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Contribution | Doc. 11719 | 26 September 2008
The OECD and the world economy
(Former) Social, Health and Family Affairs Committee
1. First of all, the rapporteur wishes to congratulate
Mrs Anna Lilliehook on her excellent report on the OECD and the
world economy. The rapporteur is aware that it is difficult to cover
the whole range of the OECD’s activities. In her contribution, she
wishes to focus on social and welfare issues, which form an important
part of OECD activities.
The globalisation paradox
2. The rapporteur very much agrees with the approach
advocated by the latest OECD Employment
Outlook that debate about the social impact of globalisation
is characterised by a paradox. On the one hand, most economists
highlight the lessons from economic history, namely that more open
markets tend to be associated with greater prosperity. Indeed, freer
trade and foreign direct investment help realise the welfare gains associated
with exploiting comparative advantage. On the other hand, however,
there is concern in the public opinion in many OECD countries about
the risks that globalisation may entail in terms of jobs and wages.
3. The rapporteur believes that this paradox can be explained,
first of all, by the unprecedented scale of globalisation. The range
of countries that participate in globalisation is much broader than
was the case in earlier episodes of international economic integration.
In particular, Brazil, the Russian Federation, India and China (the
so-called BRICs in the terminology of the OECD) are becoming major
trade and investment partners. This development has entailed a major
increase in the number of workers whose outputs compete on world
markets – it is significant that these four countries account today
for 45% of the world labour supply, compared with less than one
fifth for OECD countries as a whole.
4. At the same time, technological advances have contributed
to heightened income inequality and changed the nature of globalisation
itself, most vividly demonstrated by the rapid growth of off-shoring
of business services that were previously non-tradable. New technology
and declining transportation costs facilitate the fragmentation
of the production of both goods and services, and offshoring of
certain tasks to other countries.
5. Thus, a major factor explaining the globalisation paradox
is that economic integration is occurring in the context of wider
earnings inequality and perceptions of job insecurity. The latest OECD Employment Outlook has indeed
shown that trade deepening and off-shoring is a potential source
of vulnerability for workers. An analysis covering trade and labour
market developments since 1980 indicates that jobs and wages have become
more vulnerable to external shocks.
6. The rapporteur feels that it is crucial to address these concerns:
public support for furthering international economic integration
(and the structural reform agenda more broadly) could wane if the
perception that many workers do not benefit from it takes root.
7. In this respect, it is fundamental for policy makers to realise
that they can play a major role in making the most from globalisation
and reducing workforce adjustment difficulties. In other words,
the rapporteur believes that “globalisation begins at home”, which
means that national policies and actions still matter. Establishing
a code of good economic and social governance in enterprises and
public policies is vital at the national level; it is a prerequisite
for successfully addressing the globalisation paradox.
8. The rapporteur wishes to stress in this context the importance
of the “decent work agenda” of the International Labour Organization
(ILO). This concept refers to more than mere dignity. It involves
four objectives: minimum standards of work, the minimum wage, social
security and social dialogue between workers’ representatives and
employers. The decent work agenda indeed encompasses the “core labour standards”
that set the minimum basis of social rights established by the international
community. As an international legal framework on social standards,
it aims to ensure a level playing field in the global economy.
9. The OECD strategy has four pillars: set appropriate macroeconomic
policies; remove impediments to labour market participation and
job-search; tackle labour- and product-market obstacles to labour
demand; and facilitate the development of labour force skills and
competencies.
10. In terms of labour market policies, the leitmotif of the OECD
strategy is the need to improve labour market flexibility to reduce
high and persistent unemployment, while strengthening social safety
nets and other activation policies to ease transitions back to employment.
It emphasises that this is best done through active labour market
policies to strengthen incentives rather than through passive income
support measures that may dull incentives.
11. In this context, it appears that in Europe a consensus could
be obtained among politicians and social partners in favour of flexibility
that respected the balance between demands of the market and those
of social protection for workers (which is the essence of the so-called
“flexicurity debate”). In this respect, the rapporteur wishes to
underline the importance of the so-called “good faith principle”
in the discussion of flexicurity tools so that the adaptability
of enterprises and the social protection of workers could be effective.
12. Social inclusion is not just a social policy objective in
the human rights context: by preventing crime it also has positive
economic consequences. The rapporteur also wishes to underline the
essential role of social partners. They are ideally placed to identify
new ways of working. Many of the solutions linked to improving flexibility
and security in the workplace lie at business or branch level and
depend largely on good co-operation between the two sides of industry.
The discussions will not be easy, but the full backing of the social
partners is vital. A joint contribution from them on the issue of
flexicurity would be a very important step forward in Europe’s quest
for more and better jobs.
13. Finally, the rapporteur agrees with the general conclusion
of the OECD study that well-designed domestic policies are instrumental
for enhancing the benefits from globalisation while addressing the adjustment
and inequality concerns. These policies would also help strengthen
public support for freer trade and investment policies, and promote
perceptions that globalisation is an opportunity for all.
Fighting discrimination in the labour market
14. The rapporteur welcomes the fact that OECD labour
markets have shown significant improvements over the past decade.
The average unemployment rate dropped to 5.6% in the OECD area in
2007, the lowest rate since 1980. Employment has also increased
significantly and, on average, two thirds of the working-age population
now have a job, an unprecedented achievement in the post-war era.
15. This is welcome news, but no grounds for complacency. Labour
market conditions remain difficult for some groups, and downside
risks in the global economic environment loom large with possible
negative effects on the labour market. Looking beyond the current
cyclical weakness, the main labour market challenge in OECD countries
is how to promote further improvements in living standards in the
context of population ageing.
16. Population ageing should be seen as offering job opportunities:
in particular, the health and social welfare systems open the door
to employment not only in the more sophisticated professions but
also in those that call upon the basic competences that the general
public need.
17. The reassessed OECD jobs strategy provides a comprehensive
policy framework for boosting jobs and incomes. It highlights the
fact that assisting potential workers from under-represented groups
to find jobs is a key policy priority; in many countries, women,
youth, older people and disabled people have relatively low employment
rates. Yet, assistance with finding a job is insufficient; major
efforts are also needed to ensure that all individuals have access
to the same job opportunities. A significant part of the employment
growth in many OECD countries over the past two decades has come
through increasing the share of workers holding precarious and/or
low-paid jobs, whence the importance of the generalised adoption
of “codes of good governance”.
18. The rapporteur is convinced that policy actions to raise labour
force participation will have limited success if labour demand for
under-represented groups does not follow. Promoting equality of
opportunities in the labour market requires long-term investment
in education and training, as well as policy interventions to promote
access to productive and rewarding jobs.
19. Fighting discrimination in the labour market should also go
beyond the repression of unwanted behaviour and the compensation
of victims. It also demands interventions that promote cultural
changes and redefine socially acceptable practices. Enacting simple,
consolidated laws and promoting codes of conduct and of good governance
can help employers avoid discriminatory actions in the first place.
And, perhaps more importantly, governments can develop incentive
schemes to elicit virtuous behaviours, such as labels for non-discriminatory
practices and financial incentives for specific positive actions.
Reporting committee: Committee on Economic Affairs and Development (Doc. 11687).
Committee for contribution: Social, Health and Family Affairs Committee.
Reference to committee: permanent mandate. Contribution adopted by the committee on 15 September 2008.
See Resolution 1629 (33rd Sitting, 1 October 2008).