequality in OECD countries: What drives it and how can policy tackle it?