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National Conference on Sustainable Development
SIGNALS 2019
Vilnius, Lithuania
27 November 2019
Nicolas Woloszko
OECD Economics Department
Inclusive growth unit
Inclusive growth:
challenges and policies
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CHALLENGES FOR INCLUSIVE GROWTH
10
-
Growth in household disposable income (average annual rate, mid-2000s to latest year)OECD countries, households at median and bottom 20% income levels
3
Most people in many OECD countries have
seen little or no income growth for a decade
Source: OECD Income Distribution Database.
-1 0 1 2 3 4 5 6 7
GBR
SVN
DNK
FRA
ESP
JPN
ISL
AUT
HUN
BEL
FIN
OECD
CAN
KOR
NZL
Median household
income growth at
less than 2 %
-7 -6 -5 -4 -3 -2 -1 0
GRC
IRL
ITA
MEX
USA
PRT
NLD
LUX
DEU
Median household
income has fallen
Median
Bottom 20%
0 1 2 3 4 5 6 7
CZE
CHE
SWE
AUS
NOR
ISR
SVK
CHL
TUR
POL
LVA
EST
Stronger income
growth for median
household
-
Inequality has increased especially at the
bottom of the distribution
Gini vs Income share held by bottom 20%Average annual change from mid-2000s to latest available year
4
POL
NLD
CHL
FIN
DNK
ESP
NOR
SWE
KOR
EST
IRL
SVN
LUX
MEX
ISR
CZEGBR EU
HUN
SVK
GRC
TUR
NZL
FRACAN
ITA
DEU
OECD
USA
PRT
-0,20
-0,15
-0,10
-0,05
0,00
0,05
0,10
-0,5 -0,4 -0,3 -0,2 -0,1 0 0,1 0,2 0,3 0,4 0,5 0,6
Overall inequality, Gini coefficient, % pts
Decline in overall inequality and increase in inequality
in the bottom of the income distribution
Increase in overall inequality and decline
in inequality in the bottom of the income
distribution
Inequality measure with emphasis on the bottom of the income distribution, income share of bottom 20 per cent, % pts
Source: OECD Income Distribution Database.
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Schwellnus, C., A. Kappeler and P. Pionnier (2017), "Decoupling of wages from productivity: Macro-level facts", OECD
Economics Department Working Papers, No. 13735
The labour share has declined
-
6
Productivity gaps have widened,
and wage inequality is increasing
Note: Frontier firms are the 5% of firms with the highest labour productivity by year and sector. Industries included are manufacturing and
business services, excluding the financial sector, for firms with at least 20 employees.
Source: Andrews, D., Criscuolo C., and Gal P. (2016), “The Best versus the Rest: The Global Productivity Slowdown, Divergence across
Firms and the Role of Public Policy”, OECD Productivity Working Papers, No. 05; Orbis data of Bureau van Dijk; and OECD calculations.
Real compensation per workerIndex, 2001 = 100
Labour productivityIndex, 2001 = 100
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Middle skill income earners
have been painfully affected
7Source: OECD Employment Outlook 2017; European Union Labour Force Survey; Labour force surveys for Canada,
Japan and the United States; and OECD calculations.
Job polarisation by countryChange in share of total employment by skill level, 1995-2015
-15
-10
-5
0
5
10
SouthernEurope
NorthernEurope
WesternEurope
Total North America Japan CentralEurope
Low skill Middle skill High skill
-
8
Income redistribution has declined
0
10
20
30
40
50
-20
-15
-10
-5
0
5
ISR
SW
E
FIN
DN
K
NZ
L
CA
N
OE
CD
16
US
A
AU
S
NL
D
DE
U
FR
A
GB
R
JPN
CZ
E
ITA
NO
R
PercentagePercentage points
Change in redistribution Redistribution 2014 or latest year (right axis)
Change in redistribution for the working-age
populationMid-90s to latest available year
Source: Causa and Hermansen (2017)
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Source: Causa O., Woloszko N., Leite D., “Housing, wealth accumulation and wealth distribution”, 2019, OECD Economics Department
Working Paper ; OECD Wealth Distribution Database (oe.cd/wealth). 9
Wealth inequality
Wealth inequality is much higher than income inequality and strongly
depends on homeownership.
-
10
The geographical aspect of inequalities
Source: OECD calculations, see OECD (2003), 'Geographic Concentration and Territorial Disparity in OECD Countries' for
details of the calculation.
Employment in manufacturing is more regionally concentrated than
services
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Inequality of opportunities are likely to matter
most for people sense of ‘fairness’
11
Educational outcomes largely affected by family background (impact of family
socioeconomic status on PISA score)
Source: PISA Database.
0
10
20
30
40
50
60
0
10
20
30
40
50
60
TU
NT
UR
ME
XID
NE
SP
BR
AC
RI
LV
AIS
LU
SA
PR
TR
US
CO
LC
HL
ES
TD
NK
ITA
NO
RC
AN
GB
RA
RG
GR
CIR
LL
TU
DE
US
VN
PO
LC
HE
Ad
va
nce
dF
INS
WE
LU
XJP
NIS
RA
US
KO
RN
LD
CH
NS
VK
AU
TN
ZL
BE
LH
UN
CZ
EF
RA
-
12
Trust in government is declining
Average confidence in national government2014-16 and change since 2005-07
Source: Opportunities for All: A Framework for Policy Action on Inclusive Growth - © OECD 2018
-40
-20
0
20
40
60
80
100
-40
-20
0
20
40
60
80
100
PO
LS
VK
DE
UC
AN
CH
EC
ZE
ISL
ISR
NL
DS
WE
LV
AK
OR
JPN
ITA
HU
NN
OR
TU
RN
ZL
OE
CD
IRL
AU
TG
BR
AU
SE
ST
PR
TB
EL
LU
XM
EX
GR
CD
NK
FR
AE
SP
SV
NU
SA
FIN
CH
L
RU
SIN
DL
TU
BR
AC
RI
ZA
FC
OL
% in 2016 (right axis)
Percentage point change 2006-2016 (left axis)Percentage points %
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GOING FOR GROWTH: A POLICY FRAMEWORK FOR
INCLUSIVE GROWTH
10
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14
Going for Growth in a nutshell
Purpose:
▪ Identifying coherent structural reform strategies across a broad range of policy areas
Principles:
▪ Every 2 years, selection of five policy priority areas using a systematic monitoring of policies with a proven link to outcomes (productivity, employment and inclusiveness)
Mixed approach: quantitative + qualitative (expertise provided by country desks) to formulate country-specific recommendations
Formal integration of inclusiveness as a policy objective in 2017
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Policies
(e.g. childcare)
Desks' expertise
(qualitative assessment of country-specific
circumstances)
Quantitative assessment
(performance-policy matching algorithm)
Employment Productivity Inclusiveness
Outcomes
(e.g. aggregate
employment)
Policies
(e.g. labour tax
w edge)
Outcomes
(e.g. total factor
productivity)
Policies
(e.g. administrative
burdens)
Outcomes
(e.g. gender gaps)
5 priorities
The OECD Going for Growth framework pillars
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Inequality in household
disposable income
• Gini coefficient
• Income share bottom 20%
Poverty
• Relative poverty rates
– Total population
– Working-age population
– Children
– Youth
– Elderly
• Poverty mean gap
Emerging economies
• Absolute poverty rate
• Absolute poverty gap
Top income and wealth shares
• Top 1% income share
• Top 1% wealth share
Earnings inequality
and quality
• D5/D1 earnings ratio
• D9/D5 earnings ratio
• Earnings quality
• Gender wage gap
Labour market insecurity
and informality
• Unemployment risk
• Unemployment insurance
Emerging economies
• Vulnerable employment
• Incidence of informality
• Risk of extreme low pay
Labour market
inclusiveness
• Female employment gap
• Elderly employment gap
• Youth unemployment gap
• Foreign-born
unemployment gap
• Long-term unemployment
rate
Skills and equality of
educational opportunities
• Upper-secondary
education share
• PISA scores: mean and
overall variation
• PIAAC scores: mean and
gender gap
• Low-performing students
and adults
• Impact of socio-economic
background on PISA scores
• NEET share
Health outcomes
and inequalities
• Female life expectancy
• Male life expectancy
• Self reported good health
• Low-high income health gap
Emerging economies
• Child mortality
• Access to sanitation
Labour market: job quantity & quality
Income dimensions Non-income dimensions
Going beyond economics towards
inclusiveness
.
Source: OECD Going for Growth. 17
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REFORMSFOR INCLUSIVE GROWTH
15
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Promote business
dynamism and the diffusion of
knowledge
Firms
Unlock skills development and
innovation capacity
Skills
Help workers benefit from a fast-changing labour market
Workers
Corresponding to 3 broad categories
of recommendations
• Barriers to entry, competition, exit, trade and FDI,
• Structure and efficiency of the tax system,
• Legal and physical infrastructure
• Primary and secondary education
• Higher education and VET
• R&D policies
• A more inclusive labourmarket (gender, migrants, low-skilled, etc.)
• ALMPs and social benefits
• Labour mobility and health sector
• Labour market regulation
12
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Key recommendations to promote
inclusive growth
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• Foster business dynamism
➢ Boost productivity growth and business dynamism, while ensuring adaptation and diffusion of technologies across the board – in particular for small and young firms
➢ Optimize natural resource management for sustainable growth
• Lift the quantity and quality of jobs and address labour market insecurity and segmentation.
➢ Create more and better jobs by tackling labour market duality and segmentation, including informality.
➢ Work to achieve inclusive labour markets (female, foreign-born, elderly, long-termunemployed..)
• Ensure broad access to quality education and upskilling.
➢ Address the needs of young people from pre-school to university, so they get the best start in life and the support they need throughout their education.
➢ Promote life-long learning and acquisition of skills
• Enhance the effectiveness of taxes and transfer systems in reducing income inequality and poverty, balancing equity and efficiency objectives.
Firms
Workers
Skills
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20
Policy priorities in Lithuania
• Reducing productivity dispersion and thus wage dispersion. – removing barriers to investment,– enhancing the performance of state-owned enterprises, – boosting business dynamics through wider financing options,– easing insolvency procedures in order to help “zombie” firms exit the market quicker, – strengthening innovation capacity by fostering digitization and enhancing research-business
collaboration, as well as improving infrastructure.
• Increasing social transfers and social assistance while maintaining strong work incentives.
- the maximum duration period of unemployment benefit, currently at nine months, could be further extended.
- social benefits could also be better targeted at combating child poverty. - stronger fiscal support to low-income families could be in part financed by a higher property
taxation.
• Making the labour market more inclusive. – a high tax wage makes low-skilled workers less attractive to employers ➔ reducing social
security contributions – activation programs (currently 0.22% of GDP)– ensuring relevant skills with more and better targeted vocational training– skill mismatch could be addressed by pursuing the reform of the education system at all levels
Source: OECD (2018), OECD Economic Surveys: Lithuania 2018, OECD Publishing
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More information & references
Going for Growth
• http://www.oecd.org/eco/going-for-growth.htm
• OECD (2017), "Integrating inclusiveness in the Going for Growth framework", in Economic Policy Reforms 2017: Going for Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/growth-2017-5-en.
OECD Inclusive Growth Initiative
• OECD (2018), Opportunities for All: A Framework for Policy Action on Inclusive Growth, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264301665-en
Selected OECD papers
• Causa, O., M. Hermansen and N. Ruiz (2016), "The Distributional Impact of Structural Reforms", OECD Economics Department Working Papers, No. 1342, OECD Publishing, Paris, http://dx.doi.org/10.1787/5jln041nkpwc-en.
• Causa, O. and M. Hermansen (2017), "Income redistribution through taxes and transfers across OECD countries", OECD Economics Department Working Papers, No. 1453, OECD Publishing, Paris, http://dx.doi.org/10.1787/bc7569c6-en.
• Andrews, D., Criscuolo C., and Gal P. (2016), “The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy”, OECD Productivity Working Papers, No. 05
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http://www.oecd.org/eco/going-for-growth.htmhttp://dx.doi.org/10.1787/growth-2017-5-enhttp://dx.doi.org/10.1787/9789264301665-enhttp://dx.doi.org/10.1787/5jln041nkpwc-enhttp://dx.doi.org/10.1787/bc7569c6-en