First, I want to give you my warm congratulations on entering this 2020 intern cohort from 43 countries! And two-thirds of you are women! You should all be proud of yourself. As much as you will benefit from this programme, the Organisation learns from you, from the perspectives of creative, passionate young people.
Thank you Secretary General for sharing this wonderful message about how leadership matters to ensure we drive change with compassion. I want the interns here to keep this in mind. It is important to have a vision, develop your mission, and never lower your ambition. Make sure to find your passion and commit to it. If you care about what you are doing, the rest will follow.
First, let me say “welcome” to you all. Welcome to this event today and welcome to the OECD. We are so grateful to have you here. As much as you will benefit from this programme, the Organisation learns from you, from the perspectives of creative, passionate young people. Your valuable contributions, and those of interns before you, help make the important work we do here at the OECD less heavy. Especially in today’s context, where multilateralism is being challenged and we see greater polarization of views in our societies, we need your support now more than ever. You make our work less heavy, but you also bring enthusiasm, a “can do attitude” and a breath of fresh air, new ideas! You also contribute massively, along with our other young staff, Young Professionals, Young Associates. In the cabinet, for example, I do not know how we would do it without Alexis, Alex , Mathis, Claudia, and Ebba!
I was asked to speak today to give advice or guidance as you move forward, in these internships but also beyond. You chose the OECD because you want to pursue a career in international relations, diplomacy, economics or any expertise that this house offers – to make an important and positive impact on the world we live in. I have given lectures at many universities, and in fact the OECD is starting an Economic Diplomacy course with the support of Sciences Po and other partnering universities around the world this summer. My key message to young talented people like you is always the same – understand the dynamic change the economy and society is going through, find your passion, and develop global skills needed to make a positive change. First and foremost, we need to remember that such skills mean nothing without a passion they can be mobilized toward. As you develop your skills, always contextualize them in something you are passionate about. Find your passion and don’t let anyone stop you from pursuing it.
Allow me to share three experiences that were key to building my confidence to push forward in a tough environment. The first one happened when I was working at the Mexican Foreign Ministry and I received a Fulbright grant. I had to pick three universities that I wished to attend as part of this program. As I was making my decisions, Luis Miguel Diaz, the Legal Counsellor of the Ministry, also a Harvard alum, was passing by and immediately why I had not included Harvard in my list. I, of course, responded that there was no way I would be accepted to Harvard. It was a school for geniuses! He immediately became upset asking why I was putting obstacles in my own way. Why was I stopping myself? He advised that I should never put up my own obstacles. The world will put those obstacles up for you. Do not stop yourself. Of course, I included Harvard in the list of three schools, but was not convinced. Soon after, I was accepted. He was so right! Don’t put up any unnecessary obstacles in your own way, the world will do that work for you.
The second example is one I reflect on often. I remember very clearly the first Sherpa meeting I ever attended. This was back when the OECD was still testing the waters of its relationship with the G20 and G7 groups. Not to mention, I was still figuring out how to fit into my new role as Sherpa. At the first dinner of the meeting, I spoke and got very strong negative reactions from the Chinese and the Indian sherpas. Disgruntled, I called the Secretary General and told him everything that had happened, asking him whether I should be a bit more reserved the next day. The SG kindly listened to my rant. In hindsight, I realize he must have thought, “Who did I send as our Sherpa?!” Once I finished grumbling, the SG said “Gabriela, when in doubt, push!” That was all I needed. Four words and all the wisdom to make a difference. And now look at what we’ve achieved: successful partnerships with all G20 and G7 presidencies, the launch of our B4IG platform last summer, the 25 by 25 gender target, international commitments on action for biodiversity, to tackle online violent and extremist content.
Finally, I want to reiterate the principles of the 5Ps: Proper Preparation Prevents Poor Performance . This is the mantra at the Cabinet, that comes from the SG. I hope that when you leave the OECD, you will keep this mantra in mind. Equip yourselves with skills, evidence, data, best practices, knowledge that you need to advance your passions.
But today, we are seeing a major shift in demand for skills, largely due to digitalisation. What kind of skills will you need for the future? Traditional professions and activities are changing in nature and scope, and new professions are being invented. Your generation will likely not have a job for a lifetime, but rather several occupations, and change will be the only constant. You are likely already seeing this among your peers. This is extremely exciting of course but also emphasizes the need for lifelong learning and adaptable skillsets. In the meantime, other professions are being invented. For example, big data architects, cloud service or digital marketing specialists did not exist until recently. Even if jobs do remain, the skills required will be completely different. Take an architect for example, design now has very little do with paper and pencil, rather digital tools.
So you need good writing, reading, math, and science skills, as always. But the demanding digital environment is advancing so quickly that what we truly need are to bring back the skills and instincts that make us human, to both balance and shape the technical changes arising as a result of digitalisation: we need socio emotional skills, critical thinking, a collaborative spirit, open minds, and the need to understand the perspective of others in a highly integrated world.
These skills are particularly important given the challenges that our societies are facing whether it be growing inequalities, mistrust in institutions, environmental destruction and climate change. These challenges need innovative, empathetic solutions. We live in a convoluted world so the skills of the future are not those that only focus on preparing for the labour market, but those that prepare for life. At the OECD we call these skills « global competencies » . Global competencies are the capacity to examine and take into account global and local perspectives, tolerance to other views, values and cultures and to act for collective well-being and sustainable development.
Empathy, compassion, open mindedness are key. Thinking beyond our own good lives and jobs. It sounds obvious, but at this very moment in history, we seem to be in great shortage of these qualities, particularly among leaders in many countries. The most sought-after skills are those that help you understand each other. You must of course go forward with empathy. But beyond empathy, you must have compassion. Empathy is about felling the pain of others. Compassion is doing something about it.
I often think of Kailash Satyarthi, winner of the Nobel Peace Prize who has dedicated his life to rescuing hundreds of thousands of children from slavery, and a great friend of the OECD. Kailash once said, “Today we live in a world of rapid globalisation, information technology, markets, production, and knowledge. I hope that we can also globalize compassion.”
Thank you all for being here and I wish you the best of luck in your internships.
For the first time, the OECD held a conference to address violence against women and fight against harmful masculinities, giving a voice to survivor advocates and a platform for ministers and policy analysts to exchange best practices to inform policy recommendations going forward. The sessions focused on latest evidence of the scale of the problem, how to define, measure and tackle harmful masculinities, reporting and measurement best practices, integrated service delivery, and making VAW a whole-of-government priority.
On the final day of the conference, I was proud to present the OECD Call to Action with Icelandic Ambassador Kristjan Andri Stefansson, Swedish Ambassador Anna Brandt, Mexican Ambassador Sybel Galván Gómez, and Spanish Ambassador Manuel Escudero, signed by 18 champion ambassadors calling on our organization to act on this important issue and provide women the safety and dignity they are entitled to.
We have come a long way to understand the most fundamental aspects of gender equality. Before we think about women’s economic empowerment, we need to ensure they feel safe and protected.
First, let me say how grateful I am of Charlotte Kneer and Luke Hart for sharing their private stories with us. What we heard from these survivor advocates was emotional, strong, powerful and inspiring. But the reason why these strong women and men are sharing their stories, and why we are all here, is to make concrete progress towards preventing and eradicating intimate-partner violence. It is our responsibility to ensure that the voices of survivors are not only heard, but translated into action. People like them will be saving millions of women. I especially want to commend Ms. Kneer for the work she does to “save” women who are fleeing from their abusive partners by setting up an organization [Reigate and Banstead Women’s Aid refuge in Surrey, UK] to house vulnerable women and children who would have been lost and maybe even killed themselves without the shelter.
We see too many loopholes in judicial systems. We see too many silo approaches (criminal law and family law) in the legal system. We find that too many women and men accept and justify violence. As a result, many vulnerable women cannot trust the system. Perpetrators are set free so easily after committing violence against their partners that women fear revenge. Thus, many women do not report the violence they suffer. Some are forced into marriage so that violence is “justified”. Then, women feel isolated and helpless, making them even more vulnerable. Ultimately, they lose their voices.
We need to give women and children back their basic human rights. We need to build an eco-system of prevention and support. This conference is filled with energetic, conscientious, and dedicated advocates for gender equality. But we need to do more than talk. We need to take concrete steps to end Violence Against Women (VAW). Therefore, I am proud that Ambassadors are calling on the OECD to “act”.
We are asked to focus on areas where we have strong expertise – that is, improving data collection and analysis (of masculinities – that boys need to be aggressive and competitive), ensuring good-quality service delivery, promoting equal access to justice, targeting harmful gender stereotypes through education, and ensuring a “whole of government” approach to ending VAW.
I am very proud that this call is led by the OECD Friends of Gender Equality Plus. The OECD stands ready to respond to this call. I am also counting on media and social media to play their part in preventing toxic masculinity from spreading further. Let’s remember that we all have a part to play.
While I wish we had more male voices here drawing attention to violence against women, I am very glad to see so many female leaders in government, business, and the non-profit sector committed to ending this crisis. I am honoured to participate in this panel with all the Champions of this good cause, to drive important changes in our societies, policy-making and at home.
Prioritizing the issue of Intimate partner violence (IPV)
The frequency and intensity of violence against women is – quite simply – horrifying. Globally, one third of all women have experienced physical and/or sexual violence perpetuated by intimate partners, who also commit 38% of all murders of women. And these statistics are probably underestimated, as we have good reason to believe that many more actually experience abuse but do not report it. We see alarming rates across all OECD countries, even the ones that have good gender equality outcomes in other measures.
It is a mark of shame on all of us that women – and the persons around them – continue to experience violence day-to-day in their homes, in public, at work and online. It just shocked me that so much of this happens between intimate partners. For example, the former CEO of Amazon Mexico shot his wife dead. And did he face any consequences? No. He was let out just because it happened at home between partners!
Even more shocking is how we come to accept this unforgivable behavior. Public attitudes continue to reflect a disturbing acceptance of domestic violence. According to SIGI, one in three women agrees that domestic violence is justified; almost one in three men worldwide justify beating their wives under certain circumstances, such as accidentally burning a meal.
Stronger laws, regulations and institutional support will of course help. But what we need is to go deeper than that –to find the root causes of this problem. Our SIGI findings shows that gender-based expectations and stereotypes influences and reinforces negative patriarchal structures. We can see this reflected in our legal systems, cultural norms, including within families and in classrooms. This is why we have seen a surprising widespread acceptance of unequal treatment.
Unfortunately, perpetrators rarely face consequences because women do not always report such violence. They fear possible consequences. For example, in developing countries, more than 40% of survivors never sought help of any sort and less than 20% of women who sought help appealed to formal institutions such as the police, medical personnel or lawyers. Women hence face a “double penalty” when they cannot trust that they will be protected by the law or public authorities when they seek help.
Many countries face similar governance challenges. For instance, one of the issues is the lack of good evidence on intimate partner violence and violence against women more generally. Countries do not collect data or measure violence well or frequently enough. We have to get better in data collection and analysis if we want to be effective in ending violence against women.
We also see major challenges around the provision of good-quality care and services to survivors of violence. What makes me sad is that many survivors have to make multiple stops to re-share traumatic experiences in order to access basic social protection like housing, medical care, and income support. This only causes flash-backs in survivors’ minds, which stresses the necessity of integrated services. The justice system can be so fragmented that victims often have to face multiple litigation processes when seeking justice for themselves and their families,often without being able to afford a lawyer.
All of these factors should force us to think carefully about how governments can mainstream the issue of VAW across Ministries and at all levels of government. We need to make sure that everyone has a stake in this fight.
The OECD is engaged in helping governments foster change to fight against IPV through capacity building. As of today, two thirds of governments adhering to the OECD Gender Recommendations listed violence against women as one of the three most urgent issues facing their countries. We take this as a promising sign that most countries are committed to ending this pandemic of violence. And this is why I am delighted to see that many Ambassadors are making a collective Call to Action.
In terms of public policies addressing intimate partner violence, there is a lot of room for improvement even in OECD countries – although these countries have some of the best gender equality outcomes in the world. Firstly, laws criminalizing violence against women are a first step to eradicating this harmful and pervasive practice. In fact, despite all countries around the world having ratified an international and/or regional convention addressing VAW, only 74% (i.e. 133) of the 180 countries examined by the OECD’s SIGI criminalise domestic violence.
The OECD, as part of its efforts to support progress towards the SDG target 5.1, is working with the World Bank and UN Women to develop a rigorous assessment process to evaluate the extent to which countries have laws and legal frameworks to protect women in all spheres of life, using the SIGI as data source. Secondly, the OECD’s contribution to the global campaign to end violence against women is to really focus on specific policy areas where we have a lot of institutional knowledge and expertise. This means better data collection, integrated service delivery, access to justice, gender mainstreaming, and addressing masculine stereotypes. The latter workstream is critical, as any discussion of addressing and ending domestic violence must start with the fundamental question of what leads men to harm women – and how to stop it. In this vein, we must include both men and women in the conversation.
Our contribution also builds on the good work done by the Council of Europe in its evaluation of countries’ adherence to the Istanbul Convention, and it complements the experience of other international organisations working on this issue, like UN Women and the WHO.
In addition to analysing VAW data, we are also evaluating where there are gaps in governments’ collection of these types of data. Most governments do not run VAW surveys frequently enough, and many do not ask how survivors are faring in the social protection system. These are important gaps that we think the OECD can help governments address. We are also strongly committed to improving and integrating service delivery, which we know is problematic around the world. We have worked on how to co-locate service provision for different types of vulnerable groups, for example, and we know that this has important implications for survivors of IPV. We also want to use our expertise in justice and legal institutions to improve survivors’ access to justice.
The OECD Global Roundtables on Access to Justice, for instance, can offer many lessons on developing survivor-centred justice pathways. These pathways focus on meeting the needs of victims and minimize the experiences of revictimisation that survivors can face when they navigate through the justice system.
We also need to strengthen coordination and ensure that all public institutions act together coherently and systematically to prevent and address IPV. At the OECD, a newly launched Working Party on Gender Mainstreaming and Governance plays a key role in ensuring that VAW issues and policies are embedded in all Ministries and at all levels.
In addition, we want to use public policy to target toxic male stereotypes that lead men to abuse women, and enable other women to condone it. These harmful masculinities are perhaps the hardest issue to address, but we are already at the forefront of this.
Last but not least, the OECD has also created the first international legal standard to end physical abuse and sexual exploitation in the aid and humanitarian sectors. In July 2019, the OECD Development Assistance Committee, adopted the DAC Recommendation on Ending Sexual Exploitation, Abuse, and Harassment in Development Co-operation and Humanitarian Assistance. This will serve as a powerful tool to guiding DAC members in developing policies to foster organizational change and leadership on SEAH, including Codes of Conduct or Ethical Standards.
We here at the OECD stand ready to help governments and other stakeholders end VAW.
 Data source: Demographic and Health Survey and FRA survey (several years).
 E.g. criminal procedures, civil procedures, and family procedures such as child custody or divorce –
I also want to thank Ms. Vaeza for her comprehensive presentation of the “Regional report on the review of the Beijing Declaration and Platform for Action in Latin American and Caribbean countries”.
A very meaningful report indeed to understand what the region as a whole upholds as its priority in achieving gender equality. The report shows that the region as a whole listed “violence against women”, “women in power and decision-making” and “women and the economy (women’s labour rights to work and the redistribution of care work)” as priorities, out of 12 critical areas of concerns in the Beijing Platform for Action.
Even at times of civil unrest, this region can still maintain its high political commitment to gender equality, thanks to instruments like the Beijing Platform for Action.
We have seen progress and challenges.
Let me first turn to violence against women, as all LAC countries have prioritised this area and because this is a major barrier to a peaceful future for women.
Indeed, over the course of the last 4 years, violence against women has decreased in the region.
Countries enacted stronger, wider, and better laws.In the last five years, four of them have passed comprehensive anti-violence laws (Ecuador, Paraguay, Peru and Uruguay). And in the past 25 years, all LAC countries have laws dealing with VAW. These new laws protect women from old forms of sexual violence such as femicide. For example, Ecuador, Brazio, Paraguay and Uruguay criminalized feminicide in the period 2014–2019. Today, 18 LAC countries defining feminicide as criminal offence and instituted the corresponding reforms of their penal codes. But laws also protected women from new forms of sexual harassment such as cyber-harassment.
Albeit all this progress and effort, violence against women still persists. In 2018, 27% of the Latin American women have still suffered at least once in their life from intimate-partner violence. In 2018, 12% of women in the region considered that a husband was justified in beating his wife under certain circumstances as trivial as burning the food or neglecting the care of the children.
A whole-of-society effort is needed. For example, toxic masculinity and women’s lack of self-confidence have to be tackled early on in our lives through education.
Another area of priority for the region is women’s access to leadership and decision-making, and here, we see tremendous progress in the region.
Four countries from the region (Bolivia, Cuba, Nicaragua and Mexico) are among the top 10 countries worldwide in female representation in national parliaments. And on average, 25% of the region’s parliamentarians are women, thanks mainly to the introduction of quotas [Mexico, Argentina, Costa Rica]. Change is underway and the structure of power is shifting towards a more balanced and equal responsibilities between men and women. However, women are not thriving in the private sector. Women still only account for between 7.5% and 15% of seats on boards of largest publicly listed companies. This is well below the OECD average of 22%.
Adopting softer approaches using disclosure or targets could bring a more gradual increase in representation in boards over time compared to the more immediate increase in countries adopting quotas (from OECD countries’ experience).
What about women’s labour rights and redistribution of care work?
In Latin America, labour market segregation and the overburden of unpaid work for women continue to have repercussions on access to social protection.
Great progress has been made in promoting the education and employment of women. For every 100 females, 96 males completed primary, 94 completed lower secondary and 91 completed upper secondary education. Women’s participation in the labour market has increased in the LAC region from 40% in 1990 to 54% 2013.
Yet, when you look at the gender gaps, we find that fewer women are given the opportunity to participate in the labour market (gender gap at 27%), let alone access to quality jobs (women earn 16% less than men on average). Women are often engaged in economic sectors that are largely concentrated in informality and unsupported by public policies. But gaps remain – in participation rates and other labour market outcomes. 32% of women in the region still had no personal income in 2015.
More fundamentally, unfair share of unpaid care and domestic work have hindered women’s access to economic opportunities outside of the household.
The increase of female participation in the labour market in the LAC region (from 40% in 1990 to 54% 2013) has not translated into substantial transfers of women’s unpaid care work in the household onto men, which results in women now working more hours in total – paid and unpaid. Women in LAC spend over 3 times more in unpaid care activities than men.
It spans from 2.2 times more than men in El Salvador to 5.8 times more than men in Guatemala.
Even when both parents participate in housework, women still take most of the burden: For example, in Peru, women spend an average of 15 hours per week cooking, compared to less than 5 hours for men. This is despite the fact that gender equality and women’s empowerment are key enablers for accelerating growth and sustainable development. For example, half of the growth in OECD countries between 1960-2010 was due to increased educational attainment, especially among women.
Addressing unpaid care work is recognised as a political imperative for achieving gender equality and women’s economic empowerment in the 2030 Agenda for Sustainable Development, and highlighted as SDG target 5.4.
The OECD identified a range of policy changes needed in the areas of public services, social protection and infrastructure. Policies can help in ensuring well-paid father-specific parental leave and improving the availability of good quality and affordable early childhood education and care (ECEC).
We need to ensure the affordability of market-based solutions to infrastructure and care services. And we need to design services and products that work for women and carers, including labour saving technologies.
Awareness-raising and media campaigns can increase understanding of unpaid care work and gender stereotypes more generally. Training for service providers can also be effective, for example training of healthcare providers to encourage men’s involvement at the critical time just before and after childbirth.
Achieving gender equality is fundamentally a matter of fairness, but it is also a critical ingredient for the achievement of a more inclusive and sustainable growth.
As our work shows, even halving the gender gap in labour force participation by 2025 would increase GDP per capita by 0.2 percentage points across OECD countries. The benefits are potentially greater for countries in the region.
We could expect the increase of the regional annual GDP by 3.6 percentage points, if there is a gradual and total elimination of gender-based discrimination by 2030.
If Mexico, for example, were to halve its gender gap in labour force participation rate by 2025, annual GDP per capita growth will be 0.7 percentage points higher than the baseline model.
In Chile and Brazil, we gains would also be significant if the gap was closed!
And as populations age, it will become more important than ever for our economies that women are able to fully participate in the labour market throughout their life course, to support the labour force and higher retirement incomes. It is also important that women are not penalized for having children.
In the Closing the Gender Gap: Act Now (2012), for example, the OECD found that women over 65 are about 1.5 times more likely to live in poverty than men of the same age, in part because women generally spend less time in paid work because of childrearing and raising and are more likely to work part-time.
To close these gaps, we need action at the country level, at the regional level and at the global level.
The OECD has long championed the cause of gender equality, notably through the 2013 and the 2015 Gender Recommendations which proposed concrete measures to promote gender equality. Since then, we have assessed the progress of adhering countries in implementing these recommendations.
The results of these assessments, in particular, have demonstrated the importance of sound public governance. Meaningful changes on the ground require whole-of-government commitments to translate public policies, programmes, and budgets into concrete benefits for all men and women.
We have also contributed to advancing the G20 target to reduce the gender gap in labour force participation by 25% by 2025. We continue to monitor progress on this target today – and what we find is that even more needs to be done to empower women and close gender gaps.
We have set up an Equal Pay International Coalition together with the ILO and UN Women to support not only governments, but also employers and workers, in achieving equal pay for work of equal value.
More fundamentally, we must break down gender bias, gender-discriminating norms and institutions and other invisible barriers.
This is why the OECD has the Social Institutions and Gender Index (SIGI), which will launch its LAC regional report next year, to look at how social institutions shape women’s lives, and to identify what is driving various forms of discrimination.
Female role models are also important in showing women what they can be.
And let’s not forget about the economic case of women’s economic empowerment.
According to SIGI, discriminatory social institutions come with a huge cost.
Current level of discrimination in laws and social norms induces an income loss of USD 6 trillion, which is equivalent to 7.5% of global income! We could expect the increase of the regional annual GDP by 3.6 percentage points, if there is a gradual and total elimination of gender-based discrimination by 2030.
Imagine the potential for growth that remains to be unlocked in Latin America, where only 33% of women were in paid employment in 2016.
For the upcoming LAC Regional SIGI report, we will introduce four key dimensions that affect the life cycle of any women and girls: family (incl. girl child marriage and responsibility within the household); physical integrity (incl. VAW and reproductive rights); access to productive and financial resources; and civic liberty (incl. political representation and access to justice).
Here, let me express my personal appreciation for the remarkable leadership role that ECLAC is playing in pressing the LAC countries to develop policies that make significant leaps forward in the matter of gender equity.
We look forward to collaborating with ECLAC to put our expertise and policy analysis at the disposal of the Latin America countries and to inform and support their gender equality priorities to build more prosperous and inclusive societies.
The case for gender equality is clear, and we should capitalise on building momentum and countries’ actions to promote fairer, more inclusive societies.
A difficult road lies ahead. Multiple challenges remain. But I am delighted to see that Latin America is making gender equality a national and regional priority.
25 years in from Beijing, we reaffirm our commitment and pass the baton to the youth – through the Generation Equality Forum –to keep the momentum alive, and the OECD looks forward to working as a partner.
 Across the region, women spend between two to three times more time on unpaid care activities than men (ECLAC, 2017), pointing to the persistent perception of women as primary caregivers (OECD, 2016)
In January 2020, at the WEF 2020 in Davos I met with a wonderful group of speakers and panellists across sectors to find actionable solutions to the challenge of social mobility. In this session we discussed the effect of inequality on social mobility and the role of tax systems and tax avoidance in its perpetuation. I was joined on the panel by Magdalena Andersson, Minister of Finance, Sweden; Laura D’Andrea Tyson, Distinguished Professor of the Graduate School, Haas School of Business, University of California, Berkeley; Peter Orszag, CEO, Financial Advisory Board. The panel was facilitated by Minouche Shafik, Director, London School of Economics and Political Science.Below are my key takeaways and arguments during this panel:
Today, we are living in a world with a potentially explosive conjunction of toxic “-isms”: protectionism, populism, nationalism, parochialism. They are themselves the symptoms of anxieties of people for their jobs, for the future of their children, and vis-à-vis technological change, digitalisation and globalisation more generally. These mounting worries and fears have actually moved countries away from commitment to working together. Unfortunately, the recent Broken Elevator and Squeezed Middle Class reportconfirms people’s perceptions; the middle classes are squeezed and shrinking and the share of wages in GDP keeps falling. Today, 14% of jobs are at high risk of being automated, while a further 32% could face substantial changes in the way they operate. As high as 65% of children today will have jobs that have not yet been invented.
Instead of fuelling innovation and new opportunities, these fears are leading to distrust and fractious politics. Down the line, policy makers produce misguided policies and a vicious circle of lack of cooperation establishes itself.
Measuring the Impact of Inequality on Social Mobility
The OECD has been at the forefront of documenting the rising levels of income inequality and the lack of opportunities that many OECD countries have experienced over the past 30 years. Inequalities of income, wealth and opportunities within countries are at their highest levels across many countries for 30 years. In terms of inequality, the incomes of the top 1% have been rising particularly fast, while the income gap between the top 10% and the bottom 10% is now almost 10 times, up from 7 times in the 1980s. When it comes to wealth, the top 10% in the income distribution holds more than half of the total wealth [as much as 79% in the US], while the bottom 40% accounts for only 3%. These numbers translate into an increasing sense of economic insecurity – more than 1 in 3 people are economically vulnerable, meaning they lack the liquid financial assets needed to maintain a living standard at the poverty level for at least three months.
Children are most affected by inequality of opportunities. Children born to parents who did not complete secondary school have only a 15% chance of making it to university, compared to a 63% chance for children whose parents attended university. Health outcomes, and even life expectancy, are also heavily influenced by their socio-economic background. These unfortunate outcomes are all down to the fact that the “social elevator” is broken. It would take 5 generations (150 years!) for a child born into a low-income family to reach the average level of income in OECD countries. At the bottom, “sticky floors” prevent upward mobility for too many people. Children from disadvantaged families have weak chances of moving up. For instance, nearly 1 in 3 children whose fathers are in the bottom earning quartile will remain there. On the other hand, “sticky ceilings” are holding people at the top. Children born into greater privilege are less likely to move down the ladder; 40% of sons of fathers in the top earnings quartile will stay there. Against this backdrop, there is a widespread sense, including in advanced OECD economies, that the social contract underpinning our societies no longer works for the majority of citizens.
OECD’s findings suggest that a majority of citizens believe levels of inequality are too high. On average, 70% an OECD survey respondents want to see a reduction in the share of income held by the top 10%. In addition, around 60% of middle-income households say they do not receive a fair share of public benefits, given the taxes and social security contributions they pay. Their concerns are legitimate, as their incomes have been growing much more slowly than higher incomes for more than three decades now. Looking beyond redistribution is quintessential to issue policy recommendations that incorporate equity as a driver of growth. Because we have long operated on a “wrong” mantra of “grow first, redistribute later”, GDP became an end in itself instead of a means to an end. The issues that come with this principle were revealed during the financial crisis, a dramatic wake-up call of the levels of inequality around the world.Only a small portion of the population captured the majority of the benefits of our growth, while the rest face the tough effects of the decoupling of wages from growth. The benefits of growth and integration have not trickled down, and it is essential that we recognize that this mantra does not deliver in terms of reducing inequalities. We know as a fact that inequalities are bad of the economy – it hinders growth (i.e., productivity-inclusive nexus, a large financial sector slowing economic growth). New and improved models must be developed to ensure that the focus on growth actually improves lives. A multi-dimensional solution should be adopted in this discussion to tackle inequalities from both an economic and a societal point of view.
The Impact of Globalisation and Technological Advancements on Inclusive Growth
According to the report previously mentioned, jobs will change due to automation, with 1 in 6 middle-income workers whose jobs are at high risk of automation. Skilling, reskilling and upskilling are crucial steps for guaranteeing employment of low and middle-income workers, but those who need training the most actually train the least– Low-skilled workers are 40 percentage points less likely than high-skilled adults to participate in training. This urges us to imagine a different roadmap to ensure we do not leave anyone behind.
Evidence clearly shows that highly unequal societies are also bad for business. The failure to consider inclusiveness and equity aspects in the design of socio-economic policies prevents individuals and businesses from attaining their full potential, thus holding back aggregate productivity and economic dynamism. If not accounted for in policy and decision-making, megatrends such as climate change, globalisation and digitalisation are likely to deepen socio-economic divides, and put the most vulnerable in even more precarious situations.
Hence why the OECD developed the Productivity-Inclusiveness Nexus, which shows that more egalitarian societies have more solid and cohesive growth outcomes. In many economies today, the business environment is characterised by a “best versus the rest” phenomenon. For instance, a study of 24 OECD countries showed that labour productivity of the top 5% manufacturing firms grew at an average annual rate of 2.8% between 2001 and 2013, compared to 0.6% for other manufacturing firms. Worryingly, this growing gap between the most and least productive firms is reflected in wage divergence and rising inequality. Wages paid by top-performing firms in the services sector are about twice as high as wages paid by firms in the middle of the productivity distribution. Against this backdrop, it is essential to boost productivity convergence of laggards to help achieve inclusive growth. OECD work shows that policies that reduce barriers to technological diffusion help increase the productivity of laggard firms. These policies include training aimed at specific population groups, better access to finance for SMEs, and direct R&D support. Moreover, young businesses have a key role to play in job creation, considering their high productivity growth potential.
A new reality in business is required to promote inclusive growth, which can be implemented through strong business leadership and political will. In this spirit, the OECD has launched, with the support of the G7 French Presidency and with Danone, the Business for Inclusive Growth Platform. The 40 multinational member companies of this platform will take concrete actions to promote diversity, inclusion and responsible conduct within their companies and their operations. Companies have already “earmarked” 72 projects worth about USD 1 billion as potentially impactful and typically represent from USD 5 million to more than USD 25 million of total commitment per company.
Last but not least, one of the most important contributions we have been making to promote inclusive growth is through international tax cooperation to address the issue of tax havens. It is worth celebrating that our fight against tax evasion and erosion has already delivered EUR 102 billion in additional revenues. This is money that can effectively be invested in policies that take account of distributional effects and dynamics over the life-cycle for different groups, particularly to promote early childhood education and care and access to affordable quality housing.
Breaking the Cycle of Inequality Using Tax Systems
There are many different visions of what constitutes a desirable level of redistribution – policy makers do not all agree on what they think is an acceptable level of inequality of outcomes. However, a broader agreement can be reached around the idea of equal opportunities – that all people should have the same life chances, regardless of their initial conditions. Discussing about how to fix the “social elevator” that is broken today is a priority. Innovative policy tools can include tax progressivity, the means beyond redistribution, as well as international cooperation on the fight against tax havens and corporate tax evasion to promote inclusive growth.
In fact, as a number of economists have recently highlighted, including Gabriel Zucman and Emmanuel Saez, the tax system is a new engine of inequality. In general, OECD tax systems are less progressive than they used to be 30 years ago. Top personal income tax rates have indeed declined; from an OECD average of 65.7% in 1981, the tax rate has significantly decreased to 41.4% in 2008 and has seen only a slight push to 43% following the financial crisis. Taxes on personal capital income (i.e. dividends, capital gains and interest income earned by individuals) have also decreased since the 1980s, andtaxes on property and wealth transfers play a smaller role than they used to.
There is room to enhance the progressivity of tax systems to address income inequality. This could be achieved by removing tax expenditures that primarily benefit the wealthy, but also by ensuring effective tax enforcement. Tax systems could play a bigger role in addressing wealth inequality, particularly through more broadly based and potentially higher taxes on personal capital income and well-designed inheritance taxes. However, there is no one-size-fits-all solution because it all depends on the national circumstances and its tax base.
In countries where top tax rates are already high, the focus should be set on raising effective tax rates by removing regressive tax expenditures that benefit the wealthy (i.e., mortgage interest deductions, private pension contribution deductions and favourable tax rates on capital gains). While enhancing progressivity, scaling back such tax benefits improves efficiency by reducing distortions. Enhancing tax enforcement is also a crucial measure to raise effective tax rates on high earners. In addition, progressivity can also go beyond personal income taxation, by, for instance, introducing progressivity in property taxation.
For developing countries, different approaches may be necessary when using the tax system as a means to address inequality. Usually, a large share of their economy is informal and personal income taxation represents a small share of their tax revenue mix. Personal income taxes represent 10% of total tax revenues in Latin American countries on average, 15% in Africa, while 25% for OECD countries. Consequently, enhancing the functioning of existing income taxes is a priority. Additional options include making better use of taxes on immovable property (i.e., housing taxes), and applying indirect taxes on luxury products. Tax reform should not be considered on its own when addressing income inequality because it is the overall impact of the tax and benefit system that matters.
On average across OECD countries, ¾ of the income redistribution occur through transfers, while the remaining quarter is the result of taxation. For example, the potentially regressive effects of increases in carbon taxes might be compensated by the introduction of greater progressivity in other tax areas and by income redistribution through direct transfers.
Concerning wealth inequality, there is also a case for making better use of tax systems to address this issue. There are existing tax tools (i.e., personal capital income taxes and inheritance taxes) that can help address wealth inequality, but countries have not been using these tools to their full potential. The OECD generally recommends starting with these existing tax instruments rather than introducing a wealth tax. Nevertheless, there are national circumstances where there might be more room to consider wealth tax, notably in countries where taxes on personal capital income or inheritance are low. In addition, there is still a lot of room to improve the taxation of household savings, as well as the role of inheritance taxes to narrow wealth gaps.
Capital Mobility Constrains Policy Making
Capital mobility used to constrain national policy with the taxation of movable capital (stocks, bonds, etc.) being generally taxed at lower rates than other types of income to avoid capital flight. In the last 10 years, the work on tackling issues like tax evasion and corporate tax avoidance has progressed very fast and the OECD has been a leader in setting international standards and monitoring their global implementation in two key areas. Firstly, tax transparency is crucial to ensure that tax cheats have nowhere to hide and that tax administrations can request and receive information from these jurisdictions. Such information relates to ownership of companies or bank accounts, for example. The second area of work is fighting tax avoidance by multinational enterprises (Base Erosion and Profit Shifting (BEPS) project). In 2015, the OECD delivered a package of fifteen measures to help countries close the loopholes and fill the gaps that MNEs exploit to pay little to no tax.
There are three ingredients to keep having successful outcomes, which starts at enhancing the political will, a work which the G20 and the EU have been spearheading. The co-operation between the EU and the OECD has been fruitful, with the EU helping to push the agenda forward. Secondly, multilateral cooperation through broad membership – the two bodies in charge of the implementation of these standards are the Global Forum on Tax Transparency and Exchange of Information for tax purposes (Global Forum) which includes 158 members, while the Inclusive Framework on BEPS has 137 members. The low and zero-tax jurisdictions are part of these two groups, which helps ensure their commitment to reform. Another key element to success is the robust peer reviews the jurisdictions of the two bodies provide about one another to ensure a level playing field. This will help putting pressure on those jurisdictions that are lagging behind. The objective of the OECD list is not to “name and shame”, but to apply political pressure on those lagging behind in order to ensure their compliance with tax transparency norms. This list continues to shrink – clearly showing progress and providing encouragement for the OECD. It included 15 jurisdictions at the end of 2018, but thanks to progress made, there were only 7 jurisdictions reported as not having satisfactorily applied the OECD tax transparency criteria in October 2019. Further progress will be reported at the next G20 Finance Ministers Meeting on 22-23 February 2020.
On Tax Transparency, the progress is impressive. The OECD is proud to say that bank secrecy is over, with 97 jurisdictions that are exchanging information on financial accounts automatically. In 2019, around 6 100 bilateral automatic exchanges of information took place between these 97 jurisdictions, representing a 36% increase from 2018. As for the contents of the exchanges, in 2018 (the most recent date for available figures), information on 47 million financial accounts was exchanged, with a total value of the accounts of around EUR 4 900 billion. This figure is expected to increase significantly. As of today, 135 jurisdictions currently participate in the Convention on Mutual Administrative Tax Matters, which is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance. As for the impact of all this, a study by the OECD estimates that in the period 2008 to 2019, the progress on tax transparency is associated with a decline of 24% of bank deposits (USD 410 billion) in international financial centres. Moreover, EUR 102 billion in additional revenues (tax, interests and penalties) have been identified for collection through voluntary disclosure programmes and offshore investigations.
On BEPS, there is a steady and successful implementation of the four BEPS Minimum Standards. As a result of the OECD’s work to address harmful tax practices, approximately 30 000 information exchanges related to previously secret tax rulings have occurred since 2016. Additionally, over 290 preferential tax regimes have been reviewed since 2015 and virtually all of the regimes that were identified as harmful have been amended or abolished. These regimes had previously allowed multinational enterprises to avoid tax on their international activities, contributing to base erosion. Since June 2018, more than 80 jurisdictions have engaged in the exchange of Country-by-Country reports (CbCR) on the activities, income and assets of multinational enterprises, allowing tax administrations to better target their resources and audit activities. Furthermore, 93 jurisdictions have signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, which allows governments to modify existing bilateral tax treaties in a synchronised and efficient manner to implement the tax treaty measures developed during the BEPS Project.
This work is carried out in an inclusive manner. The body in charge of the implementation of the tax transparency standards (the Global Forum on exchange of information and transparency for tax purposes) has 158 members, whereas the BEPS Inclusive Framework has 137 members. Also, capacity building activities ensure that all the members can benefit from the implementation of these standards. This work must continue and is moving forward, with the implementation of automatic exchange of information being closely monitored and peer reviewed with the final results expected in 2022. This is to ensure it works in practice and globally. In fact, the BEPS Minimum Standards are currently reviewed for possible improvement. Fortunately, more is being done on capacity building thanks to generous donors and the attention of the G20.
On a New Social Contract
Growing inequalities of income, wealth and opportunities are fracturing society economically and socially, thus threatening the stability and sustainability of the Social Contract. For that reason, a new Social Contract must be established, comprising of two elements. On one hand, policies that can protect people against the risks they face and give everyone the opportunity to thrive should be implemented. On the other, measures that can address people’s perceptions and attitudes are necessary in order to build support for these policies. The main areas and levers for action include investment in health; education and skills; social protection; and the promotion of gender equality. In fact, policies that are particularly effective are those which take account the distributional effects and dynamics over the life-cycle for different groups, notably women. Two examples of such measures are the promotion of early childhood education, and the care and access to affordable quality housing. The OECD recently released a report entitled Changing the Odds which highlights the benefits of investing in vulnerable children.
The case for social investment is at the heart of the “Economy of Well-Being” agenda which highlights that investment in well-designed and inclusive social protection schemes can be very effective in protecting individuals, while at the same time delivering better labour market outcomes. Effects can indeed be particularly important for middle class families, which face a higher risk of downward social mobility. However, building the necessary public support to implement these policies will require measures to restore trust and address existing perceptions and attitudes. In fact, the OECD is establishing standards which can help stakeholders restore trust, for example through its Trust in Business initiative and the work on trust in digital environments in the context of its Going Digital project.
WEF 2020: Addressing the SDG financing gap and reducing inequalities beyond ODA via alternative investment models.
The international development finance landscape has been changing rapidly since the agreement on the 2030 Agenda on Sustainable Development. This sense of urgency has only increased since the news at UNGA last year that the global community’s current efforts are well off-track. Overall, the global SDG financing gap has been estimated at USD 2.5 trillion annually (UNCTAD, 2019), and low income and developing countries (LIDCs) are particularly in need of financing and support, facing an estimated SDG financing gap of USD 0.52 trillion annually (IMF, 2019).
Filling the development aid gap with alternative investment models
While a top-down approach such as Domestic Resource Mobilization is the primary source of financing for development, public revenues in many countries remain below the minimum required for effective state functioning and the achievement of the SDGs. Increasing the tax to GDP ratios across developing countries by just 1% would provide an extra $250 billion in revenues in developing countries. Moreover, the OECD-UNDP joint program, Tax Inspectors without Borders, creates $100 of tax return to developing countries for each dollar spent. Yet for many developing countries, administrative and capacity constraints continue to limit their ability to increase taxation revenue.
The OECD is responsible for around $150bn of ODA annually. While ODA is critical, this challenge needs much more than ODA. A holistic approach to financing the SDGs is needed by 2030, which incorporates the whole gamut of domestic and international financial flows that can contribute to financing the global goals – both private and public. Hence why the OECD is pioneering a three pillar approach to help fill the financing gap: mobilizing additional and enhancing existing financing for the SDGs; aligning this finance with the Goals; and measuring and managing its impact on people’s lives.
Including the private sector in development finance
The OECD has time and time again demonstrated the importance of engaging and leveraging the expertise and additional resources of the private sector to fill the gap in development aid through blended finance, impact investment and green finance.
The Blended Finance Funds and Facilities report confirms that the blended finance market is growing (in both breadth and depth), with well over USD 60.2 billion invested in 111 developing countries at the end of 2017. About a quarter of the total assets sitting in blended funds stems from commercial investors – pension funds, HNWIs, insurance companies, and commercial banks.
The 2019 Social Impact Investment report also demonstrates significant growth in the impact investment market in terms of the number of funds investing and the amount invested, as well as through the growing number of policies being put in place around the world to facilitate the market (almost 600 policies in over 45 countries, up from a very small number covered in our earlier 2015 report). States must recognize the urgency of “Aligning development co-operation and climate action” to reach development goals more efficiently and effectively. Recent report find that only 20% of development finance provided each year by members of the OECD DAC over 2013-2017 included a focus on climate change.
The OECD has established key partnerships with foundations as to tackle economic, social and environmental challenges collaboratively. These engagements have enabled the support of a common vision of improving well-being, sustainable development and open societies. According to OECD DAC statistics, 33 of the largest private philanthropic foundations have provided USD 7.8 billion (on a gross disbursement basis) in support of development finance. While this amount remains modest compared to ODA (USD 153 billion), these foundations remain key actors – the efforts of the Bill and Melinda Gates Foundation in the health and reproductive health sectors have had a significantly positive impact.
The third annual Private Finance for Sustainable Development (PF4SD) Conference and Week will be taking place at the end of January 2020, with the goal of bringing the relevant communities together – from blended finance, to impact investment, to private philanthropy and green finance – to work on how to build financing in support of the SDGs while also fostering innovative approaches that can lead to systemic change.
Aligning investment with development goals
The G7 has mandated the OECD and the UNDP to develop a robust common framework to help align private finance and investment with the SDGs. Guided by a group of senior experts drawn from across the public and private sectors, the framework will help align finance with the SDGs through three main components: standards of impact and process, innovative financial tools and partnerships, and regulations that provide incentives for alignment.
A multi-year programme of action on Financing for Sustainable Development has also been mandated by the KSA Presidency at the G20 to help overcome the SDG financing gap, focused specifically on low-income and developing countries (LIDCs). This programme looks at all sources of financing – domestic and external, public and private – and maps them against the SDGs.
These new investment models are not just about mobilizing more private and philanthropic resources to address the SDGs, but also about piloting more effective and efficient solutions. Many of the current “solutions” are simply not working and more and better innovations are needed to reach these global goals.
Governments play a critical role in systems change, but change also requires the commitment and collaboration of the private sector, civil society and other stakeholders. This is why SGD 17 is about partnerships and the WEF Annual Meeting this year relies heavily on stakeholder engagement.
Inclusive growth and innovative financing
A number of years ago, the OECD launched an initiative on Inclusive Growth as a major response to address the increase of inequality and its widespread consequences on the economy and the society.In August of 2019, the B4IG platform was launched at the G7 Summit in Biarritz. B4IG brings the CEOs of 34 leading global firms together to pledge against inequalities. Two major foundations have also joined – Rockefeller Foundation and the Bill and Melinda Gates Foundation. The initiative includes an accelerator and a financing forum with the goal of scaling and funding solutions that have proven to be effective. The financing forum aims to bring together philanthropists, impact investors and other investors to fund models that can deliver tangible impact.
In a nutshell, outcomes focused approaches and instruments require the blending of philanthropic, private and public funding. The objective of the financing forum is to further work and focus on these models.
Efforts in Impact measurement
The OECD is leveraging its expertise and long-standing experience in measurement of social and environmental outcomes, including the work on measuring well-being.Apartnership with an international coalition of standard setters is currently in process for the development of a conceptual framework and set of guidelines for impact measurement. The Impact Measurement Project (IMP) Structured Network was joined by the OECD alongside the UNDP, IFC and many other key players.IMP notably aims to build a common framework to help all types of investors and businesses (MNEs, SMEs, social enterprises, etc.) in navigating the numerous management and impact measurement methodologies that exist. In addition, the OECD is currently working to provide more guidance to ensure that investments in sustainable development can be designed, tracked and evaluated in a comparable manner across policy sectors and independently of the type of organisation.
To this end, the OECD endeavors to drive a process of sharing and coordinating public and private actors, and bringing together the best practices to build consensus in the industry on the most credible principles, frameworks, standards and metrics for measuring and managing impact. The objective is to create consensus around a Development Impact Framework to enhance the ability of all stakeholders to design, measure and track in a comparable manner sustainable investments in developing countries. Collaboration for the development of a consensus around impact management and measurement is critical, and efforts are targeting having some deliverables ready for the UK G7 Presidency in 2021.
It is essential to continue to work on identifying criteria and metrics to measure the specific impact of social enterprises and social economy organization to produce an international manual on this issue in the next couple of years.
Engaging Foundations and Governments to innovative funding models
Many countries have started to explore innovative financing mechanisms, such as payment by outcomes. Among these, Social Impact Bonds (SIBs) allow governments or commissioners to enter into agreements with social service providers (e.g. social enterprises or non-profit organisations) and investors to pay for the delivery of pre-defined social outcomes (OECD, 2015). SIBs can thus be an opportunity to nurture a culture of monitoring and evaluation in social service delivery.
Yet, SIBs and other financing experimentations should be embedded in a holistic policy strategy that ensures continuity of social service delivery by the public sector, particularly for vulnerable groups. SIBs should be designed in a way that helps fostering social innovations and tackling severe social challenges – which is not always the case.
Policy makers should pay attention to the models of the many initiatives that promote financial intermediaries in order to match the demand and the supply side, often by analysing deal by deal solutions and providing non-financial support (e.g. assistance in preparing a business plan etc.).
Transforming innovative funding to development and enabling collaboration necessitates taking into account the different needs and interests at stake in the financing, philanthropic and third sectors while working toward a common framework to measure impact – without losing sight of the specificities of the different actors (e.g. social enterprises and social economy organisations).
 According to the OECD DAC statistics, ODA in 2018 was USD 153 billion, a decline of 2.7% from 2017, with a declining share going to the neediest countries.
 The GIIN estimates the current size of the global impact investing market to be $502 billion. Based on the collation of AUM data on more than 1,300 impact investors around the world