G20 china_web

Structural reform and SMEs
3
0.9%
Average wage increase in developed
countries between 2007 and 2013
Factor by which American workers earned
more than Chinese workers in 2013
INTERNATIONAL LABOUR ORGANIZATION
A young man doing hard work in bad
working conditions in Serbia
A child at work in Transylvania
W
KEY TAKEAWAYS
Labour market policies need to
support recovery
The purchasing power of wages
must be maintained
Promoting decent work maximises
the benefits of globalisation
eakness in employment growth, falling
labour incomes and stagnant real wages for
the bulk of the workforce in most countries
has reduced global aggregate demand. It
has also created a self-reinforcing cycle of
diminished business expectations and low
investment, further weakness in demand
and insufficient labour market recovery.
Reversing this slide into a slow-growth
trap is the challenge facing G20 leaders
at their Hangzhou Summit. Medium- and
long-term challenges are also daunting.
These include eradicating extreme poverty
and reducing inequality; adapting to climate
change and ageing; responding to growing
numbers of young job seekers in Africa and
South Asia; and shaping the future of work
during rapid technological change.
Labour market policies need to support
the recovery by boosting incomes and
household consumption. They also need
to ease workers’ mobility from lowproductivity
to higher-productivity jobs as
part of significant structural change.
Creating confidence
Labour market adjustment is difficult to
manage amid slow growth. It involves
workers changing jobs, changing employers,
learning new skills and sometimes moving
home. It can lead to unemployment or lower
earnings. These changes are much easier for
individuals, families and communities
if there is reasonable confidence that the
new jobs will be better and support the
same or a higher living standard.
The prospect of unemployment or
reduced wages brings resistance, though.
Such employment adjustment may reduce
aggregate demand, slow growth and
recovery. The timing and design of labour
market reforms must take this into account.
Social and economic priorities
The medium- and long-term challenges
must be addressed simultaneously. The
political consequences of communities that
now have a high risk of being left behind
are increasingly evident around the world.
Maintaining and increasing the purchasing
power of wages – especially minimum
wages – and of social benefits are priorities
for economic as well as social reasons.
These two policy fields are highly
relevant to strengthening demand and
recovery and also to ensuring that structural
changes lead to much more inclusive growth
and development.
Wages make up around two-thirds of
national income in most economies and are
the main source of household consumption,
which drives investment and growth.
Income inequality has widened for
several decades as the gap in wages has
grown and an increasingly larger share
has gone to capital. This has undermined
growth. It was a trigger of the financial crisis
and resulted in a sluggish recovery.
The level of wages, and their
distribution and share in national income,
is the outcome of generally decentralised
processes between employers and workers
and their organisations. Broad coverage
of collective bargaining contributes to a
narrower distribution of income and more
stable growth. However, coverage has
110 G20 China: The Hangzhou Summit • September 2016 G7G20.com