The World Economic Forum today issued a report proposing a shift in economic policy priorities to respond more effectively to the insecurity and inequality accompanying technological change and globalization. The Inclusive Growth and Development Report 2017 concludes that most countries are missing important opportunities to raise economic growth and reduce inequality at the same time because the growth model and measurement tools that have guided policymakers for decades require significant readjustment.
The Report finds that annual median incomes declined by 2.4% or $284 per capita across 26 advanced economies between 2008 and 2013 (or most recent period available). Developing countries fared much better, with median incomes rising by an average of 10.7% or $165. However, 23% of them experienced a decline in median per capita income of 9%, as compared to 54% of advanced countries experiencing a decline of an average 8% or $1044 per person equivalent to $2,505 per average household.
The Report argues that sustained, broad-based progress in living standards, a concept that encompasses income as well as economic opportunity, security and quality of life, should be recognized by policymakers as the bottom-line objective of national economic performance rather than GDP growth. It proposes a new policy framework and set of measurement tools to guide the practice and assess the performance of countries accordingly.
Inclusive Development Index (IDI). The report ranks countries based on 12 Key Performance Indicators of inclusive development. Providing a more complete measure of economic development than GDP growth alone, the Index has three pillars: Growth and Development, including GDP growth, labour force participation and productivity, and healthy life expectancy; Inclusion, including median household income, poverty and two inequality measures; and Intergenerational Equity and Sustainability, including adjusted net saving (including natural capital depletion and human capital investment), demographic dependency ratio, public debt and carbon intensity.
51% of the 103 countries for which these data are available saw their IDI scores decline over the past five years, attesting to the legitimacy of public concern and challenge facing policymakers regarding the difficulty of translating economic growth into broad social progress. In 42% of countries, IDI decreased even as GDP per capita increased. A chief culprit was wealth inequality, which rose in 77% of economies by an average of 6.3%.
Some countries rank significantly higher in the IDI than GDP per capita, suggesting they have done a relatively good job of making their growth processes inclusive, including countries as diverse as Cambodia, the Czech Republic, New Zealand, South Korea and Vietnam. By contrast, others have significantly lower IDI than GDP per capita rankings, indicating that their growth has not translated as well into social inclusion; these include Brazil, Ireland, Japan, Mexico, Nigeria, South Africa and the United States.
According to Richard Samans, Member of the Forum’s Managing Board, “There is a global consensus on inclusive growth, but it has been far more directional than practical. To respond more effectively to social concerns, economic policy needs a new compass setting, broad-based progress in living standards, and a new mental map in which structural reform is reimagined and reapplied to this task, with chief economic advisers and finance ministers prioritizing it every bit as much their traditional focus on macroeconomic, financial supervisory and trade policy.”
New Framework or “Growth Model.” The Report suggests that 15 areas of structural policy and institutional strength together constitute the underlying “income distribution system” of modern market economies and are the crucial tools available to policymakers to strengthen economic growth and social inclusion in tandem. It argues that rising inequality reflects mainly “a lack of attention to this policy ecosystem rather than an iron law of capitalism.” Moreover, for many countries such a reimagined process of structural reform encompassing both demand- and supply-side elements also offers the best hope for boosting economic growth given their limited monetary and fiscal policy space in the aftermath of the 2008-09 financial crisis.
The Report also includes policy metrics — 140 Policy and Institutional Indicators across the 15 policy domains that have the potential to drive both stronger growth and wider social inclusion. These permit countries to benchmark their institutional strength and policy incentives in these areas against their peers.
Education and Skills Development – access; quality; equity
Basic Services and Infrastructure – basic and digital infrastructure; health-related services
Corruption and Rents – business and political ethics; concentration of rents
Financial Intermediation of Real Economy Investment – financial system inclusion; intermediation of real economy business investment
Asset-building and Entrepreneurship – small business ownership; home and financial asset ownership
Employment and Labour Compensation – productive employment; wage and non-wage labour compensation
Fiscal transfers – tax system; social protection
An Agenda for Global Inclusive Growth. Based on its findings, framework and tools, the Report proposes a coordinated international initiative to combat the prospect of secular stagnation and dispersion (chronic low growth and rising inequality) by placing progress in median living standards – people – at the heart of national policy and global economic integration:
· Major economies to undertake mutual effort to address their structural weaknesses within this Framework with support of OECD and other international organizations, potentially by expanding and reprioritizing the G20 Enhanced Structural Reform Agenda, launched during China’s recent presidency.
· All countries experiencing labour market challenges related to the Fourth Industrial Revolution to set national investment targets and public-private implementation strategies across five areas of human capital formation: active labor-market policies (training); equity of access to quality basic education; gender parity; non-standard work benefits and protections; and school-to-work transition. Data indicate few countries are well positioned.
· International financial institutions to embrace this reformulation and reprioritization of structural economic policy in their public signaling, country advice, and development cooperation programs as well as catalyze a scaling of blended, public-private financing of sustainable infrastructure – crucial for attainment of the SDGs — by shifting from direct lending to risk mitigation, co-investment, aggregation and project development.
· Trade and investment cooperation to be refocused from the negotiation of formal new norms such as free trade agreements to the facilitation of trade and investment activity within as well as among countries, particularly in respect of SMEs, services and value chains, encouraging convergence around best practices and standards to reduce frictions and boost development impact, while increasing capacity-building assistance for these purposes.
The Report was developed as part of the Forum’s multistakeholder System Initiative on Economic Growth and Social Inclusion and includes written contributions from five international organizations, three companies and one G20 government highlighting their contributions to this challenge.
Circular Economy: New rules will make EU the global front-runner in waste management and recycling
EU Member States approved a set of ambitious measures to make EU waste legislation fit for the future, as part of the EU’s wider circular economy policy.
The new rules – based on Commission’s proposals part of the Circular Economy package presented in December 2015 – will help to prevent waste and, where this is not possible, significantly step up recycling of municipal and packaging waste. It will phase out landfilling and promote the use of economic instruments, such as Extended Producer Responsibility schemes. The new legislation strengthens the “waste hierarchy”, i.e. it requires Member States to take specific measures to prioritize prevention, re-use and recycling above landfilling and incineration, thus making the circular economy a reality.
Commissioner for Environment, Maritime Affairs and Fisheries, Karmenu Vella said: “The final approval of new EU waste rules by the Council marks an important moment for the circular economy in Europe. The new recycling and landfilling targets set a credible and ambitious path for better waste management in Europe. Our main task now is to ensure that the promises enshrined in this waste package are delivered on the ground. The Commission will do all it can to support Member States and make the new legislation deliver on the ground.”
The Commission had originally presented proposals for new waste rules in 2014, which were withdrawn and replaced by better designed, more circular and more ambitious proposals on December 2015 as part of the Circular Economy agenda of the Juncker Commission. These proposals were then adopted and are now part of the EU rule book.
The new rules adopted today represent the most modern waste legislation in the world, where the EU is leading by example for others to follow.
The details of the new waste rules:
Recycling targets for municipal waste
|By 2025||By 2030||By 2035|
In addition, stricter rules for calculating recycling rates will help to better monitor real progress towards the circular economy.
New recycling targets for packaging waste
|By 2025||By 2030|
|Paper and cardboard||75%||85%|
Building on the existing separate collection obligation for paper and cardboard, glass, metals and plastic, new separate collection rules will boost the quality of secondary raw materials and their uptake: hazardous household waste will have to be collected separately by 2022, bio-waste by 2023 and textiles by 2025.
Phasing out landfilling
Landfilling of waste makes no sense in a circular economy and can pollute water, soil and air. By 2035 the amount of municipal waste landfilled must be reduced to 10% or less of the total amount of municipal waste generated.
The new legislation foresees more use of effective economic instruments and other measures in support of the waste hierarchy. Producers are given an important role in this transition by making them responsible for their products when they become waste. New requirements for extended producer responsibility schemes will lead to improving their performance and governance. In addition, mandatory extended producer responsibility schemes have to be established for all packaging by 2024.
The new legislation will place a particular focus on waste prevention and introduce important objectives for food waste in the EU and halting marine litter to help achieve the UN Sustainable Development Goals in these areas.
Strong labour relations key to reducing inequality and meeting challenges of a changing world of work
Globalisation and rapid technological innovation have spurred unprecedented economic growth but not everyone has benefited. Unions and employers, together with governments, can play a major role in making growth more inclusive and helping workers and businesses face the challenges of a changing world of work. Good labour relations are a way to reduce inequalities in jobs and wages and better share prosperity, according to a new OECD-ILO report.
Building Trust in a Changing World of Work finds that trade union membership is declining in a majority of countries, while in several emerging economies large shares of the workforce are still in the informal economy. The share of employees whose job conditions and pay are regulated by collective bargaining varies greatly across sectors and countries, from less than 10% in Turkey to over 90% in Sweden. Coverage of collective bargaining have also seen a marked decline in many countries over the last decades, although in some countries more workers are covered today thanks to decisive policy reforms.
“Creating more and better jobs is key to achieving inclusive economic growth. At a time marked by increasing job insecurity, wage stagnation and new challenges from the digital revolution, constructive labour relations are more important than ever,” said OECD Secretary-General Angel Gurría, launching the report alongside Swedish Foreign Affairs Minister Margot Wallström, French Labour Minister Muriel Pénicaud, ITUC General Secretary Sharan Burrow and ILO Deputy Director-General for Field Operations & Partnerships, Moussa Oumarou.
The report is part of the Global Deal for Decent Work and Inclusive Growth, an initiative launched in 2016 by the Swedish Prime Minister Stefan Löfven and developed in cooperation with the OECD and the ILO. This multi-stakeholder partnership aims to foster social dialogue as a way of promoting better-quality jobs, fairer working conditions and helping spread the benefits of globalisation, in keeping with the Sustainable Development Goals. The Global Deal has around 90 partners representing governments, businesses, employers’ and workers’ organisations and other bodies who make voluntary commitments to contribute to a more effective dialogue and negotiated agreements on labour issues.
“We are convinced that the Global Deal for Decent Work and Inclusive Growth can help to spur more and better social dialogue so we can provide all workers with strong voices, protection, fair working conditions and good levels of trust with employers,” Mr Gurría said.
“The new report shows that enhanced social dialogue can create opportunities for more inclusive labour markets and economic growth, better socio-economic outcomes and greater well-being for workers, improved performance for businesses and restored trust for governments,” said ILO Director-General Guy Ryder.
Some 2 billion workers around the world – more than half the global labour force – are in informal and mostly insecure jobs, according to the report, meaning they do not have formal contracts or social security. Annually there are 2.78 million work-related deaths and 374 million non-lethal work-related injuries and illnesses.
The report highlights the crucial role that unions and employers can play in shaping the future of work by jointly deciding what technologies to adopt and how, contributing to manage transitions for displaced workers, helping identify skills needs and developing education and training programs. The report also shows that when looking at the OECD Guidelines for Multinational Enterprises companies with a higher social score (a measure of their capacity to generate trust and loyalty among the workforce, customers and wider society) also have a stronger financial performance.
This report analyses the voluntary commitments made by Global Deal partners and gives examples of initiatives to improve labour relations that have been taken in different countries and sectors.
How digital is your country? Europe needs Digital Single Market to boost its digital performance
European Commission published the results of the 2018 Digital Economy and Society Index (DESI), a tool which monitors the performance of Member States in digital connectivity, digital skills online activity, the digitisation of businesses and digital public services.
According to it, the EU is getting more digital, but progress remains insufficient for Europe to catch up with global leaders and to reduce differences across Member States. This calls for a quick completion of the Digital Single Market and increased investments in digital economy and society.
Andrus Ansip, Vice-President for the Digital Single Market, said: “This is a shift, albeit small, in the right digital direction. As a whole, the EU is making progress but not yet enough. In the meantime, other countries and regions around the world are improving faster. This is why we should invest more in digital and also complete the Digital Single Market as soon as possible: to boost Europe’s digital performance, provide first-class connectivity, online public services and a thriving e-commerce sector.”
Mariya Gabriel, Commissioner for Digital Economy and Society, said: “We look forward to a rapid progress on major reforms such as the European Electronic Communications Code aiming at boosting investments in enhanced connectivity. This year’s Digital Economy and Society Index demonstrates that we must deploy further efforts to tackle lack of digital skills among our citizens. By integrating more digital technologies and equipping them with skills, we will further empower citizens, businesses and public administrations. This is the way to succeed the digital transformation of our societies.”
Over the past year, the EU continued to improve its digital performance and the gap between the most and the least digital countries slightly narrowed (from 36 points to 34 points). Denmark, Sweden, Finland and the Netherlands scored the highest ratings in DESI 2018 and are among the global leaders in digitalisation. They are followed by Luxembourg, Ireland, the UK, Belgium and Estonia. Ireland, Cyprus and Spain progressed the most (by more than 15 points) over the last four years. However, some other EU countries still have a long way to go and the EU as a whole needs to improve to be competitive on the global stage.
DESI 2018 shows:
Connectivity has improved, but is insufficient to address fast-growing needs
- Ultrafast connectivity of at least 100 Mbps is available to 58% of households and the number of subscriptions is rapidly increasing. 15% of homes use ultrafast broadband: this is twice as high as just two years ago and five times higher than in 2013.
- 80% of European homes are covered by fast broadband with at least 30 Megabits per second (Mbps) (76% last year) and a third (33%) of European households have a subscription (23% increase compared to last year, and 166% compared to 2013).
The number of mobile data subscriptions has increased by 57% since 2013 reach 90 subscriptions per 100 people in the EU. 4G mobile networks cover on average 91% of the EU population (84% last year).
Indicators show that the demand for fast and ultrafast broadband is rapidly increasing, and is expected to further increase in the future. The Commission proposed a reform of EU telecoms rules to meet Europeans’ growing connectivity needs and boost investments.
More and more Europeans use the internet to communicate
The highest increase in the use of internet services is related to telephone and video calls: almost half of Europeans (46%) use the internet to make calls, this is almost a 20% increase compared to last year and more than 40% increase compared to 2013. Other indicators show that 81% of Europeans now go online at least once a week (79% last year).
To increase trust in the online environment, new EU rules on data protection will enter into force on 25 May 2018.
The EU has more digital specialists than before but skills gaps remain
- The EU improved very little in the number of Science, Technology, Engineering and Mathematics (STEM) graduates (19.1 graduates per 1000 people aged 20 to 29 years old in 2015, compared to 18.4. in 2013);
- 43% of Europeans still do not have basic digital skills (44% last year).
Alongside the Digital Skills and Jobs Coalition, the Commission has launched the Digital Opportunity Traineeships to tackle the digital skills gap in Europe. The pilot initiative will provide digital traineeships for up to 6,000 students and recent graduates until 2020 in another EU country.
Businesses are more digital, e-commerce is growing slowly
While more and more companies send electronic invoices (18% compared to 10% in 2013) or use social media to engage with customers and partners (21% compared to 15% in 2013), the number of SMEs selling online has been stagnating over the past years (17%).
In order to boost e-commerce in the EU, the Commission has put forward a series of measures from more transparent parcel delivery prices to simpler VAT and digital contract rules. As of 3 December 2018, consumers and companies will be able to find the best deals online across the EU without being discriminated based on their nationality or residence.
Europeans use more public services online
58% of internet users submitting forms to their public administration used the online channel (52% in 2013).
- 18% of people use online health services.
In April 2018, the Commission adopted initiatives on the re-use of public sector information and on eHealth that will significantly improve cross-border online public services in the EU.
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