Remarks by Angel Gurría, Secretary-General of the OECD, Moscow, 18 July 2013

G20 Meeting of Labour and Employment Ministers: Labour Activation, Equity and Inclusion

(As prepared for delivery)

Minister Topilin, Ministers, Ladies and Gentlemen,

I would like to begin by thanking the Russian Government for hosting this meeting. Never has it been more important for the G20 Labour and Employment Ministers to come together to address the challenges facing the global economy.

According to our Employment Outlook launched this week, unemployment is set to remain high in the OECD area, around 8% well into 2014, not very far from the peak reached at the depth of the crisis in 2009. But there are also growing disparities across countries; while unemployment is gradually declining in the United States, Mexico and Japan, it is increasing in the Euro area. In emerging economies, tackling low paid employment in insecure jobs with little social protection remains a key challenge.

The impact of the crisis has been extremely harsh for youth. In fact, youth unemployment has risen to alarming levels: exceeding 60% in Greece, 55% in Spain, 52% in South Africa and approaching 40% in countries like Italy. To compound things further, as countries shift their fiscal stance from stimulus to tackling unprecedented deficits, pressure on social spending continues to increase further.

Declining job prospects, rising unemployment, diminished social spending and rising inequalities - never has your role as Labour and Employment Ministers been so important to promote inclusive growth and jobs.

In the context of this session on “Labour Activation, Equity And Inclusion” I would like to share with you the OECD’s assessment of the urgent need to address some key labour market challenges.

High unemployment cannot be addressed without a return to sustained growth.

Macroeconomic policies – supportive monetary policy, fiscal consolidation, and banking sector reform – remain vital. These must be complemented by a broad range of structural reforms.

Increasing competition and productivity through product market reforms and labour market reforms is essential to deliver more and better jobs. The OECD was called on by the G20 Leaders to monitor progress with structural commitments under the Framework for Strong, Sustainable and Balanced Growth.  It is crucial that employment measures have a central role in this process and that you, as Labour and Employment Ministers, be closely involved.

Macroeconomic and structural policies are just two key parts of the solution to re-ignite and strengthen economic growth and job creation.

Activation strategies for stronger and more inclusive labour markets

At the same time, the OECD’s background report on “Activation Strategies for Stronger and more Inclusive Labour Markets in G20 Countries”, highlights the critical role of activation policies in all G20 countries to build more inclusive labour markets. This can be achieved by taking action now to help youth and the long‑term unemployed get (back) to employment quickly and to strengthen the labour market attachment of other groups that face significant employment barriers, such as women, migrants, the disabled and older workers. 

The objective of these policies is to complement short-term policies to promote job creation and economic growth. But there are significant long-term gains to be achieved, which can be visible in lowered poverty and strengthened well-being, reduced economic and social inequalities and ultimately stronger, more resilient, economies and labour markets.

There is no “magic formula” for designing effective activation policies conducive to more inclusive labour markets.

Based on the wide range of experiences and good practices reviewed, there are three key areas where lessons can be learned from G20 countries in developing and implementing activation strategies:

• First, a comprehensive strategy along various lines of action, carefully tailored to each country’s circumstances, is required. The responsiveness and effectiveness of activation policies have, in many countries, been improved by overarching institutional reforms to improve coordination and coherence in the provision and delivery of both social protection measures and employment services.
  
  
• Second, it is important to design measures that are responsive to the specific needs of different groups and the obstacles they face in gaining access to rewarding and productive employment. Let me mention some specific examples of tailored policies for different groups:

 - Poor households and recipients of welfare benefits require broad and integrated packages of support, services and incentives as well as a delivery model that can successfully bring these services to the families that need them the most. Conditional cash transfers can link benefit receipt to a broad range of integration measures and programmes to address structural and long-term poverty (Oportunidades in Mexico; Bolsa Família in Brazil). Where comprehensive social protection systems remain lacking, public work schemes (such as the case with the Mahatma Gandhi National Rural Employment Guarantee in India; the Community Work Programme in South Africa; and construction of village infrastructure in Indonesia) have an important role to play as emergency safety nets. China has several public employment projects targeted to particular groups at higher risk of poverty, such as men over 50 years old.

- In the case of measures for the long-term unemployed, the provision of paid work linked to skills acquisition and work experience offer promising outcomes; the Work Programme in the UK and Work Experience Phase in Australia are two telling examples here. Efforts in this direction need to be combined with intensive and specific case management and interventions, such as the individualised action plans and employment service centres in Japan.

- For youth, different forms of hiring incentives,such as the Youth Contract in the United Kingdom or the Zérocharges Jeunes in France and the tax incentives introduced recently in Italy, could be considered as short-run measures targeted to provide job opportunities, especially for the low‑skilled youth. Other countries have focussed more on the role of infrastructure projects as a vehichle to acquire work experience in the private sector (Jóvenes Constructores de la Comunidad in Mexico; or Programa Jóvenes con Futuro in Argentina; internships in SMEs in the Republic of Korea).

- In the medium- to longer-run, many countries need to introduce better and more attractive options for allowing youth to combine study and work experience and for encouraging their participation in vocational education and training. Useful examples in this direction are provided by the German and Australian experiences. China has also taken measures in this sense, recently.

- For school drop outs and other disconnected low‑skilled youth, intensive second-chance programmes may be needed, with US Job Corps and Employment Generation and Marketing Mission in India being two telling examples. The promotion of Youth Guarantees is also an important policy option. In the EU, countries are now encouraged to put in place measures to ensure that young people up to the age of 25 receive a good quality offer of employment, continued education, an apprenticeship or a traineeship within four months of leaving school or becoming unemployed.

- For women,opportunities to work, and to return to work after child‑related breaks need to be strengthened. In all G20 economies, a range of measures can be used to address the needs of working women, including adjustments in the tax systems, in out-of-work transfers, in childcare support and in parental-leave provisions.

 - In emerging economies, basic social protection measures can assist women in accessing earnings opportunities. This is the case for example with the Child Support Grant in South Africa. The promotion of gender-equal employment opportunities can also be reflected in the regulation as has been the case with the Employment Promotion Law in China. Affordable and high quality childcare – the Rio de Janeiro public day care programme -- and parental leave policies -- Dad and Partner Day in Australia -- also play an important role in supporting female labour force participation in all G20 countries.

- Last but not least, for informal workers stuck in low-productivity, low-pay jobs, further extensions of social safety nets may be required. Action in this direction needs to be combined with financial incentives for employers to fully and transparently disclose their employees and greater efforts are to be undertaken to strenghten tax and labour inspections. In many countries, overly strict employment protection may also contribute to make employers more reluctant to formalise employment relations.

• The third area for lessons pertains to evaluation. This is key to both deciding which measures should be expanded, adapted or ended, and which interventions might work best as part of a package in combination with other measures. Our report shows that several knowledge gaps remain outstanding. Most evaluation results are from a relatively small number of economies with a longer activation “tradition” and conclusions may not be easily transferrable to other country contexts. Evaluations also are usually focused on short‑term outcomes and thus  results on the longer‑term impacts of policies are scant.

Ministers, Ladies and Gentlemen,

The need for activation policies to make labour markets more inclusive has been further reinforced by the global financial crisis. Going forward, the potential for policy dialogue and for sharing experiences are of utmost importance in the field of activation policies.

The G20 process can play a pivotal role in this context, in helping countries identify effective policies. The OECD stands ready to assist the G20 in this process.

Thank you.