Remarks by Angel Gurría
Brussels, Belgium - 8 July 2019
(As prepared for delivery)
Dear Chair, Dear Commissioner, Dear Ministers,
I am honoured to present the OECD Report on the “Economy of Well-Being” at the European Council. On this first Council Meeting of the new Presidency, I would like to take the opportunity to wish Finland a productive and successful semester.
The OECD has been working on the measurement of well-being beyond GDP since the 1970s. Over 50 years, we have seen the concept of well-being develop from an interesting side-note into a well-established agenda for policy. The OECD’s Well-Being Framework has further developed the concept by providing us with a clear definition and rigorous analytical basis. The Framework for Policy Action on Inclusive Growth has helped identify the channels through which governments can promote greater well-being and sustainable economic growth for all their citizens.
The Economy of Well-Being highlights the need for putting people at the centre of policy. it is important to move away from an attitude of “grow first, redistribute and clean up later”, towards a growth model that is equitable and sustainable from the outset.
Failure to do so has economic and social consequences. Take the pressures building up on the middle class, a traditional source of growth and stability in Europe. In 2016, for example, nearly 50% of middle-income households experienced difficulties making ends meet. In EU countries, this ranges from under 10% to over 70%.
The political consequences are also clear. Across 15 EU countries surveyed in 2018, 70% of respondents believed government should be doing more to ensure their economic and social security.
This brings us to the importance of an economy of well-being. This is defined as a ‘capacity to create a virtuous circle in which citizens’ well-being drives economic prosperity, stability and resilience, and vice-versa those good macroeconomic outcomes allow to sustain well-being investments over time’.
An economy of well-being has several key characteristics:
(i) Expanding opportunities for upward social mobility and for improving people’s lives along the dimensions that matter to them; (ii) Ensuring these opportunities translate into well-being outcomes for all society, including those at the bottom of the income distribution; (iii) reducing inequalities; and (iv) ensuring environmental and social sustainability.
An economy of well-being has four main pillars. The first pillar is education and skills. Skills are the most important driver of long-term economic growth. For instance, one additional year of schooling in all society increases GDP per capita by around 12%. And what is true at the macro-economic level also holds at the individual level. Returns to education more than double once health and employment benefits are accounted for.
Policy can help leverage the benefits of education. For example, higher attendance in pre-primary education, greater autonomy of schools, reduced gaps between academic and vocational branches of education and higher funding for tertiary education can all boost human capital, while also improving the efficiency of education systems. At the same time reducing inequalities of access and opportunity at school is essential to promote better educational outcomes, as countries with high levels of inequality in education and skills also record lower average educational performance.
The second pillar is health. Evidence shows that good health fuels economic growth, productivity and individual earnings. The total costs of mental ill-health are estimated at over 4% of GDP – more than EUR 600 billion – across the EU28 . Around 550 000 people of working-age die prematurely every year in the EU due to non-communicable diseases. Good health is also a key factor for people’s well-being. It allows them to invest in education and skills, access quality jobs and enjoy better quality of life.
Increased spending has driven much of the improvement in health outcomes, but we need to go beyond. This means looking at the range of services covered by primary healthcare, as well as addressing new or persistent risk factors. Reducing inequalities of access is also essential to promote better health outcomes, as the proportion of people in poor health weighs heavily on key health indicators. Moreover, health inequalities are often stratified along economic, educational or occupational lines. For instance, unmet care needs are substantially higher for low-income groups.
The third pillar is social protection and redistribution. Both play an important role in reducing economic volatility and fostering resilience. They also prevent inequality today from translating into inequality of opportunities for the next generation. Recent OECD research confirms that lower inequality is associated with higher GDP growth.
Combining income-support schemes with active labour market policies provides effective protection and supports employment. Promoting more progressive tax and benefit systems can help countries promote equality of opportunity and social mobility. Social protection systems also need to adapt to a changing world of work, notably by improving coverage for non-standards workers, and to evolving social risks, notably the increasing prevalence of lone-parents and frail elderly.
The fourth pillar is gender equality. Raising women’s employment and hours worked can deliver productivity gains and higher GDP growth. It can also reduce income inequality, strengthen resilience and consolidate the middle class. In the EU, improving gender equality could increase total GDP by up to 19% by 2050.
Policies to reconcile work and family responsibilities are essential for promoting gender equality. This includes improving access to early childhood education and care and providing both parents with non-transferable entitlements to paid parental leave. Expanding long-term care services also has the potential to deliver multiple benefits, but it will be important to improve working conditions and the productivity of care jobs. Of course, gender equality goes beyond labour markets. The OECD Gender Recommendations outline a full set of policies that governments can use.
There are many other dimensions to an economy of well-being, for instance the quality of housing and infrastructures, as well as the equitable access to those; and of course the quality of the environment that significantly affects health outcomes, especially among the poorest.
Well-being is a shared European value, as recognised by Article 3 of the Treaty on European Union. The EU has a unique opportunity to lead by showing how an economy of well-being can work. Doing so can enhance people’s well-being across the continent, revitalise the European project and highlight the competitive advantage conferred by the European Social Model.
Promoting fundamental rights and increasing opportunities for all constitute the heart of an economy of well-being. They are also key for meeting the aspirations of the Core European Treaties, the objectives of the European Pillar of Social Rights and the commitments embedded in the 2030 Agenda.
The good news is that European countries are already framing budgetary discussions through well-being– as in Italy, France and Sweden; to guide strategic planning – as in Slovenia, Scotland and Latvia; and to create new institutions – as in the United Kingdom. Some OECD countries like New Zealand have taken the extra step and are using well-being as the main compass for their policy design.
Ladies and Gentlemen:
The case for building an economy of well-being is strong: investing in people’s potential, now and for the future, means making a winning bet on sustainable and inclusive growth, on societal resilience and stability. It also creates the conditions for restoring public trust by putting people back at the centre of policy.
The OECD stands ready to continue working with the EU in this area and to ensure that a well-being strategy has a future in Europe. Thank you.
OECD work with Inclusive Growth