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Austria: Reforms will be necessary to uphold high well-being levels

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Austria stands out for its high levels of economic and social well-being. Preserving these will require reforms to improve competition in the service sector, increase access to risk capital for firms of all sizes, encourage more women and migrants into the workforce and lengthen work lives to reflect the ageing population, according to a new OECD report.

The latest OECD Economic Survey of Austria, presented in Vienna by the OECD’s Director of Country Studies Alvaro Pereira, projects GDP growth of 1.4% for 2019 and 1.3% for 2020. The 2020 projection is down from 1.6% forecast by the OECD in May, though the 2019 projection is unchanged, as recruitment bottlenecks, weakening external demand – especially from key markets Germany and Italy – and global trade tensions dampen Austria’s outlook.

The report’s key recommendations include linking the retirement age to life expectancy, which has risen steadily while Austrians are still retiring much earlier than the OECD average. The effective retirement age in Austria is notably lower than in neighbouring Germany and Switzerland. Austria’s labour participation rate is also low, especially among older women.

To increase the incentives to stay in work, the report recommends Austria do more to reduce its high levels of tax and social security on labour income, particularly for low earners, relative to most other OECD countries. This could be balanced by shifting to alternative sources of taxation such as environmental, consumption, inheritance and wealth taxes.

Reducing barriers to entry in key sectors ranging from service professions and specialist manufacturing to rail and freight transport and pharmaceutical distribution could bolster competition and economic dynamism. The small and medium-sized businesses that dominate Austria’s economy would benefit from greater access to venture capital and a better developed equity market. A reform planned by the outgoing government to address the debt-bias in the corporate tax system would help level the playing field between debt and equity financing.

The report recommends making access to quality childcare, early childhood education and all-day schooling for older children a legal entitlement throughout the country, to make it easier for new mothers to return to work and improve their career prospects. While this is a challenge given Austria’s geography, it would also contribute to more equal opportunities in the education system.

Austria has one of the highest shares of migrants in its workforce of OECD countries. This means migrants play an important role in meeting robust demand for labour yet the country also has a major challenge in trying to integrate low-skilled immigrants. Increasing the availability of language courses and adult skills training would help to address this.

The report also calls for Austria to increase its focus on environmental issues, for example by increasing carbon prices, which are low by international standards, and improving town planning to address the rising environmental impact of urban sprawl.

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Collapsing consumer demand amid lockdowns cripple Asia-Pacific garment industry

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Women at work in a garment factory in Hai Phong, Viet Nam. © ILO

The COVID-19 pandemic has triggered government lockdowns, collapsed consumer demand, and disrupted imports of raw materials, battering the Asia Pacific garment industry especially hard, according to a new report released on Wednesday by the International Labour Organization (ILO).

The UN labour agency highlighted that in the first half of 2020, Asian imports had dropped by up to 70 per cent.

Moreover, as of September, almost half of all garment supply chain jobs, were dependent on consumers living in countries where lockdown conditions were being most tightly imposed, leading to plummeting retail sales.

ILO Regional Director for Asia and the Pacific, Chihoko Asada Miyakawa, pointed out that the research highlights “the massive impact COVID-19 has had on the garment industry at every level”. 

Ripple effect

In 2019, the Asia-Pacific region had employed an estimated 65 million in the sector, accounting for 75 per cent of all garment workers worldwide, the report reveals.

Although governments in the region have responded proactively to the crisis, thousands of factories have been shuttered – either temporarily or indefinitely – prompting a sharp increase in worker layoffs and dismissals.

And the factories that have reopened, are often operating at reduced workforce capacity.

“The typical garment worker in the region lost out on at least two to four weeks of work and saw only three in five of her co-workers called back to the factory when it reopened”, said Christian Viegelahn, Labour Economist at the ILO Regional Office for Asia and the Pacific.

“Declines in earnings and delays in wage payments were also common among garment workers still employed in the second quarter of 2020”.

Women worst impacted

As women comprise the vast majority of the region’s garment workers, they are being disproportionately affected by the crisis, the report tracked.

Additionally, their situation is exacerbated by existing inequalities, including increased workloads and gender over-representation, as well as a rise in unpaid care work and subsequent loss of earnings

Moving forward

To mitigate the situation, the brief calls for inclusive social dialogue at national and workplace levels, in countries across the region.

It also recommends continued support for enterprises, along with extending social protection for workers, especially women. 

The ILO’s recent global Call to Action to support manufacturers and help them survive the pandemic’s economic disruption – and protect garment workers’ income, health and employment – was cited as “a promising example of industry-wide solidarity in addressing the crisis”.

“It is vital that governments, workers, employers and other industry stakeholders work together to navigate these unprecedented conditions and help forge a more human-centred future for the industry”, upheld Ms. Miyakawa.

Nuts and bolts

The study assessed the pandemic’s impact on supply chains, factories and workers in Bangladesh, Cambodia, China, India, Indonesia, Myanmar, Pakistan, Philippines, Sri Lanka and Viet Nam.

It is based on research and analysis of publicly available data together with interviews from across the sector in Asia.

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A few ‘green shoots’, but future of global trade remains deeply uncertain

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Although global trade is making a frail recovery, the outlook remains uncertain, UN trade and development body UNCTAD said on Wednesday, in announcing its latest COVID-era update

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. 

Furthermore, UNCTAD expects the value of all good traded to contract by seven to nine percent compared to last year, depending on how the COVID-19 pandemic evolves in the winter months. 

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

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COVID-19 crisis puts migration and progress on integration at risk

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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.  

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