OECD Secretary-General

Addressing the social impact of the crisis


Angel Gurría, OECD Secretary-General, delivered at a High-Level Parliamentary Seminar

Paris, OECD Conference Centre, 10 October 2011

Ladies and Gentlemen,
We are living in turbulent times. Citizens are impatient and expect leaders to take bold but wise decisions to put our economies back on track, and to offer our societies a decent future. Being their representatives, you are well aware of that. To avoid seeing this impatience turning into despair, it is urgent that we address the root causes of the crisis, while dealing heads on with its social impact.

Let me focus on the latter and share with you what I consider as the most pressing social challenges in the current uncertain economic context. The most recent economic news is indeed not good. Economic growth is faltering in many advanced economies and there has been some deceleration of growth in major emerging economies. The recovery remains tentative. The most dreadful and immediate consequence of this, is that unemployment and under-employment remain stubbornly high in many countries. And many workers remain trapped in low-paid jobs with little social protection.

Some trends are particularly worrisome. First, unemployment is becoming entrenched in a number of G20 countries. Second, the crisis is having a disproportionate impact on youth. Finally, growing inequality is threatening social cohesion and the living standards of vulnerable families and individuals.

To deal with these threats, it is necessary to kick-start sustainable job creation, but also to reinforce social safety nets to make them stronger and more effective. In other words, we must foster long-term inclusive growth. We thus urge governments to address urgently and forcefully the social impact of the crisis. This is our simple message today: “Go social”, in addition to “Go Structural”. This was also the key message I delivered to the G20 Labour and Employment Ministers in Paris two weeks ago. And I am glad to say that it was echoed strongly in the concluding statement.

The threat of unemployment becoming entrenched

The first major threat to our social fabric is the steep rise in the number of people who have been unemployed for a year or more. Among major OECD economies, only Germany has recorded a drop in long-term unemployment. Meanwhile, long-term unemployment has exploded elsewhere. It has tripled in the US, affecting more than one in three unemployed. In Spain, it now represents more than 40 per cent of the 4.9 million unemployed. We know only too well from past recessions that such steep hikes can take many years to unwind. In the meantime, the people concerned are at high risk of exclusion and poverty.

How should governments respond to this dramatic situation? The OECD’s message is clear. Renewed job creation is obviously essential. This requires rebuilding confidence through credible medium-term plans for fiscal consolidation. It also means taking measures to boost job creation that are cost-effective and that focus on the most vulnerable groups. In the short run, hiring subsidies for companies that decide to expand their workforce can be a cost-effective way to boost job creation. And this measure is indeed central in President Obama’s recently-announced American Jobs Act. 

A shift towards greater investment in training is also warranted. This would facilitate the re-employment of jobseekers, especially those with low or obsolete skills. It would also help to maintain an effective labour supply, especially if it is linked to local labour market needs.

The universal challenge of tackling youth employment

But another major threat to our societies and to our future is youth unemployment. We must give youth a better start in the world of work. This is our biggest challenge. Our 2011 Employment Outlook, released two weeks ago, documents how young people have been hard hit by the crisis and have borne a disproportionate share of job losses. Many of them are facing significant barriers to finding worthwhile employment, especially now that the recovery is faltering.

Improving the labour market situation of youth requires a two-pronged approach. First, we must tackle the rise in youth joblessness that took place during the crisis. Labour market programmes can make a difference, including effective counselling, job-search assistance and even temporary hiring subsidies for low skilled youth. They facilitate the transition to productive and rewarding jobs for young jobseekers.

Second, we must overcome the long-term failure to give all youth a better start in the labour market. This requires equipping youth with basic foundation skills relevant to the labour market. This is a key responsibility of the education system. But it must begin as early as possible, preferably in early childhood for children from disadvantaged backgrounds. And it must be sustained through the compulsory schooling period.

In addition, we should not forget the important role of well-designed vocational education and training programmes. They facilitate a successful transition from school to work by providing technical skills and blending workplace and classroom learning.

Tackling growing inequality and child poverty

The final and fundamental issue I want to raise with you is inequality. You may remember our “Growing Unequal?” report in 2008, which sounded the alarm of this worrying trend. We will follow up with a new flagship publication in December. It will show that inequality is still on the rise in most advanced and emerging G20 countries. It was rising before the crisis, and it has further increased since, especially where long-term unemployment has risen sharply.

The up-coming report will highlight the key role of the tax and social protection systems in reducing inequalities. It will also draw attention to the worrying fact that, in many countries, the redistributive effect of the tax and benefit system has weakened over the past 15 years. But why should we worry? Is growing inequality damaging? Definitely yes. It is synonymous with a heightened risk of poverty for families and children.

And child poverty is one of the ugliest and longest-lasting scars in our societies. An unacceptable reality, but an undeniable one, as one in five children live in poverty in countries as different as Israel, Mexico, Poland, Turkey and the United States. It is hard to believe, but this has been shown in our Doing Better for Families publication this spring.

This is an obvious demonstration of public policy failure. For children in poor families, it is harder to eat well, to learn well and to become adults with good career prospects. Hence, we plea policy makers to pay particular attention to the situation of families and children. When deciding public spending priorities, don’t forget the long-term benefits of support for families.

Family and gender issues

We are also closely monitoring whether and how the crisis impacted men and women differently, and what are the consequences for families. When the crisis first hit, men were more likely to lose jobs than women. In fact, female working hours actually increased while men’s hours fell. By working more, women made households more resilient. However, current cuts in the size of the public sector might well reverse this pattern in many countries. The lesson is that we shall focus on families as a whole, and not only on individual workers, in order to fully assess the social consequences of the crisis.

Better designed social policies are needed

To tackle these challenges, better-designed policies are needed in a range of different areas, on employment, education, training and social support. The challenge is to do so in such a way that it reduces inequality and poverty and, at the same time, sustains growth and employment. This task is made even more difficult in today’s environment of tough fiscal constraints. But don’t forget that across-the-board social cuts inevitably increase inequality, as low-income groups are those who depend most on social benefits.

Ladies and gentlemen,
Action must be taken, urgently, to avoid a “lost generation”. We must all “Go social”, but be effective in doing so! Good-quality social policies, particularly those addressed to the most vulnerable, should be seen as sound social investments. By tackling the large human cost of unemployment and under-employment, they promote sustainable improvements in economic growth and well-being.

In closing, let me thank you for your interest in our work. We value this dialogue with you and that is why we are setting up the OECD Parliamentary Network. I am glad that we have already received nominations of focal points from 21 parliaments. Some of those nominated are here today. We need now to reflect on how to best respond to your interests and needs, as we did for example this year by working with Chile’s Chamber of Representatives to establish a Department for Law Evaluation.

Let me also thank our Chilean representatives for their gracious offer to host the next High-level Parliamentary Seminar in March 2012. This will be an excellent opportunity to continue opening ground for joint work between the OECD and legislative bodies.

And, please, be reassured that, in these critical times, the OECD will continue to respond actively to requests for analysis and advice. It is our job to support you in our common quest to put in place better policies for better lives.
Thank you.


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