Across the OECD and beyond, the foundations of economic growth are under strain. Over the past two decades, labour productivity growth has slowed markedly in most countries. This slowdown reflects a combination of structural bottlenecks: subdued business investment, declining firm dynamism, slowing technology diffusion and a weakening pace of human capital accumulation. While employment growth has been resilient, many countries are facing significant population ageing, which will affect the potential for labour to sustain growth.
At the same time, rapid advances in artificial intelligence and digital technologies offer the potential of a new wave of sustained productivity gains. Whether new technologies translate into sustained productivity gains will depend crucially on structural policy settings.
This first edition of Foundations for Growth and Competitiveness arrives at a pivotal moment. Structural reform momentum has slowed across many OECD countries but there is heightened need for countries to remain competitive and resilient in a global landscape characterised by unprecedented structural transformations and geopolitical and trade shocks. To help countries meet these challenges, the report offers practical tools for policy makers, including a comprehensive online data platform to identify structural policy bottlenecks and tailored reform priorities for 48 countries developed through an iterative dialogue with national authorities.
Sustainable prosperity rests on strong enabling conditions: high-quality human capital, sound institutions, effective governance, reliable infrastructure, affordable and secure energy supply and macroeconomic stability.
Across countries, strengthening skills systems and lifelong learning emerges as one of the most frequent reform priorities in this report also to promote an effective adoption of digital and in particular AI tools. As artificial intelligence and digitalisation reshape production and the way businesses work, workforce adaptability becomes a decisive competitive advantage. Countries that strengthen vocational education, expand access to lifelong learning and deepen links between universities and labour markets will be better placed to adapt to evolving business needs.
Institutional quality and efficient regulatory processes are equally critical. Predictable, transparent and well-designed regulatory frameworks foster trust and reduce uncertainty. Strong institutions improve the allocation of resources and underpin market incentives. In an era of heightened geopolitical and economic uncertainty, macroeconomic stability and sound fiscal frameworks remain essential anchors.
Yet enabling conditions alone are not sufficient. Markets must also function efficiently to promote economic dynamism, technological diffusion and business investment. But when these forces are weakening, policies that strengthen competition and reduce regulatory barriers become more important. Accordingly, improving product market regulation and insolvency regimes is another central reform priority identified across countries. Recommendations also emerge in the tax space, given that poorly designed tax systems can distort incentives and discourage investment.
Labour mobility and participation also remain central to competitiveness and for enhancing access to quality jobs for workers. Reducing barriers to participation – particularly for women, older workers and underrepresented groups – while strengthening work incentives, employability and expanding access to affordable childcare can raise both equity and efficiency. Housing policies that facilitate mobility and tax systems that broaden the base while limiting distortions can further enhance allocative efficiency.
With strong foundations and effective market incentives in place, governments can more successfully guide economic activity toward strategic priorities. Innovation policy, energy security and the clean energy transition are areas where well-designed, targeted interventions can address market failures and support long-term growth. Public support for research and development, when combined with strong human capital and competitive markets, can unlock private investment. Energy market reforms that reduce entry barriers and encourage investment in renewables can strengthen both resilience and competitiveness.
A central message of this edition is that structural reforms are most powerful when they are coherent and complementary. Product market reforms enhance the impact of human capital-augmenting policies. Sound fiscal frameworks reinforce confidence and enable reform to endure. Policy complementarities are particularly important in the context of major technological and demographic transformations.
While the long-term benefits of reform are well documented, the political feasibility of reforms often hinges on near-term effects on policies. By providing examples of how some reforms affect economic performance in the short run, this edition provides food for thought in designing and implementing reform packages that are both economically effective and have strong and broad support. Understanding transitional effects, anticipating distributional impacts and deploying complementary measures can help sustain reform momentum.
Structural reforms also play a crucial role in strengthening fiscal sustainability. At a time of elevated public debt and rising spending pressures, growth-enhancing reforms offer a path to improving debt dynamics without relying exclusively on fiscal consolidation. By broadening tax bases, improving government efficiency and boosting economic dynamism, reforms can reinforce both resilience and long-term prosperity.
Ultimately, competitiveness is not a zero-sum concept. Economies that strengthen their domestic foundations contribute to a more dynamic and resilient global economy. The objective is not simply faster growth, but growth that is durable, innovation-driven and aligned with environmental sustainability and social cohesion.
The OECD economies are facing new growth opportunities but also challenges. Take the most out of these opportunities while addressing the challenges will be key to revitalise productivity and secure higher living standards for future generations.
The foundations of growth must now be rebuilt deliberately and decisively.
Stefano Scarpetta
OECD Chief Economist and G20/G7 Finance Deputy
