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Changing world of work needs new jobs strategy

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Governments need to do more to help workers and firms adapt to the fast-changing world of work and drive inclusive growth, according to the new OECD Jobs Strategy.

New evidence in the report reveals that countries that promote job quantity, quality and inclusiveness – such as Denmark, Iceland, Norway and Sweden – perform better than those which focus predominantly on market flexibility. While flexibility and adaptability are essential to stimulate the creation of high-quality jobs in an ever more dynamic environment, the gains and costs need to be fairly shared between businesses and workers, according to the OECD.

“Countries must step up their efforts to adapt policy and institutions to the challenges of a rapidly changing world of work,” said OECD Secretary-General Angel Gurría, launching the report in Paris with France’s Minister for Labour Muriel Pénicaud. “Technological progress, globalisation and demographic change are creating many new opportunities, but not for everyone; policymakers should focus on helping those at risk of being left behind through well-targeted education and training, labour market and social policies as part of inclusive jobs strategies to help everyone get ahead.”

While in the 1990s the OECD Jobs Strategy stressed flexibility in response to widespread unemployment, and in the 2000s it advocated different policy mixes to advance full employment, the new OECD Jobs Strategy provides a comprehensive policy framework to promote not only more but also better jobs and a more inclusive and resilient labour market. This will be increasingly important in light of the digital transformation and rapid technological change that our economies and societies are undergoing. The most recent OECD analysis suggests that nearly half of all jobs are either at high risk of automation or likely to see significant changes.

The new OECD Jobs Strategy argues that a shift in emphasis is needed from remedial to preventive policies, which would boost efficiency and equity at the same time. Wage-setting rules and the tax-and-benefits system can be combined to make work pay and protect workers rather than jobs.

Countries need to invest in an effective education and training system, which gives workers the skills needed by employers and offers opportunities and incentives for education and training throughout their working lives. Social partners also have a key role to play in fostering inclusiveness, protecting workers and making effective collective bargaining systems.

The Strategy stresses the rise in various forms of non-standard work, including temporary jobs and self-employment. Despite currently representing only a small share of employment, “gig work” is also on the rise and it may expand significantly in the near future. The challenge for governments is to accompany innovation in the creation and use of non-standard employment arrangements, while avoiding abuse, creating a level playing field between companies, and providing adequate support to all workers.

Since non-standard forms of work are likely to increase, governments need to ensure that everyone has access to social protection and is covered by key labour market regulations, regardless of contract or employment type. Social protection can be made more effective by extending coverage and adapt or create specific schemes, consistent with the principle of a universal social protection floor, while promoting portability of benefits.

Equality of opportunities also needs to be strengthened, so that socio-economic background does not become the key determinant of success in the labour market, including through targeted interventions during (pre)school years and in the transition from school to work.

Working conditions should be adapted to make it easier for people to combine work, care and social responsibilities. This will increase labour force participation among both men and women, narrow gender gaps and reduce the risk of poverty and exclusion.

Building public support for reforms is vital, according to the new Jobs Strategy. This will require winning a mandate for reform and effective communication, as well as complementary reforms to cushion short-term costs. Once reforms are passed, they must be fully implemented, effectively enforced and rigorously evaluated.

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Belarus Rail Sector Reforms Would Boost Competitiveness, Contribution to Economy

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Organizational restructuring, tariff  reforms, and strategic use of digital technologies would boost the competitiveness of the Belarusian railway sector, improving rail passenger experience and contributing more to the economy, says a newly published World Bank Railway and Logistics sector study for Belarus.

Over the last decade, the railway sector’s share of transit traffic in Belarus has fallen from 35% to 29%, a decline caused largely by increased competition from road transport, combined with challenges in the railway sector’s organizational structure and tariff policies.

“Belarusian Railways isn’t a company in the conventional sense – it’s a Public Association that supervises 29 different state-owned legal entities, each with its own balance sheet, statement of accounts and assets, and decision-making processes,” says Alex Kremer, World Bank Country Manager for Belarus. “Consolidating all these entities into a single state-owned enterprise would help improve the sector’s overall management and competitiveness.”

The study recommends a new strategy for Belarusian Railways that includes revaluation of assets, changes to accounting practices, and development of commercial strategies and business plans both for freight and passenger units. The study also calls for the strategic use of digital technologies to improve customer service, increase operational efficiency, and support infrastructure management.

In Belarus, most rail prices are regulated by the state. While international passenger tariffs have increased, regional and local passenger service tariffs have declined considerably, compared with inflation and earnings. As such, Belarusian Railways has had to cross-subsidize passenger services by charging higher tariffs on its freight business, which adversely impacts its competitiveness against foreign carriers and road freight.

“Prices for passenger transport by rail are so low that a 30km rail journey costs less than a metro ride in Minsk,” says Winnie Wang, World Bank Senior Transport Specialist. “An obligation to cross-subsidizing loss-making passenger services which should be a public service has prevented Belarusian Railways from making critical investments in its freight network, and even threatens the railway’s financial viability. To enhance competitiveness, therefore, Belarusian Railways should review its tariffs and set its own prices.”

As an important first step in the long-term process of transforming the railway sector, the study suggests that Belarusian Railways undertakes analyses of freight and passenger markets and forecasts, investment needs and requirements, and organizational structure.

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Spending on health increase faster than rest of global economy

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Spending on health is outpacing the rest of the global economy, particularly in low- and middle-income countries, the World Health Organization (WHO) said on Wednesday.

According to the UN health agency, “countries are spending more on health, but people are still paying too much out of their own pockets”.

The agency’s new report on global health expenditure launched on Wednesday reveals that “spending on health is outpacing the rest of the global economy, accounting for 10 per cent of global gross domestic product (GDP).

The trend is particularly noticeable in low- and middle-income countries where health spending is growing on average six per cent annually compared with four per cent in high-income countries.

Health spending is made up of government expenditure, out-of-pocket payments and other sources, such as voluntary health insurance and employer-provided health programmes.

While reliance on out-of-pocket expenses is slowly declining around the world, the report notes that in low- and middle-income countries, domestic public funding for health is increasing and external funding in middle-income countries, declining.

Highlighting the importance of increasing domestic spending for achieving universal health coverage and the health-related Sustainable Development Goals (SDGs), Dr. Tedros Adhanom Ghebreyesus, WHO’s Director-General, said that this should be seen as “an investment in poverty reduction, jobs, productivity, inclusive economic growth, and healthier, safer, fairer societies.”

Worldwide, governments provide an average of 51 per cent of a country’s health spending, while more than 35 per cent of health spending per country comes from out-of-pocket expenses. One consequence of this is 100 million people pushed into extreme poverty each year, the report stresses.

When government spending on health increases, people are less likely to fall into poverty seeking health services. But government spending only reduces inequities in access when allocations are carefully planned to ensure that the entire population can obtain primary health care, the UN agency said.

“All WHO’s 194 Member States recognized the importance of primary health care in their adoption of the Declaration of Astana last October,” said Agnés Soucat, WHO’s Director for Health Systems, Governance and Financing. “Now they need to act on that declaration and prioritize spending on quality healthcare in the community,” she added.

The report also examines the role of external funding. As domestic spending increases, the proportion of funding provided by external aid has dropped to less than one per cent of global health expenditure. Almost half of these external funds are devoted to three diseases – HIV/AIDS, tuberculosis (TB) and malaria.

The report also points to ways that policy makers, health professionals and citizens alike can continue to strengthen health systems.

“Health is a human right and all countries need to prioritize efficient, cost-effective primary health care as the path to achieving universal health coverage and the Sustainable Development Goals,” Dr. Soucat concluded.

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Responsible investment and sustainable development growing priority for private equity

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Responsible investment – involving the management of  environmental, social and governance (ESG) issues – is an increasingly significant consideration for both private equity houses (general partners – GPs) and investors (limited partners – LPs), according to a new survey released today by PwC.

The Private Equity Responsible Investment Survey 2019 draws upon the views of 162 respondents from 35 countries/territories, including 145 PE houses. This is the fourth edition of the survey, following on from previous editions in 2016, 2015 and 2013.

The 2019 survey has found that nearly 81% of respondents are reporting ESG matters to their boards at least once a year, with a third (35%) doing so more often. Almost all (91%) report having a policy in place or in development, compared to 80% in 2013. Of these, 78% are using or developing KPIs to track, measure and report on progress of their responsible investment or ESG policy.

Most strikingly, 35% of respondents reported having a team dedicated to responsible investment activity (an increase from 27% in 2016). Of those without a specific function, 66% rely on their Investment/Deal teams to manage ESG matters.

Meanwhile, two thirds (67%) of respondents have identified and prioritised SDGs that are relevant to their investments (compared to 38% in 2016) and 43% have a proactive approach to monitoring and reporting portfolio company performance against the SDGs (up from 16% in 2016).

Will Jackson-Moore, Global Private Equity, Real Assets and Sovereign Fund Leader at PwC, says, ‘This is a really encouraging survey that suggests responsible investment is starting to come of age in terms of driving sustainable business practice. The private equity sector has a vital role to play in supporting sustainable development: the survey highlights that private equity houses and LPs are taking that responsibility seriously and driving genuine change. That is especially important as their role in global capital markets increases.

‘It is heartening to see that responsible investment is seen as a matter for those at the heart of the investment process and needs to be supported by rigorous monitoring and reporting. LPs are playing a vital role in applying pressure to act on key areas of ESG concerns and in influencing board agendas.

‘Yet while responsible investment may only be at the ‘young adult’ stage of development, these are signs of increasing maturity.’

Even so, the survey also acknowledges a continued distance between those considering action, and those taking proactive steps. For instance, while 89% of respondents cite cyber and data security as a concern, only 41% are taking action. Similarly, 83% are concerned by climate risk for their portfolio companies, yet only 31% have acted upon this.

Will Jackson-Moore says,‘There is a risk of “impact-washing” – where it is claimed that investments have a greater SDG-aligned contribution or positive impact than can be evidenced, or using positive examples of responsible investment to divert attention from other investments where  less action has been taken.

‘Yet investors and PE leaders have a role to play in continuing to influence responsible investment behaviour, through demanding more robust and granular reporting around ESG matters. For instance, PwC UK has worked with the well-respected global initiative The Impact Management Project to develop an impact assessment framework based on the SDGs, to support investors.

‘We are at the stage that we can see ESG genuinely driving returns, and enhanced ESG practices can potentially enhance multiples: it may well be the next big value lever.

‘It is therefore vital for PE houses and investors alike to recognise that even if responsible investment may seem challenging there are numerous solutions and frameworks that can be applied to achieve positive outcomes.’

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