Poland’s economic growth remains strong. Rising family benefits and a booming jobs market are lifting household income while poverty rates and inequality are falling, says a new OECD report.
In its latest Economic Survey of Poland, the OECD encourages policy-makers to build on the country’s current economic strength and social progress in order to tackle major remaining challenges. To sustain rising living standards Poland has to develop its capacity to innovate and invest in skills and infrastructure, as is acknowledged in the government’s Strategy for Responsible Development. The report says that the level of expenditure on research and development, despite recent welcome rises and tax incentives, remains weak. Vocational training suffers from limited business engagement which is hindering many of the country’s plentiful small enterprises from modernising and improving productivity.
Poland is also ageing rapidly. The working age population is projected to decline markedly over the coming decades. The lowering of the retirement age risks increasing poverty among the elderly, particularly women, says the OECD. Women often have patchy career paths and their retirement age is now set to remain unusually low. Workers should be made aware of the benefits of working longer for their future pension income, the report says.
Despite efforts to improve childcare, it remains insufficient and expensive, especially in rural areas. More investment in childcare is required as part of a range of measures to help combine work and family life and strengthen the number of women in employment.
Presenting the Survey in Warsaw, OECD Deputy Secretary-General Mari Kiviniemi said, “Poland is in a strong position. A dynamic job market together with the Family 500 + programme has helped make economic development more inclusive. Many people now benefit from new opportunities and rising incomes.”
“The time is ripe to ensure that living standards continue to rise. Strengthening innovation, improving infrastructure and investing in skills will be crucial. With rising labour and skills shortages, many employers now realise how important it is to invest in training. The government must seize this opportunity to engage with them.”
Measures to improve tax compliance have succeeded in shrinking the public deficit despite higher spending on social benefits. But more resources – or shift in how they are used – will be needed to raise spending in priority areas such as public infrastructure, healthcare and higher education and research.
Limiting reduced VAT rates, increasing environmental taxes and giving a stronger role to the progressive personal income tax would raise additional revenue while contributing to more equity and a greener environment.
Plans to reform higher education and improve research excellence and industry-science co-operation are welcome, the report says. The general health status of Poles and access to healthcare are very unequal, while environmental quality is below the average of OECD countries. Tax rates on air and water pollution and on CO2 emissions are low and many environmentally harmful fuel uses are exempt from taxation. Raising environmental taxes would provide stronger incentives to replace ageing coal-intensive equipment with greener alternatives.
A clear immigration policy strategy is also needed to better monitor integration of foreigners in line with labour market needs, the protection of their rights and their access to education and training.
Transition to Low-Carbon Rice Will Help Vietnam Meet Its Emission Target
Moving to low-carbon rice production offers the highest potential for Vietnam to meet its goal of cutting methane emissions by 30 percent by 2030 while boosting the competitiveness of a strategic export item, a new World Bank report says.
The report, titled “Spearheading Vietnam’s Green Agricultural Transformation: Moving to Low-Carbon Rice,” suggests that Vietnam can transform the rice sector by cutting GHG emissions, improving resource efficiency and yields, boosting resilience, and diversifying production. Such transformation will require significant investment and major policy reforms to align incentives and coordinate behaviors of stakeholders at all levels.
“The agricultural sector, despite all its successes, is an important contributor to GHG emissions in Vietnam,” said Carolyn Turk, World Bank Country Director for Vietnam. “It has reached a point where a transition to lower-carbon modes of farming is imperative—the longer it takes to switch, the higher the costs will be. Experience suggests that government has a catalytic role to play in driving the green transition through strategic allocation of public investment and strengthening the enabling environment for private sector participation in a modern, green agriculture sector.”
Rice, which is Vietnam’s most important crop and grown on more than half of its agricultural land area, accounts for 48 percent of the agriculture sector’s GHG emissions and over 75 percent of methane emissions. Based on conservative estimates, improving water management and optimizing application of inputs such as seeds, fertilizers, and pesticide can help farmers maintain or increase yields by 5 to 10 percent and reduce input costs by 20 to 30 percent, thereby boosting net profits by around 25 percent. More importantly, these improved techniques would also help cut GHG emissions by up to 30 percent. Such approaches were successfully piloted in over 184,000 ha of rice farming under the Vietnam Sustainable Agriculture Transformation Project financed by the World Bank.
“These methods have been proven effective,” said Benoît Bosquet, World Bank Regional Director for Sustainable Development in East Asia Pacific. “If we can scale them up in the whole agricultural sector, they will help Vietnam progress towards its 2050 net-zero greenhouse gas emissions target.”
The report highlights five short- to medium-term policy areas to accelerate the transition to low-carbon agriculture, including ensuring policy coherence and plan-budget alignment, repurposing policy tools and public expenditures, promoting public investments, strengthening institutions, and enabling the private sector and other stakeholders to participate.
The report was launched at the “Integrated Climate Resilience and Sustainable Development of the Mekong Delta” workshop, co-organized by the Ministry of Agriculture and Rural Development and the World Bank in Can Tho on September 24.
World Bank calls for urgent climate action in Latin America and the Caribbean
A new World Bank report calls on countries in the region to take urgent action to help reduce the impacts of climate change and set a path for the transition to low-carbon economies.
According to the report,A Roadmap for Climate Action in Latin America and the Caribbean 2021-2025, climate-related disasters such as hurricanes, droughts, fires, and floods are becoming increasingly frequent and intense in the region and are the cause of enormous economic losses. Latin America and the Caribbean (LAC) is among the regions most vulnerable to the destructive power of such events, with annual costs due to disruptions in energy and transport infrastructure equivalent to 1 percent of regional GDP and up to 2 percent in some Central American countries.
Furthermore, climate change is expected to have negative impacts on productivity and harvests in several countries in the region. This could exacerbate acute food insecurity, which increased rapidly during the COVID-19 pandemic to affect more than 16 million people across the region, with many families at risk in 2022 due to higher inflation and food prices. Without action, by 2030, up to 5.8 million people could fall into extreme poverty as a result of climate change, and by 2050 over 17 million people could be forced to leave their homes to escape climate impacts.
“Countries in LAC have a unique opportunity to act swiftly and lead the change towards more resilient and low-carbon economies that foster a better future for their people,” said Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean. “The World Bank has long been a strong partner to the region and as part of our long-term commitment to achieving sustainable and inclusive development, we have stepped up our support, providing about $4.7 billion in climate-related financing during the last year.”
The region is responsible for 8 percent of global greenhouse gas emissions. The agricultural sector, together with changes in land use and deforestation, accounts for 47 percent of emissions in LAC, well above the global average of 19 percent. Energy, electricity consumption and transportation account for another 43 percent of emissions. The report emphasizes opportunities in these areas for both economic growth and services with lower emissions as key to accelerating climate action and leading an urgent transition to low-carbon economies to avoid the irreversible effects of climate change.
“This report offers an ambitious and urgent roadmap for transformative climate action in the region, building on country climate priorities and commitments and focusing on adaptation and resilience, while supporting countries to achieve their low carbon development goals,” said Anna Wellenstein, Regional Director for Latin America and the Caribbean in sustainable development.
The report highlights several priority areas in key sectors for new and accelerated climate action:
- Managing landscapes, agriculture and food systems that include deforestation-free value chains
- Decarbonizing power generation, transport systems and manufacturing while reducing infrastructure disruptions
- Making cities more resilient to climate shocks and reducing urban emissions
While supporting cross-cutting actions that:
- help vulnerable populations adapt to climate change and achieve just and equitable transitions to low carbon economies; and
- promote green growth while reducing financial sector risks and anticipating market transitions.
In FY22, the World Bank provided US$4,691 million for climate action in the region, in projects such as:
- Climate Resilient and Sustainable Agriculture (Belize)
- Resilient Connectivity and Urban Transport Accessibility (Haiti)
- Enabling a Green and Resilient Development Policy Financing (Peru)
- Second Disaster Risk Management Development Policy Credit (Honduras)
- Belgrano Sur Passenger Railway Line Modernization Project (Argentina)
The targets of the Roadmap for Climate Action in Latin America and the Caribbean 2021-2025 are grounded in the World Bank Group’s Climate Change Action Plan (CCAP) and fully integrate all parts of the World Bank Group to work with a broad range of partners in the development of multisectoral solutions.
Jobs outlook highly uncertain in the wake of Russia’s war of aggression against Ukraine
OECD labour markets bounced back strongly from the COVID-19 pandemic, but the global employment outlook is now highly uncertain according to a new OECD report.
Russia’s war of aggression against Ukraine has caused lower global growth and higher inflation, with negative impacts on business investment and private consumption.
The OECD Employment Outlook 2022 says that while labour markets remain tight in most OECD countries, lower global growth means employment growth is also likely to slow, while major hikes in energy and commodity prices are generating a cost of living crisis.
Since the low point of the pandemic in April 2020, OECD countries have created about 66 million jobs, 9 million more than those destroyed in a few months at the onset of the pandemic. The OECD unemployment rate stabilised at 4.9% in July 2022, 0.4 points below its pre-pandemic level recorded in February 2020 and at its lowest level since the start of the series in 2001.
The number of unemployed workers in the OECD continued to fall in July and reached 33.0 million, 2.4 million less than before the pandemic.
Looking at individual countries however, the unemployment rate in July remained higher than before the pandemic in one fifth of OECD countries. In a number of countries, labour force participation and employment rates are also still below pre-crisis levels. Moreover, employment is growing more strongly in high pay service industries, while it remains below pre-pandemic levels in many low pay, contact-intensive industries.
“Rising food and energy prices are taking a heavy toll, in particular on low income households,” OECD Secretary-General Mathias Cormann said. “Despite widespread labour shortages, real wages growth is not keeping pace with the current high rates of inflation. In this context, governments should consider well targeted, means-tested and temporary support measures. This would help cushion the impact on households and businesses most in need, while limiting inflation impacts and fiscal cost of that policy support,” he said.
Tight labour market conditions mean that companies across the OECD are confronted with unprecedented labour shortages. In the European Union, almost three in ten manufacturing and service firms reported production constraints in the second quarter of 2022 due to a lack of labour.
Nominal wages are not keeping pace with the rapid rise in inflation. The real value of wages is expected to decline over the course of 2022, as inflation is projected to remain high and generally well above the level expected at the time of relevant collective agreements for 2022. The cost of living crisis is affecting lower-income households disproportionally. They have to devote a significantly larger share of their incomes on energy and food than other groups and were also the population segment falling behind in the jobs recovery from the COVID-19 pandemic.
In these circumstances, supporting real wages for low-paid workers is essential, according to the report. Governments should consider ways to adjust statutory minimum wages to maintain effective purchasing power for low paid workers. Targeted, means-tested, and temporary social transfers to people most affected by energy and food price hikes would also help support the living standards of the most vulnerable.
In the current circumstances, active discussions between governments, workers and firms on wages will also be key. None of them can absorb the full cost associated with the hike in energy and commodity prices alone. This calls for giving new impetus to collective bargaining, and for rebalancing bargaining power between employers and workers, enabling workers to bargain their wage on a level playing field.
Countries should step up their efforts to reconnect the low-skilled and other vulnerable groups to available jobs. About two thirds of OECD countries have increased their budget for public employment services since the onset of the COVID 19 crisis. However, more funding is not enough: employment and training services need to be integrated, comprehensive and effective in reaching out to employers and job seekers.
Improving job quality for frontline jobs should be an urgent priority for governments. More than half of OECD countries set up one-time rewards to compensate workers in the long-term care sector for extra work during the pandemic. Yet less than 30% of countries have increased pay on an ongoing basis.
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