Speech from “Reinventing our Communities: Transforming our Economies” 22 September
Why Inclusive Growth?
We have reached a key moment for the world economy. Just yesterday we launched the OECD Economic Outlook, for the world economy, and it is not positive. A low-growth trap has taken root, trade is depressed, investment is depressed, productivity and wages are depressed. The US looks better but cannot be the only engine of growth.
On top of this, inequality is at its highest levels in 30 years. And in the US, the gap between the 10% richest and the 10% poorest is the double of the OECD average.
But we need to remember that inequality is not just about money. Inequality is also felt in labour market exclusion, lower social mobility and greater polarisation in educational and health outcomes. Here in the US, there is still much work to be done:
- The share of women in the labour force has continued to decline, reaching levels below Germany and Japan. And a considerable wage gap persists, with women earning around 18% less than men.[i]
- Or consider that, on average, the most well-educated white males in the U.S. are expected to live 14 years longer than the least-educated African-Americans![ii]
OECD research also demonstrates that income inequality hurts economic growth over the long term. This is linked to the fact that low-income groups cannot invest in the education of their children, thereby denying them the opportunity to improve their life prospects.
All on Board for Inclusive Growth
It is not enough to document inequalities, we need to advance the policies to address them and this is what the OECD has been doing with the All on Board for Inclusive Growth initiative.
And this year, we took those efforts to another level, with a report we produced on the Productivity-Inclusiveness Nexus. The report examines the interactions between rising inequalities and slowing aggregate productivity growth, looking at four dimensions: people, regions, countries and firms.
The bottom line is this: we need growth that puts people at the centre of our economies. We need to provide the means to all to fulfil their full potential.
What does this mean concretely?
- In the US, this means putting more efforts in education, skills and labour market reactivation measures, focusing on disadvantaged groups.
- It means implementing family-friendly policies that enable women to re-enter the labour market after having children, and promoting paid parental leave for mothers and fathers as well as quality childcare facilities.
Why Inclusive growth in cities?
As everyone in this room knows well, fighting inequality is not only a global and national concern ─ it is also a very local one. We need cities, and their leaders, at the centre of this fight.
Cities generate growth and economic opportunity, but they also concentrate inequalities. OECD data show that cities consistently record higher levels of income inequality than the respective national average, and large cities tend to be more unequal than smaller ones.
- Among the 70 largest US metro areas, Miami has the highest level of inequality (in terms of Gini coefficient), while Albany, NY, records the lowest levels.
We see huge differences in inequality levels within countries:
- In my country, Mexico, for instance, the range in the Gini coefficient of the states of Tlaxcala (0.41 in 2012) and Guerrero (0.53 in 2012) is similar to the difference between Mexico (0.48 in 2012) and New Zealand (0.32 in 2011)!
As I said, inequality has a clear spatial footprint. We all know that disadvantaged neighbourhoods are often home to poorer housing conditions, limited access to services and lower-quality schools. And mounting evidence suggests that poverty and inequality are reproduced across generations.
- Here again, the situation in the US is particularly worrisome. Our analysis suggests that the most income segregated cities in the Netherlands and France are at comparable levels to the least segregated cities in the US!
But there is good news!
Cities are also where innovative solutions are emerging – where leaders are stepping up to articulate and deliver on a vision for Inclusive Growth.
Cities have a hand in many policy areas that matter for Inclusive Growth: like education and skills, health, transport, housing and spatial development.
They are also critical investors in Inclusive Growth, with sub-national governments carrying out around 40% of total public spending in the OECD and 60% of public investment.
The OECD Inclusive Growth in Cities initiative
At the OECD, we are conscious that we cannot win the battle against inequalities if we ignore the crucial role of cities and local leaders. That’s why, this past March, with the support of the Ford Foundation – I know our friend Xavier Briggs was here yesterday – we launched the OECD Inclusive Growth in Cities Initiative.
We’ve built a global coalition of Champion Mayors around the world who are leading the fight against inequality. Alongside Mayor Bill de Blasio from New York, nearly 50 mayors signed on to the New York Proposal for Inclusive Growth in Cities, collectively committing to ensure that cities work for all of us.
Let me highlight just a few of the key policy areas outlined in the NY Proposal:
- First, cities can help provide education and training systems that enable people of all ages and backgrounds to develop skills and improve their life chances. In today’s panel, we will hear from Mayors in Camden, Miami Gardens and Rochester, about how they are forging partnerships to improve children’s literacy, job training and workforce development in their communities.
- Second, cities can expand economic opportunities by putting in place policies that support labour market integration — whether it’s expanding childcare and preschool to support women in the workplace or helping immigrants adapt their skills to new labour market contexts.
- Third, we can change the way we build our cities. Too often, housing policies are divorced from a broader strategy for urban development, transport and access to services. We need housing policies that aim to build cities, not just houses.
- Fourth, we can invest in high quality, accessible infrastructure, which can promote faster growth with particular benefits for low-income groups.
- Here in Philadelphia, you understand the importance of investing high quality infrastructure. The smart infrastructure investments you made to reduce storm-water runoff have reduced capital expenditure by USD 8 billion over 25 years.That’s USD 8 billion freed up to address other dimensions of inequality in the city!
Let me close by outlining a few ways in which the OECD will support these efforts:
- First, with evidence. Our Metropolitan Database is the only international source for comparable data for over 375 metro areas. We are also developing a new metric for cities that measures well-being across a range of dimensions – inequalities, income, unemployment and health – building on our statistical work at national level.
- Second, with cross-cutting policy expertise. We have produced many metropolitan reviews, from Chicago to Cape Town to Stockholm, we have helped cities develop comprehensive policy agendas and measure progress toward more competitive, sustainable and inclusive outcomes. We also help promote exchanges of best practices among cities.
- Third, by elevating the voices of Mayors, bringing their visions and ambitions to the forefront of international agendas – including the SDGs and the New Urban Agenda to be launched at Habitat III next month. In November, Champion Mayors will join Mayor Anne Hidalgo to deliver the Paris Action Plan, committing to specific actions to build more inclusive cities and societies.
The response from Mayors around the world has been amazing! And we hope that more Mayors will continue to join us. We think this work strikes a chord with local leaders because they understand better than anyone that inequalities, when unaddressed, threaten the core of our societies and our economies.