Dialogue with Labour Organisations


Remarks by Angel Gurría, OECD Secretary-General, delivered at the G20 in Los Cabos, Mexico,
17 June, 2012


General Secretary Burrow,
Minister Vélez,
Ladies and Gentlemen,

Thank you for giving me the opportunity to share with you our assessment of the current economic situation in the G20 countries.  This is an unusually challenging moment for the global economy.

The OECD’s recent Economic Outlook suggests that, at first glance, prospects for the global economy were somewhat brighter than six months ago. However, on closer inspection, the recovery remains fragile, extremely uneven across different regions and countries and with serious risk of being derailed by the ongoing crisis in the euro area. The balance of risks has since tilted even further to the downside.

The Eurozone remains at the epicentre of the current turmoil. The world economy keeps sliding into a deep and widespread loss of confidence. A bad-outcome scenario in the euro area, with negative implications for growth prospects in other G20 countries, cannot be ruled out.

We all know that this is not just a banking or sovereign debt crisis but also a major jobs crisis. Our Economic Outlook and joint  background papers prepared by the OECD and ILO for the recent G20 Labour and Employment Ministers meeting in Guadalajara, show unemployment is still close to the peak reached during the downturn in a number of G20 countries. At the end of 2011, some 109 million people were unemployed across the G20 countries, not counting discouraged and underemployed workers. Over 20 million jobs would need to be generated in order just to recover the pre-crisis employment rate.

The jobs crisis in many G20 countries, is hitting young people particularly hard. Youth are bearing much of the brunt of our high unemployment or under employment in low paid jobs lacking social protection. In the G20 countries, some 37 million young men and women are currently out of work and some 40 million jobs have to be created every year just to match the growth in the working-age population. Giving youth a fair chance in the world of work is not only an imperative to fulfil their legitimate ambitions and avoid further social tensions, but also to build the basis for the prosperity of our societies. 

The costs of this crisis are already large, and we must not downplay the risks attached to the human and social legacies of the “Great Recession”:

  • Mass unemployment and rising inequalities can damage the very foundations of political and social stability in some of our countries.
  • Long-term unemployment is already weighing negatively on the future productive capacities of our economies while, in the short-run, high and persistent unemployment is undermining households’ confidence and inhibiting the recovery. 

Time is running out! Kick-starting jobs growth and fighting youth and long-term unemployment must be priorities for action.

What can be done on these fronts?
We need bold actions now, to tackle this emergency: immediate measures to stabilise the banking system and curtail contagion, strengthening and mobilising the firewalls in the euro area, both in size and by extending their role to provide support for EU banks. The reactivation of ECB Bond purchases under the Securities Market Programme.

This all-out approach could be the European equivalent of the TARP, which allowed the US financial system to recover from the crisis.

We also see a case for some macroeconomic policy easing in those countries with room for manoeuvre. This cannot be an open-ended commitment, as the existing room for manoeuvre is constrained in many countries. But the countries that still have some room for flexibility in this quest for deficit reduction should definitely be encouraged to use it.

In countries where there is no alternative to tough fiscal consolidation to “stay the course”, fiscal policy should be growth friendly, seeking to minimise any possible negative effect on long-term growth. Examples where particular care needs to be taken include improving efficiency in major spending areas of the public sector, such as health and education, without precluding output delivery; raising taxes on negative externalities, such as those affecting the environment; and cutting inappropriate or ineffective tax expenditures.

In addition, further monetary policy easing can play a crucial role in Europe to support growth in the short-term, particularly given the prospect of declining inflationary pressures.

Well-targeted labour market measures should also be adopted.

  • Hiring subsidies can be a cost-effective way to boost job creation in the short-run if they are paid to companies that actually expand their workforces.
  • A shift towards greater investment in training, linked to local labour market needs and aimed at countering skills obsolescence, would help to maintain an effective labour supply.
  • Income support to the unemployed, including the long-term unemployed, should be maintained to limit the risk of poverty, but it is essential to condition it on effective job search to minimise the risk of benefit dependency. 


Ladies and Gentlemen, let me emphasise the urgency of 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.  This is an issue that we have reviewed in detail in our Skills Strategy launched at the OECD Ministerial meeting two weeks ago. Improving the responsiveness of life-long learning systems to labour market needs and retraining requirements of workers affected by skills obsolescence are other key issues tackled by the Skills Strategy.

We are very keen on working with the social partners on a blueprint for quality vocational training, apprenticeships and internships and on organising a workshop on youth employment in the second half of the year.

The OECD stands ready to pursue its dialogue with social partners on how to engineer a recovery that would be conducive to enhanced job creation; and to continue our support to G20 countries and in particular to the Task Force on Employment.

Despite the very good work achieved by the G20 Task Force under the Mexican Presidency, there is still room for the G20 to enhance its work on employment and to be bolder on job-related issues. 

There is a particularly glaring gap in the work of the G20 on employment that needs to be filled: the interface between the work undertaken under the G20 Framework for Growth - that is taking place in the Finance Track - and the work that is being done in the Labour and Employment Track.

We can help to bridge this gap: in the report requested from International Organisations by the G20 on how its economic reform agenda under the Framework for Growth could contribute to job creation - we have proposed the extension of the commitments under the Los Cabos Action Plan in the making - that might boost sustainable growth by strengthening the quantitative and qualitative aspects of employment creation. That’s a first step towards creating more consistency between the two strands of G20 work.

International organisations need to be bolder and more coherent when it comes to employment and growth. This is why the OECD has embarked on a reassessment of our social and labour policy recommendations as part of a major project called “New Approaches to Economic Challenges”, an effort to learn the lessons from the crisis and rethink our analytical framework and policy recommendations. We have to find better ways to deal with interlinked policy challenges and to look at policy effects on income distribution, environment, social cohesion and welfare. To get this right, your contribution will be essential.  
Thank you!


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