Joint meeting of G20 Finance & Labour Ministers
Thank you, Chair. Ministers, the initiative to hold this joint session is most timely for three main reasons.
First, growth has disappointed for a number of years and has continued to disappoint since G20 Leaders adopted their Brisbane goal of increasing growth by more than 2 per cent above trend projections by 2018. Continued cyclical weaknesses in demand are now interacting with weak investment and productivity growth and threatening to transform short-term problems into long-term ones. High unemployment and under-employment, coupled with stagnant wages in many G20 countries are major factors contributing to the weakness in global demand, which further discourages private investment in the real economy, despite extraordinarily low interest rates.
The report before you by the International Organizations paints a worrying picture of persistently weak employment performance across most G20 countries. Furthermore it finds that the problem is not “jobless growth”—in fact there has been little change in the overall employment intensity of growth in the G20—but rather that there has simply not been enough growth.
Secondly, rising inequality and a reduced labour income share in many countries is increasingly recognized as a factor contributing to weak economic growth. Labour market developments are an important driver of inequality trends, along with tax, transfer and education policies, and this points policy-makers to focus on how labour market policies can be coordinated with more traditional fiscal measures to accelerate growth and to reduce inequality.
Thirdly, output growth and employment growth are mutually dependent and they tend to be mutually reinforcing—in either positive or negative directions, producing virtuous or, if not counteracted, vicious circles.
A country-specific, comprehensive and multifaceted approach is required that simultaneously addresses deficits in demand, starting at the household consumption and investment levels, as well as supply constraints. While country circumstances clearly differ, there is sufficient common ground in the challenges and possible responses to make G20 coordination potentially very productive.
The Labour and Employment Ministers’ Declaration adopted this morning endorsed a range of labour market policies that would support inclusive economic growth and jobs. In headline form they include:
• Strengthening labour market institutions, including wage setting mechanisms like minimum wages and collective bargaining, that help to put money into the households most likely to spend and thereby increase demand;
• Improving employment opportunities—and outcomes—for vulnerable groups in the labour market, including women, youth and other disadvantaged groups, through means such as improving access to quality education, training and lifelong learning and through provision of effective employment services;
• Improving job quality by promoting the quality of earnings, reducing labour market insecurities and promoting good working conditions and healthy workplaces
These labour market policies should be combined with appropriate monetary policy and fiscal measures such as adjustments to tax and social protection systems to lift the incomes of lower and middle income households. Investment in infrastructure is also a proven method of creating jobs in the short term and increasing productivity and connectivity in the medium term.
It is also important to note that good national policies can have very important positive spillover effects to other G20 countries and beyond, by increasing global aggregate demand, offsetting the impact of negative shocks and reducing the temptation to engage in beggar-thy-neighbour policies.
To conclude, Chair, this joint meeting can be of enormous service to G20 Leaders by integrating policy initiatives that work on both the demand and the supply side of labour markets, thus helping us to get back on track for the 2 per cent growth ambition and making that growth more inclusive.