Canada is one of the OECD economies delivering the best outcomes for its citizens, according to a new OECD report presented in Ottawa today by OECD Chief of Staff and G20/G7 Sherpa Gabriela Ramos. Canada scores highly in all dimensions of the OECD’s Better Life Index, especially in regards to self-reported well-being, personal security and health status. Canada is also undertaking several programmes to foster inclusive growth – with respect to childcare benefits, gender equality and social housing – in line with the OECD Framework for Policy Action for Inclusive Growth.
The 2018 OECD Economic Survey of Canada finds the macroeconomic situation to be broadly favorable, with low unemployment, inflation on target and growth expected to remain solid over 2018-19.
The greatest uncertainty weighing on the growth outlook stems from the possibility of new trade restrictions, principally in relation to the ongoing renegotiation of the North America Free Trade Agreement. The Survey points out that outcomes will depend on political decisions, notably in the United States, while showing that business investment is already being negatively affected. A second risk underlined in the Survey concerns the combination of elevated household debt and high housing prices, which could lead to a disorderly market correction, potentially reducing residential investment and household wealth and dampening consumption.
The Survey emphasises that the rapid growth of Canadian housing prices in recent years not only represents a macroeconomic risk but has also created affordability challenges that are most acute in fast-growing major cities. Since 2016, both the national and provincial governments have responded to housing market pressures with policies that have helped to cut the national average growth rate of real estate prices to 2.9% in the year to June 2018 from 14.2% in the previous twelve-month period. The government should monitor the effects of recent targeted regulations, paying close attention to high-debt, low-income borrowers most vulnerable to high debt-service loads as interest rates rise, the Survey says. It also recommends increasing the supply of affordable housing and better maintaining the existing social housing stock.
Much of the Economic Survey is devoted to improving inclusiveness for women, youth and older people. The report welcomes many of the efforts of the federal government to achieve more inclusive growth, including through the 2017 National Housing Strategy, the increase in parental leave benefits in the 2018 Budget and the establishment in 2017 of the Multilateral Early Learning and Child Care Framework. “Canada should continue leading by example and walk the extra mile to ensure inclusive labour outcomes for underrepresented groups such as women, youth and seniors. This will not only contribute to a more inclusive society, but also to a more productive economy, in the context of low productivity growth and the ageing of the population”, Ms Ramos said.
The gender employment gap remains virtually unchanged since 2009, and women, particularly mothers, continue to earn significantly less than men, in part due to a large disparity in unpaid childcare responsibilities. Outside the province of Quebec, low (but increasing) rates of government support for childcare should be expanded considerably, as should incentives for fathers to take parental leave. Skills development among youth should be prioritised to arrest declining skills and weak wage growth among young males with low educational attainment. Improving labour market inclusion of Indigenous Peoples in Canada is another way to boost labour force participation and well-being, and the Survey argues that better alignment between federal and provincial Indigenous labour market programmes, targeted work experience, expanded access to higher education and rigorous monitoring and evaluation are all important.
Growth in old-age poverty is linked to the indexing of minimum public pensions to the consumer price index, which has meant that they have grown more slowly than earnings. This should be tackled through further increases in basic pension payments over time. Increasing the age of eligibility for public pensions, in line with life expectancy, would boost growth by increasing the employment rate of older Canadians still willing and able to work. This should be accompanied by greater flexibility in working arrangements for older workers.
The Survey also devotes special attention to Canada’s immigration system, which has been highly successful, welcoming large numbers of immigrants from diverse backgrounds who contribute to the economic dynamism and cultural diversity of the country while maintaining high levels of social cohesion. With the introduction in 2015 of the Express Entry system, the focus has been on the selection of immigrants with higher levels of human capital and earnings prospects. Canada has also developed a range of successful settlement programmes and initiatives to facilitate immigrant integration.
To further enhance the benefits immigration generates for the Canadian economy, the Survey suggests increasing the weight given to skilled Canadian work experience in selection processes and prioritising applications from candidates with skilled work experience and relevant job offers before others. Canada should also expand bridge and mentoring programmes, which help immigrants with post-secondary credentials gain recognition and develop professional networks, and redirect resources for settlement programmes so that utilisation patterns better reflect needs. Immigration policy will also need to continue to strike a balance between maximising ease of integration through selection of highly skilled immigrants and maximising the welfare gains for migrants by supporting migration of less-skilled migrants.
On the key challenge of climate change – an area where Canada has scope to do better- the Survey welcomes the launch of the Pan-Canadian Framework on Clean Growth and Climate Change and recommends further steps by governments to progressively increase the carbon price, which would make it possible to reduce overlap between other measures and allow Canada’s greenhouse gas abatement objectives to be met in the most efficient way.
The Survey also notes Canada’s disappointing productivity growth, and reiterates past recommendations to close the gap with the OECD economies having the highest productivity levels. These include reducing barriers to entry in network industries and services as well as restrictions on internal trade.
A few ‘green shoots’, but future of global trade remains deeply uncertain
Estimates show that world trade will drop by five per cent this quarter, compared with the 2019 level. While this is an improvement over the nearly 20 per cent decline in the second quarter of the year, it is still not enough to pull trade out of the red.
Uncertainty aggravating trade
“The uncertain course of the pandemic will continue aggravating trade prospects in the coming months”, said UNCTAD Secretary-General Mukhisa Kituyi.
“Despite some ‘green shoots’ we can’t rule out a slowdown in production in certain regions or sudden increases in restrictive policies.”
While the projection represents a decrease, the figure is a more positive result than previously expected, as UNCTAD had projected a 20 per cent year-on-end drop for 2020, back in June.
Trade trends have improved since then, the agency added, primarily due to the earlier than expected resumption of economic activity in Europe and east Asia.
China leads recovery
The report points to China, which has shown a notable trade recovery.
Chinese exports had fallen in the early months of the pandemic and stabilized in the second quarter of the year, before rebounding strongly in the next quarter, with year-over year growth of almost 10 per cent.
“Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period”, the report said.
Within China, demand for goods and services has also recovered. Imports stabilized in July and August, and grew by 13 per cent in September.
Growth and decline in Asia
India and South Korea also recorded export growth last month, at four per cent and eight per cent, respectively.
UNCTAD reported that as of July, the fall in trade was significant in most regions except east Asia.
West and south Asia saw the sharpest declines, with imports dropping by 23 per cent, and exports by 29 per cent.
The report also includes an assessment of trade in different sectors, with the energy and automotive industries hardest hit by the pandemic.
Meanwhile, sectors such as communication equipment, office machinery, and textiles and apparel, have seen strong growth due to the implementation of mitigation responses such as teleworking and personal protection measures.
Wealthy nations benefit from COVID-19 medical supply trade
The report also gives special attention to COVID-19 medical supplies, which include personal protective equipment, disinfectants, diagnostic kits, oxygen respirators and related hospital equipment.
Between January and May, sales of medical supplies from China, the European Union, and the United States, rose from $25 billion to $45 billion per month. Since April, trade has increased by an average of more than 50 per cent.
However, the authors found wealthier nations have mainly benefited from this trade, with middle and low income countries priced out from access to COVID-19 supplies.
Residents of high income countries have on average benefited from an additional $10 per month of imports of COVID-19 related products. This compares to just $1 for their counterparts in middle income countries, and 10 cents for those in low income nations.
UNCTAD warned that if a COVID-19 vaccine becomes available, the access divide between wealthy and poor countries could be even more drastic.
The report urges governments, the private sector and philanthropic organizations to continue mobilizing additional funds to fight the pandemic in developing countries and to support financial mechanisms that will provide safe and effective COVID-19 vaccines to poor countries
COVID-19 crisis puts migration and progress on integration at risk
Migration flows have increased over the past decade and some progress has been made to improve the integration of immigrants in the host countries. But some of these gains may be erased by the COVID-19 pandemic and its economic fallout. Governments need to secure the health and safety of all workers in essential activities and maintain spending on integration to help migrants continue to contribute to society and the economy, according to a new OECD report.
The OECD International Migration Outlook 2020 says that the COVID-19 crisis has had unprecedented consequences on migration flows. Before the pandemic, permanent migration flows to the OECD amounted to 5.3 million in 2019, with similar figures for 2017 and 2018. Although there were fewer refugee admissions, permanent labour migration rose by more than 13% in 2019 and temporary labour migration also rose, with more than 5 million entries recorded in the OECD.
Following the onset of the pandemic, almost all OECD countries restricted admission to foreigners.
As a result, issuances of new visas and permits in OECD countries plummeted by 46% in the first half of 2020, compared with the same period in 2019. This is the largest drop ever recorded. In the second quarter, the decline was 72%. Overall, 2020 is expected to be a historical low for international migration in the OECD area.
There are strong signs that mobility will not return to previous levels for some time. This is due to weaker labour demand, persistent severe travel restrictions as well as the widespread use of teleworking among high-skilled workers and remote learning by students.
“Migration will continue to play an important role for economic growth and innovation, as well as in responding to rapidly changing labour markets,” said OECD Secretary-General Angel Gurría, launching the report with European Commissioner for Home Affairs Ylva Johansson. “We need to avoid rolling back on integration and reaffirm that migration is an integral part of our lives.”
Migrant workers have been on the frontline of the crisis. They account for a large share of the OECD medical workforce, with one in four medical doctors in the OECD, and one in six nurses. In many OECD countries, more than a third of the workforce in other key sectors, such as transport, cleaning, food manufacturing and IT services, are immigrants.
Yet immigrants are facing a hard time in the labour market. Much of the past decade’s progress in employment rates among immigrants has been wiped out by the pandemic. In all countries for which data are available, immigrants’ unemployment increased more, compared to their native-born peers. The largest increases for immigrants were observed in Canada, Norway, Spain, Sweden and the United States. In Sweden, almost 60% of the initial increase in unemployment fell on immigrants. In the United States, unemployment of immigrants was lower than their native-born peers by almost one percentage point before the pandemic, it is now 2 percentage points higher.
Migrants are highly exposed to the health impacts of the pandemic as a result of working on the frontline during the pandemic but also vulnerabilities linked, for example, to housing conditions and poverty. Studies in a number of OECD countries found an infection risk that is at least twice as high as that of the native-born.
Going forward, getting migration and integration policies right will be essential if we are to achieve a strong and truly inclusive recovery.
Global Deal report: Social dialogue crucial to tackling impact of COVID-19
Social dialogue between employers, workers and government can play a central role in managing the impact of the COVID-19 crisis in the workplace and has great potential in ensuring that the livelihoods and opportunities of those hardest hit are protected, according to a new report.
Partnership, says the pandemic has exposed and intensified underlying inequality and is having a disproportionate impact on vulnerable groups already facing insecurity, such as the low-skilled, informal workers, youth and women.
The report argues that social dialogue and collective bargaining have a key role to play in building back a more sustainable economy in which the benefits of growth are distributed across the whole of society.
Agreements between business, trade unions and governments have often played an important role in establishing the short-time working arrangements aimed at protecting incomes and firms during lockdowns. The key ingredients have been commitments by employers not to fire workers while unions accept shortening working times and a lowering of wages. Governments have then stepped in with benefits or wage subsidies to make up for the wage shortfalls.
Such agreements can help shore up consumer confidence by keeping workers in jobs and maintaining incomes. The report looks at how such arrangements have worked in a number of countries, including in Germany, Italy and France. In Denmark, the job retention scheme managed to limit the rise in unemployment to 0.1 percentage point between February and May 2020. In Korea, social partners agreed to lift the employment retention subsidy from 63% to 75% with additional emergency support available for small businesses and workers on non-standard contracts.
The report points to the importance of involving all social partners in ensuring safe working conditions during the pandemic, particularly as individual workers may be even more reluctant to voice their concerns during the crisis for fear of losing their jobs. Social dialogue provides a forum to understand workers’ concerns and negotiate balanced approaches.
Presenting the report alongside ILO Director-General Guy Ryder and Swedish Trade Minister Anna Hallberg, OECD Secretary-General Angel Gurría said, “Social dialogue has shaped the policies that supported workers and sustained the economy, helping to boost confidence during the crisis. Social dialogue’s importance is not limited to the immediate management of the crisis. It also helps countries to meet their UN 2030 Agenda commitments and prepare for global trends such as digitalisation, globalisation and climate change.”
With many of the essential ‘frontline’ workers on low wages, such as those in healthcare, food processing, or for instance supermarket cashiers, setting appropriate minimum wages via statutory provisions and/or collective bargaining and achieving balanced decisions through social dialogue can improve standards of living. Fairness and equity will result in a more resilient labour market and a stronger economic recovery, the report says.
Beyond the challenges brought by the COVID-19 crisis, labour markets are having to adapt to technological change creating a demand for new skills. The report says clear policies and mechanisms are needed to promote lifelong learning and skills development. Social dialogue is needed at national, sectoral and firm level, and involving workers in the decisions can facilitate effective adoption of the skills development programmes.
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