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Building resilience of

Building resilience of jobs in OECD countries at high 9% 40% risk of automation (average) of the world’s people linked to a network The world is experiencing an unprecedented backlash against globalisation and a severe trust deficit. Sluggish growth, increased inequalities of income and opportunities, and disruptive trends (such as digitalisation, ageing or migration) have fuelled mistrust and put into question the value of international cooperation. With public confidence in governments in the Organisation for Economic Co-operation and Development (OECD) at just 42 per cent, all alarms should be ringing. The Hamburg Summit is thus a significant opportunity for the G20 to rise to the challenge to deliver concrete outcomes based on the German presidency’s priorities of resilience, sustainability and responsibility. G20 economies must work together to create conditions for higher growth and greater inclusion. Growth has been at the core of G20 work since its ‘upgrade’ to the leaders’ level in 2008. In 2014, the G20 adopted the ambitious Brisbane Action Plan to increase the G20’s collective gross domestic product by an additional cumulative two per cent by 2018, above the baseline growth trajectories at the time. This is not being achieved. Despite a modest recent acceleration, at 3.5 per cent, growth remains below the pre-crisis levels of around four per cent. Productivity growth is slowing, business start-up rates are falling across OECD countries, and the ‘diffusion machine’ needed for innovation and technological progress to benefit all firms appears broken. Income disparity Inclusiveness is also a major concern. While unemployment is declining, employment rates remain below pre-crisis levels in several G20 members. Average household disposable incomes are still below pre-crisis levels in a third of OECD countries, and households in the poorest decile experienced a 15 per cent reduction in labour income between 2007 and 2014. Conversely, incomes for the top 10 per cent continued to rise. Germany’s G20 presidency has emphasised the need to step up reform efforts and enhance resilience 25BN active ‘smart’ devices connected to networks by 2030 These trends have produced distrust in policies and public institutions, fractious politics and a surge of populist movements. Ultimately, this generates ‘reform fatigue’ at a juncture where reforms should actually be stepped up. As reported in the OECD’s recent Going for Growth report and its Enhanced Structural Reform Agenda (ESRA) report to the G20, the implementation of reforms has steadily decelerated, compared to before the crisis. Thus, Germany’s G20 presidency has emphasised the need to step up reform efforts and enhance resilience. As the 2018 Brisbane deadline nears, now is the time for the G20 to revisit its policy agenda to harness new, more inclusive and sustainable sources of growth, create jobs, and restore citizens’ trust in governments and an open global economy. G20 members, individually and collectively, should respond to the pressing economic challenges and growing social demands with swift action. International standards can make a difference by supporting pro-growth and proinclusiveness policies at the national level. G20 achievements in tax transparency and tax avoidance, supported by the OECD, are a good example. The Global Forum on Steel Excess Capacity, facilitated by the OECD, is another promising development. Promoting responsible business conduct could form the new frontier of the G20’s contribution to levelling the global playing field. Governments should also act to get the most out of digitalisation. We live in a world of rapid technological change, a trend likely to accelerate, generating far-reaching transformations in the way our economies function and citizens live and work. Today, 40 per cent of the world’s population is connected to networks, compared to just four per cent in 1995. By 2030, eight billion people and 25 billion active ‘smart’ devices will be connected. Digitalisation is driving structural change, leading to the demise of some economic sectors, creating new ones, and generating new opportunities for existing industries to grow and for 44 G20 Germany: The Hamburg Summit • July 2017

Building resilience for more on advancing women in the P130workplace by Phumzile Mlambo-Ngcuka Student pro-Remain protesters demonstrate against Brexit ISTOCK / NICOLA FERRARI emerging economies to leapfrog. It is also transforming work and the skills needed to succeed. On average across OECD countries, nine per cent of jobs are at high risk of automation, and another 25 per cent will likely experience a major retooling. Policy makers need to anticipate these changes and focus on how individual workers and the economy as a whole can benefit from new technologies. This may include quality infrastructure, upskilling and reskilling policies, or new approaches for taxing digital businesses while encouraging innovation. The OECD has worked closely with the 2016 Chinese G20 presidency and this year’s German presidency here. Spur productivity by inclusion More generally, growth strategies need to ensure nobody is left behind. The ineffective ‘grow first, distribute later’ approach must replaced by the productivity-inclusiveness nexus, which prioritises unlocking productivity potential through higher inclusiveness and creating an enabling environment for people, business and communities. The progressivity of tax-and-transfer systems must be strengthened, notably in countries where it has diminished dramatically over the last decades or is very low. We should also devise innovative interventions – on social protection, education, preventive health, active labour market policies, etc. that offer the biggest return in growth and inclusiveness. In education, a child whose parents did not attain upper secondary education has just a 15 per cent chance to make it to tertiary education: this not only KEY TAKEAWAYS Growth remains below pre-crisis levels of around 4% Digitalisation is driving structural change and transforming work The gender gap should be closed highlights the disparities in opportunities within our communities, but, when the poorest are unable to fulfil their potential, we all lose out in economic growth. It is also essential to prioritise women’s economic empowerment to close the gender gap in labour force participation and provide better opportunities for migrants and other vulnerable groups. And we need to design policy packages that boost productivity while enhancing the re-employment prospects of displaced workers. Placing people at the centre We need to break the vicious circle of low growth, high inequality and citizens’ mistrust. People must be at the centre of our public policies, especially those who need our help the most. This is not only a moral or ethical imperative but also good economics. It is also good politics. In Hamburg, G20 leaders can step up their commitment to inclusive growth as a priority, cutting across the three themes of Germany’s presidency — resilience, sustainability and responsibility. G20 July 2017G20 Germany: The Hamburg Summit 45

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