Remarks by Angel Gurría

Secretary-General, OECD

Ankara, Turkey

3-4 September 2015

Minister Erdem, Distinguished Ministers, Ladies and Gentlemen,

Current labour market situation and outlook

Unemployment remains unacceptably high and must remain a priority for further action. Too many people are under-employed and stuck in low paid and precarious jobs and deserve a better future.

Without vigorous and ambitious policy action, this situation is unlikely to improve in the short run: global growth is indeed projected to remain subdued. Advanced countries are likely to see a modest quickening of growth overall, particularly in the euro zone, while many emerging economies are experiencing slower growth. The recent turmoil in the Chinese stock‑market that was reflected in markets around the world, also points to risks ahead for the global economy and the need for the G20 economies to redouble their efforts to promote stronger, sustainable and inclusive growth.

Therefore, the OECD very much welcomes the Turkish Presidency’s choice to focus on the three I's of inclusiveness, implementation, and investment. Within these priorities, employment policies have an important role to play and the OECD is pleased to have contributed to the preparation of your meeting today, including the development of the key policy principles and frameworks that feature in the annexes to your draft declaration.

Let me highlight some of the most pressing labour market challenges facing G20 economies and then focus on the areas of inequality and job quality that deserve to be placed high up on the policy agenda.

Labour market challenges

Although the main labour market challenges are indeed somewhat different in advanced and emerging G20 economies, there are also many commonalities.

In the advanced economies, there is a growing risk that vulnerable groups in the labour force will become trapped at the bottom of the economic ladder if high labour market slack persists much longer. In the OECD area, where there are still 111 million more unemployed than before the crisis, 9.6 million people have been out of work for two years or longer. Youth who finished their schooling during the crisis years are particularly vulnerable: Our 2015 Employment Outlook shows that workers’ long-term career prospects are largely determined during the first 10 years of their working lives. Many young adults appear to be approaching a “make-or-break” point in their lives and we need to assure that they do not fall by the wayside. If that should happen, the long-run legacy of the crisis would be to ratchet inequality up, yet another notch, from levels that were already far too high.

The recent slowing of growth in some  emerging G20 economies also raises concerns about more workers falling into unemployment or becoming trapped in underemployment and poor quality jobs. The OECD Employment Outlook looks at job quality in emerging economies and shows that it remains a major challenge. Not surprisingly, earnings are substantially lower and their distribution is much more unequal in the G20 emerging economies than in the G20 advanced economies. But labour market insecurity is also much higher and working conditions much poorer. For instance, over 20 per cent of all Turkish workers have very long working hours of 60 hours per week or more compared with only 6% of workers in the OECD area on average. Job quality is particular low for workers in informal jobs. Ominously, many of them remain trapped in these jobs. Less than a third of informal workers each year shift into formal jobs in urban China, and this rate falls to below 10% in Turkey. Thus, promoting the transition towards formal employment is crucial for improving the well-being of workers.

Broader challenge to curb the rise in inequality and promote inclusive growth

The need to create more and better jobs is closely related to the broader challenge to assure that the entire population shares more fully in the benefits of economic growth. The OECD’s most recent publication on inequality, In it Together, shows that across the OECD area the average income of the richest 10% of the population is almost 10 times that of the poorest 10%, as opposed to 7 times in the 1980s and 8 times in the 1990s. Even in those emerging economies where inequality has fallen, such as Brazil, inequality remains at staggeringly high levels (50:1 in Brazil). In South Africa, it may reach triple digits.

Recent OECD work shows that high and rising inequality - and in particular inequality affecting lower-middle and working class families - not only harms social cohesion and well-being, it also harms growth. Thus, we need to focus much more on the bottom 40%; it is there that the lack of social mobility drags down economic growth.

Policy response

The G20 has to move the conversation forward and develop concrete policy solutions to promote opportunities for inclusive growth. In the draft declaration, there is annex on “G20 Policy Priorities on Labour Income Share and Inequalities”. It recommends taking action in four key areas. 

First, we must focus on education and skills of all segments of our societies.  Thus, the proposed G20 Skills Strategy is vitally important as it will help countries turn the tide towards a more equitable distribution of skills. You will discuss those aspects tomorrow.

Second, more must be done to promote greater labour market participation of all groups – youth, women, older people, those with disabilities, immigrants – in order to reduce inequality. This includes tackling barriers to participation, and strengthening activation policies that help and encourage unemployed people to find work. Eliminating gender gaps in our societies is particularly important. We are not happy with the slow pace of change, which is why the G20 commitment to reducing gender disparities in labour force participation by 25% by 2025 is so important.

Third, we need tax and transfers systems that are fairer and more effective, to reverse the trend of a weakening in redistribution mechanisms in many OECD economies, and to strength social safety nets and social protection system in the emerging economies. I will elaborate on these aspects during our joint meeting with Finance Ministers.

Fourth, we need jobs.  But not just any jobs.  When people are in informal employment or temporary jobs, the evidence suggests that too often these are not stepping stones to better jobs, but trap people in a cycle of insecurity, low skills and missed opportunities. We need quality jobs.

The G20 Framework for Promoting Job Quality, which builds on OECD's work on job quality, gives us the building blocks for developing policies for better jobs.

• We need coherent policies for wages.  Driving wages down gives only a temporary competitive advantage. For long-term growth, we should aim at ensuring a living wage for all. This can be achieved through a combination of in-work benefits or conditional cash transfers that effectively reduce in-work poverty and setting minimum wages at adequate levels to underpin wages but which do not undermine job creation. The United Kingdom, for instance, has recently announced the introduction of a National Living Wage that represents a substantial increase in the minimum wage for those aged 25 and over. Germany has recently introduced a national minimum wage and the Earned Income Tax Credit in the United States has played a substantial role in reducing the risk of in-work poverty.
   
• We need to give workers greater security in the labour market by reducing the incidence and consequences of job loss.  Putting in place a social protection floor for all is an attainable goal for most G20 countries. Countries such as Brazil with Bolsa Familia, China with its strengthening of Unemployment Insurance and its Dibao Social Assistance Programme, Mexico with Seguro Popular and South Africa with Child Credit, all demonstrate what can be achieved.
   
• The best-performing countries have a good quality of the working environment.  Long hours, high job strain, low levels of health and safety at work not only damage the health of workers but also drag down productivity. In response, Japan and Korea have taken a number of measures to reduce excessively long working hours. In many emerging economies, helping workers shift out of poor quality, informal, jobs is of utmost importance. Therefore, initiatives such as those by Argentina, Brazil and Mexico to promote and increase incentives to formalise work arrangements are particularly welcome. The OECD also welcomes the initiatives adopted by G20 Ministers to improve occupational, health and safety conditions where all G20 economies can make progress and where additional support for developing countries is clearly needed.

The evidence is clear: countries with the best job quality are also those with the highest levels of employment and the lowest levels of inequality. There need not be a trade-off between job quality and the number of jobs if the right policies are in place to guarantee adequate living standards while still promoting strong productivity growth.

Ministers, Ladies and Gentlemen,

The challenges we face are large, but so are the opportunities for progress. The OECD is proud to contribute to your discussions and remain committed to working with your countries, partner organisations and the social partners on designing, developing and delivering better labour policies for better lives. Thank you!