Towards a more productive, inclusive world


Despite nearly a decade of policy efforts, the global economy remains in the repair shop. The legacies of the crisis are still very much present: weak growth, persistently high unemployment in several countries, faltering trade and investment and a profound loss of public confidence and trust. Any prospect of a strong upturn in advanced or emerging economies has dimmed in the past year. But we may be getting closer to finding solutions by focusing on the roots of the problems.

The lingering crisis has sharpened the focus on two long-term trends that are impeding our economies and tearing at our social fabric: first, a decline in productivity growth, with hourly labour productivity growth in the OECD area sliding from 2% in 1990-2000 to 0.9% in 2007-14; and second, a longer-standing rise of inequalities in wealth, incomes, well-being and opportunities. As the rich have become richer, the middle classes have seen little, if any, improvement in their incomes with their ranks dwindling in many countries, while many low earners have slipped into poverty. At no point in the past 30 years has productivity growth been lower, and at no point over the same period has income inequality been higher.

Policy makers must take action if we are to lay the foundations of sustainable economic growth and build fairer societies. A bold and comprehensive policy approach is needed.

OECD Week 2016, comprising the OECD Forum on 31 May- 1 June, and the OECD Ministerial Council Meeting (MCM) on 1-2 June, will probe these issues, with a view to improving policy making for more productive, inclusive societies. I agree wholeheartedly with President Michelle Bachelet of Chile, who I am delighted is chairing the MCM, when she writes in the OECD Yearbook that the purpose of enhancing productivity should be to make economies grow smarter and decrease inequalities.

How can policies for inclusiveness and productivity reinforce each other? First of all, we need to get the growth engine functioning again, in particular by boosting investment and bringing down the persistent high levels of unemployment in many countries. Another place to look is innovation. As OECD data show, productivity growth has slowed, but despite what many people might think, the issue is not so much a shortage of innovations, as a failure of those innovations to spread throughout the economy. In particular, innovations are not making their way from advanced firms–knowledge-based “frontier” enterprises where productivity is actually growing– to other firms in industry and services. This gives us hope, because policies can help kick-start the innovation-diffusion engine, for example by enhancing competition in product markets–especially in services, to ensure incumbents are not favoured over entrants–by incentivising firms to adopt better technologies and improve managerial performance, and by creating the conditions for more productive private investment.

However, spreading innovation and improving market access are only part of the answer. As a growing body of analysis at the OECD indicates, both productivity and inequality can also be affected by regulatory issues affecting property and labour markets, debt versus equity questions, capital misallocation, productivity dispersion within firms, or excessive pay in the financial sector.

This requires constant upgrades of our economic frameworks. It means reforming tax-and-transfer systems and making tax systems fairer. It means fixing our regulatory frameworks to foster market access and the spread of innovations. It means getting more women and young people into good jobs, and doing much more to close the unacceptable gender pay gap in our countries. Moreover, it means doing more to address migration and integrating newcomers within our societies so that they can put their skills to full use, for everyone’s benefit.

The importance of skills cannot be stressed enough. If productivity means “working smarter,” then it holds that higher productivity requires a highly skilled workforce, with everyone on board. This not only requires expanding the supply of skills in the population but also reskilling and improving the way skills are used in the workplace.

As I warned at our Future of Work policy forum in January, skill mismatches in our economies risk growing exponentially unless we urgently put in place policies to improve skills, so strengthening the conditions for inclusive growth. The digital revolution is profoundly disrupting the nature of work, raising demand for high-skilled jobs as well as for some low-skilled ones, and automating and displacing jobs involving routine tasks.

However, skilled people are also vulnerable, as articles in this OECD Yearbook show. Whether we are talking about bus drivers or bus designers, bank tellers or bank managers, or even quintessential middle-class professionals like doctors or lawyers, the production revolution promises to transform everyone’s life. Policies to help all people prepare for uncertainties, and to build confidence and competence, are becoming more important than ever.

Productivity, therefore, should no longer be viewed in isolation. Indeed, productivity and inclusiveness have many common roots. The key challenge for policy makers is to identify win-win policies that can deliver both and create a virtuous circle of improved inclusiveness and productivity growth. Social and environmental sustainability are also key in this new equation; any effort to raise productivity cannot ignore the imperative of safeguarding our planet, or our duty to strive towards better functioning, more equitable societies. In fact, sustainability is itself opening up a new frontier that can help boost productivity and inclusiveness.

Major international agreements were struck in 2015–on the Sustainable Development Goals at the UN in New York in September, the Paris Agreement on climate at COP21 in December (and formally signed in April this year), and on multilateral trade at Nairobi in December. The OECD/G20 Base Erosion and Profit Shifting (BEPS) package was also presented, designed to boost global financial transparency and reduce international tax evasion.

Our future welfare relies on honouring these commitments, and 2016 must be the year for beginning implementation and seizing these historic opportunities. We must double our efforts to restore trust and social cohesion, and heal the domestic and global divisions that threaten our future.

This makes international collaboration ever more vital. Inclusiveness is about countries as well as people: no one and no place should be left behind.

Implementing agreements and advancing together towards a stronger, cleaner and safer world: that is what the world’s citizens expect and what policy makers can and must deliver. Economic and political headwinds may make the going tough, but together we can overcome any challenge. Together, we must be more productive and inclusive in helping to build better policies for better lives.


Productivity and inclusive growth at the OECD Forum 2016

Innovation and the digital economy at the OECD Forum 2016

International collaboration at the OECD Forum 2016

OECD work on inequality

OECD work on productivity and long-term growth

OECD work on innovation

OECD Observer website

OECD Yearbook 2016

‌‌‌‌Angel Gurría

Angel Gurría
Secretary-General of
the OECD


OECD Forum 2016‌‌‌

© OECD Yearbook 2016


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