Opening Remarks, by Angel Gurría, OECD Secretary-General
Guadalajara, 17-18 May, 2012
Secretaria Vélez, Ministers, Executive Director Ducci, Ladies and Gentlemen:
It is a great pleasure for me to share with you our assessment of the current economic situation in the G20 countries, to highlight the urgent need to address some key labour market challenges, especially those facing our young people, but also to look forward at new sources of quality jobs, especially those associated with the transition to green growth.
The short-term economic and employment outlook
The prospects for the global economy are a little brighter than they were at the time of your last meeting. However, the situation remains fragile.
Stronger economic growth in the United States during the second half of 2011 and policy interventions in the euro area in response to its deepening economic crisis have reduced the threat of a sharp global slowdown. But downside risks still prevail.
Going forward, the recovery will likely resume in the major advanced economies, but with further decoupling between North America where growth prospects continue to firm and Europe where the short-term outlook remains weak and uncertain given the continuing instability in the eurozone. In the emerging economies, after a brief slowdown, signs suggest that a cyclical upswing is now getting underway.
The most recent improvements in the economic outlook give some hope that labour market conditions could start improving again soon – and have already done so in a number of G20 countries but the timing and strength of a future generalised recovery in employment remain highly uncertain and contingent on a durable solution to the woes in the eurozone being fixed quickly.
A continuation of weak growth in employment in many G20 countries, in turn, will make it impossible to close the jobs gap (i.e. the number of additional jobs that would be required to restore the employment-population ratio to its value in end-2007) which is about 21.3 million persons accumulated since the onset of the global financial crisis. The jobs gap is particularly large in South Africa, Spain and the United States. The latest OECD projections to be released next week suggest that these gaps could persist through 2013.
The threat of high unemployment becoming entrenched
One of the most worrying features of the present situation is the steep rise in the number of people who have been unemployed for a year or more in several countries. Long-term unemployment has tripled in the US affecting one in three unemployed. In Spain, more than 40 per cent of the almost 5.5 million unemployed have been out of work for more than a year. Among the major OECD economies, only in Germany has the incidence of long-term unemployment fallen.
In addition to lowering potential output growth via the resulting loss of human capital, there are also substantial social costs related to long-term unemployment, as it is associated with an increased risk of poverty, ill health and school failure for the children of the affected individuals. If we add this to the very fragile conditions in many families in emerging economies, which operate in an informal context, the picture is not encouraging.
Large jobs gap, persistently high unemployment and high informality in some countries underlie the urgency of kick-starting job creation and improving the quality of jobs in many G20 countries:
- Hiring subsidies can be a cost-effective way to boost job creation in the short-run if they are paid to companies that expand their workforces.
- Also, a shift towards greater investment in training, linked to local labour market needs and aimed at countering skill obsolescence, would help to maintain an effective labour supply.
- At the same time, income support to the unemployed, including the long term unemployed, should be maintained to curb the risk of poverty, but it is essential to condition it on effective job search to minimise the risk of benefit dependency. In many emerging countries, efforts are needed to reduce the risk of vulnerable families sliding into extreme poverty and exclusion. To this end, a key challenge is to expand the coverage of basic social protection programmes, although careful programme design is required in order to improve their cost-effectiveness and to avoid harming work incentives.
Giving youth a better start
Youth are a key asset to society. Equipping them with the required skills and giving them decent work opportunities to become well-integrated into the labour market not only contributes to their own well-being but also to the productive potential of the economy, social cohesion and overall progress.
Therefore, I welcome the first results of the intense work of the G20 Task Force on youth employment; it has provided a unique platform for your experts to share good practices and identify key policy recommendations that you will review later today. We stand ready, in close collaboration with the ILO and other relevant international organizations, to further support the work of the Task Force on this and other key policy issues that you will identify.
While the challenge of giving youth a better start is common to all G20 countries, the difficulties countries face in achieving this vary. Young people have been hard hit by the global economic crisis; in most countries they have borne a disproportionate share of job losses and many of them are facing significant barriers to finding worthwhile employment in the current recovery phase. The youth unemployment rate is above 20% in as many as 8 G20 countries and many youth have given up looking for work and are at high risk of exclusion.
Improving the labour market situation of youth requires actions on different fronts. Action needs to be directed at tackling the steep rise in youth joblessness that took place during the crisis. Labour market programmes, including effective counselling, job-search assistance and temporary hiring subsidies for low skilled youth, can make a real difference in facilitating the transition to productive and rewarding jobs for young jobseekers.
Policies must also be put in place to give all youth a better start in the labour market. Investment in human capital is a key factor in facilitating transitions from school to work and putting youth on promising career tracks. Unfortunately, several G20 countries face challenges concerning educational attainment, participation in good-quality vocational education and, in some cases, access to schooling.
To address these issues, the following policies have proven effective in a number of countries:
• In many countries, completion of high school (i.e. usually between the age of 15 and 18) is becoming a key policy goal to ensure a smooth transition to work, for participation in life-long learning and for career progression. In countries where enrolment in education through lower secondary education is almost universal, the focus has been on improving retention in upper secondary education, in some cases by raising the age of compulsory participation in learning and ensuring that it leads to the acquisition of a valued qualification.
• In some countries where educational enrolment is low, particularly among children from disadvantaged socio-economic backgrounds, school attendance has been added as a condition to the receipt of cash transfers by families through so-called Conditional Cash Transfer schemes. In a number of emerging economies, these schemes have proven successful at improving school enrolment and attendance as well as child nutrition and health.
• High-quality vocational education pathways in upper secondary education can help engage youth with learning, improve graduation rates and ensure smooth transitions from school to work. Dual schooling systems combining class-based learning with work-based apprenticeships can play a decisive role here. Germany is a shining example among G20 countries in this regard.
• High-quality career guidance can help youth make better informed decisions about their future. The combination of work and study can also help youth acquire some of the skills required in the labour market before they leave the education system.
These policy measures should be seen as part of a comprehensive approach to make sure that: i) youth acquire the skills that the market needs; ii) they are able to deploy these skills in the most effective manner; and iii) the necessary skill investments are financed in a sustainable and equitable way. In this context, I am glad to report to you that next week we will launch the OECD Skills Strategy that provides this comprehensive approach to skills development and effective skills use.
Unleashing the potential for Green Jobs
Finally, we must harness the job potentials of a transition to green growth.
The transition to green growth has significant jobs-creating potential. The joint ILO-OECD paper on sustainable development and green growth maps this potential. But we also highlight that this transition also entails new risks for workers and their families.
Thus, it is highly important that labour market and skill policies assure a just transition by maximising the new opportunities for workers, especially those most in need of better employment opportunities, while minimising unavoidable adjustment costs and assuring that they are shared in an equitable manner.
Four areas where policy actions may be particularly important are identified in our joint report as follows:
• Meeting the emerging job-skill requirements of a greening economy;
• Helping workers to move from declining firms and sectors to growing firms and sectors while providing income security;
• Assuring worker rights in growing green sectors, while seizing opportunities to promote social inclusion;
• Strengthening labour market information systems and social dialogue so as to promote a deeper shared understanding of how best to green the labour market.
Green growth policies can also improve welfare through distributional impacts. Most of the environmentally-harmful subsidy measures are indeed poorly targeted to address poverty– IEA estimates that only 8% of global fossil fuel subsidies reach the poor (the bottom 20%) - making them an expensive tool. Retargeting the subsidies to more directly support poor households can increase equity.
New legislation in Indonesia aims to achieve this objective by redirecting fuels and electricity subsidies to health, education and infrastructure in poor areas. Another example of a green growth policy that is having positive distributional impacts is the Bolsa Floresta (forest allowance) initiative in Brazil, which rewards traditional communities in the Amazonas for their commitment to stop deforestation.
Protecting the most vulnerable households from the possible adverse distributional effects of green growth is essential to ensure it is inclusive and contributes to sustainable development and poverty reduction in the longer term. It is also likely to increase political support for the reforms.
Secretaria Vélez, Ministers:
We are nearing 3 years into the recovery from the Great Recession. More than ever promoting the creation of sufficient quality jobs for the many unemployed and under-employed, including many youth, is the key policy priority for all G20 countries. This requires a whole-of-government approach that puts the social dimension of the crisis at the core of our actions.
On the occasion of the third gathering of G20 Labour Ministers, I would like to encourage you Ministers to be ambitious and aim, as one visible outcome of this Ministerial, for a concrete commitment to ensure that jobs and youth become a stable feature of the G20 agenda. It is also important to create close links between the G20 Labour and Finance tracks and I hope that the report on “Boosting Employment and Job Creation under the G20 Framework”, jointly prepared by the OECD and the ILO in collaboration with the IMF and the World Bank, will be an important first step in fostering this joint effort to design, promote and implement better labour policies for better lives.
The OECD stands ready to assist the G20 Labour and Employment Ministers in any way we can in this endeavour.