Beyond GDP: What Counts for economic and social performance? Understanding different daily life challenges in Europe?

On 16 June 2020 Gabriela Ramos participated in a virtual webinar entitled “Beyond GDP: What Counts for economic and social performance? Understanding different daily life challenges in Europe?” co-hosted by the HLEG and Bertelsmann Stiftung. She was joined by Brigitte Mohn, Member of the Executive Board, Bertelsmann Stiftung; Christian Kastrop, State Secretary, Federal Ministry of Justice and Consumer Protection; former Director, Europe’s Future, Bertelsmann Stiftung; Joseph E. Stiglitz, HLEG Co-Chair and Nobel Prize Laureate; Martine Durand, HLEG Co-Chair and former OECD Chief Statistician; Wolfgang Schmidt, State Secretary, Federal Ministry of Finance; Gary Gillespie, Chief Economist, Scottish Government; Dennis Snower, Global Solutions Initiative. Find the recording of the session below, session agenda here, summary here, and Gabriela’s remarks as delivered below.


A) What do you think are some of the most urgent priorities here, from an inequality and vulnerability perspective? 

  • Thank you, Martine [Durand, Chair of this session].
  • Dear State Secretary [Wolfgang Schmidt], distinguished guests,
  • First, I’d like to thank the Bertelsmann Foundation for organising this important meeting and for supporting the High Level Expert Group on the Measurement of Economic Performance and Social Progress (HLEG).
  • When we set up the HLEG in 2013, our central message was “what we measure affect what we do. If we measure the wrong thing, we will do the wrong thing. If we don’t measure something, it becomes neglected, as if the problem didn’t exist”. This was a strong message that continues to guide the work at the OECD.   
  • In a crisis moment like this, we take a step back and think what matters most to us. And what we care about most are falling apart.
  • Indeed, the COVID-19 pandemic unveiled in a more dramatic way the accumulation of our vulnerabilities as societies and economies.
  • First, this health crisis bluntly reminded us that high-quality and affordable universal health coverage is the foundation to protecting the most vulnerable. It has put the spotlight on inadequate health security and preparedness, including inadequate healthcare facilities and resources such as shortages of hospital beds, medicines, ventilators and healthcare workforce.
  • We need to analyse why some countries like Germany had better results… Because they have already built resilience in the health systems.  Particularly in this crisis, the most important bottlenecks in hospital capacity are caused by a lack of intensive care beds.
  • No wonder Germany managed the pandemic well, with the highest number of intensive care beds in the OECD [33.9 per 100,000] compared to Italy for example even with UHC [8.5 per 100,000].
  • We need capable governments that are fit to address the multiple gaps in the health care systems. Needless to say, universal health coverage is a must.
    • Today, about 925 million people spend more than 10% of their household income on healthcare; 200 million people spend more than 25% of their income on health. Look at the countries with universal health coverage (South Korea, Singapore, Japan) which managed better.
  • And the sustainability of healthcare workers….In fact, the virus has particularly profound implications for developing countries since about 90% of low-income countries face health-worker shortages.
  • Building a strong health system should be our priority. This is not a cost but an investment for a better future.
  • Second, the crisis has laid bare pre-existing gaps in social protection provisions.
  • 55 % of the world’s population (4 billion people) are NOT covered by social insurance or social assistance. Globally, ONLY 20 % of unemployed people are covered by unemployment benefits, and in some regions the coverage is much lower.
  • Even in countries with the most advanced systems of social protection, some workers and their families miss out: workers with non-standard jobs [the self-employed, temporary, and informal workers, and those who work very short hours] are often not covered by insurance-based unemployment and sickness benefit schemes.
  • Furthermore, as migrants across the OECD lose their jobs and their livelihoods, they also lose their ability to send remittances to their families. With remittances estimated to  fall  by  close  to  20%  in  2020,  this  is  likely  to  put  even  further  strain  on  the  budgets  of  vulnerable households, including in emerging and developing countries.

No wonder the most affected are the ones that were already struggling. We need to fix this.  

  • Going forward, we need to be mindful. The magnitude of the impact is so big that people will want growth at any cost.
  • Our society is already increasingly divided not least because of the social distancing but because the crisis has basically shed light on all kinds of inequalities.
  • We need to include distributional outcomes, and sustainability issues. We need to see the outcomes for the most affected and intervene there. 

We already know that inequalities have a compounding effect.

First, COVID may deepen the intergenerational divide and create a lost generation of youth.

  • The Economic Outlook that we released last week highlights that if we are unable to avoid a second wave, OECD unemployment rate would nearly double to 10% with little recovery of jobs expected in 2021.
  • Youth are the particularly hard hit by this economic fallout. Already, more than 1 in 6 young people have stopped working since the onset of the pandemic or have working hours cut by 23%.
  • Furthermore, lockdown will increase the risk of dropping out from education and employment since the more we spend out of school or employment makes the transition back to normal more difficult.
  • Our research shows that it is the most disadvantaged who have the greatest risk of learning loss from school breaks.
  • It can take up to 6 weeks of adjustment time for these students to be mentally and physically ready to re-engage with the curriculum after a summer break.
  • So the crisis might cast a dark shadow over children’s future well-being.
  • We are particularly concerned about the projected rise in child poverty of 15% (or 86 million more children), based on UNICEF data.
  • As we moved towards teleworking and e-learning, the digital divide has created clear winners and losers.
  • Indeed, half of the world’s population now connected to the Internet.
  • Across the OECD, 22% of children from the lowest socio-economic status don’t have internet access.
  • We need urgent investment in affordable and sustainable digital infrastructure.
  • And, women have also been disproportionately affected as they are facing many burdens: unpaid work (3 times as much as men on average in the OECD); over-representation in informal economy without adequate social protection (60% globally and 73% for young women); overrepresentation in the hardest hit sectors; and access to liquidity for women owned businesses.

We need to urgently address this disproportionate impact. 

Solutions?  We need to drive the people-centred growth.

  • The pandemic has inspired an outpouring of public appreciation for the front line workers – doctors and nurses are the most obvious but they actually represent less than 20% of all essential health workers. Too often, we overlook the heroism and dignity of millions of under-paid, under-valued and essential workers, including cleaners in an acute nursing facility or waste pickers or food vendors. Or I would say teachers as well! Despite their contributions to our society and this health crisis, they do not get the respect that they deserve.  
  • Healthcare workers: Nursing assistants, house keepers, medical assistants, etc – their median pay is just $13.48 an hour in the US for example. And let’s not forget about another layer of inequality – 70% of the health care workers are women.
  • Teachers: ONLY 26% of teachers on average across OECD countries (TALIS) think that the work they do is valued by society.
  • And informal workers who provide essential services. Many are essential workers who today are responsible for ensuring food security, collecting our waste and recyclables, and providing care work.  Despite the tremendous value of this work in sustaining our economies and societies, informal workers are too often excluded or marginalized within economic and social policy.
  • Going forward, this needs to change.

To fulfil this mission, we need to rethink the growth model, and it begins with reviewing our objectives. Societal progress should not be measured by income and outputs. Instead it should be based on multidimensional well-being (educational attainment, social connection, good health, environmental quality, economic and personal security) – the things that matter in people’s lives.

But better measures of “social progress” is not enough. What matters is to anchor these measures in the policy process.

It is actually encouraging to see that more than half of OECD governments have now developed their own well-being and sustainable development indicator dashboards.

And well-being is not just for measurement, it is to be used to inform policy at national [New Zealand’s well-being budget is the most visible approach, but also Italy and France have used well-being metrics in national budget. Scotland, Wales and Northern Ireland have used subjective well-being measures in cost-benefit analysis] and international level [EU Council Conclusions on the Economy of well-being under the Finnish Presidency in 2019]

These experiences hold the promise of delivering policies that, because they go beyond the traditional silos, are more effective in achieving their goals and in improving people’s lives, as well as in overcoming the barriers between elites and others that are at the root of today’s political crises.


Talking points

Economic Outlook

  • The shadow of 2008 falls over the outlook today. In the Economic Outlook released just last week at the Ministerial Council Roundtable, we provided a dual outlook scenario.
  • In the case where we avoid a second wave of infections, we will see global economic activity fall 6% in 2020 and unemployment climb from 5.4% in 2019 to 9.2% (nearly double!). This is far greater than anything experienced during the 2008 financial crisis. In the case where we are unable to avoid a second wave, OECD unemployment rate would nearly double to 10% with little recovery of jobs expected in 2021.
    • Even more concerning are the long-lasting effects to the most vulnerable people in our society. 
  • In fact, we thought that we learnt a lesson from the 2008 crisis, where the GDP loss brought down people’s well-being in the recession and the subsequent weak recovery. What followed was a reinforcement of pre-existing inequalities (income and wealth) as well as a birth of new inequalities (skills, social mobility, and subjective well-being), which in turn is causing political and social upheaval.
    • On average, OECD households spent around 21% of their disposable income on housing costs, and nearly 1 in 5 lower-income households spent more than 40%.
    • 30% of households were living in overcrowded conditions in Mexico, Latvia and Poland.
    • Middle-income households will also struggle to make ends meet as 1 in 5 middle-income households spends more than it earns across the OECD. In most OECD countries, over-indebtedness is more widespread among middle-income households than among low and high-income households, and concerns around 11% of middle-income households on average.  With a loss of income and job security across all OECD countries, middle and lower classes will be further squeezed.

Measures taken by countries to support the affected workers and SMEs.

  • Countries have responded by ramping up their income-support programmes and get money into the hands of those who need it most:
    • Stepping up means-tested support to bolster the incomes of those with the least resources (11 of 37 OECD countries);
    • Providing targeted transfers to support those whose vulnerability has been revealed by the crisis 28 countries);
    • Offering universal transfers, to ensure a rapid pay-out and limit the number of people that fall through the cracks (3 countries); and
    • Providing direct relief to those unable to meet their expenses (27 countries).

Where and towards which population groups should we be focusing our efforts?

Child well-being

  • Child well-being needs to be a priority in the COVID recovery and the higher level of investment and better policy making required to manage the impact of this crisis. Stress concern of projected rise in child poverty of 15% or 86 million more children[1] and need of the international community and country governments need to respond quickly to protect children and invest in child well-being.
  • Education and school is one of the main channel through which confinement is exacerbating existing stressors and inequalities. Learning loss is a critical issue. Children from disadvantaged families typically lose one month of learning during the two month break from school over summer. This loss is cumulative. In fact, children from advantaged families can make learning gains through parental support and new opportunities to learn.
  • Evidence from the joint OECD-Harvard study reveals that many children and youth are not actively engaged in distance learning, particularly the most vulnerable: only about half of students are able to access all or most of the curriculum.[2]
  • Extended confinement will create problems once schools and centres re-open, in particular school routines and ability to concentrate. Deliberate effort is needed to rebuild student’s engagement and avoid increases in school drop-outs, makeup for lack of access for disadvantaged children, and support children making school transitions.  Schools need to provide special measures for students exposed to violence at home and experiencing higher levels of psychological stress.

Youth

  • Efforts needs to be made to keep young people engaged in training and education and the labour market. One Lesson from the Great Recession is that the problem of young people not in education or employment (NEET) is structural and will persist after economies pick up. 
  • Governments need to build commitment across the public administration, set procedures and prepare guidelines to applying a youth and intergenerational lens in crisis response and recovery measures. Targeted policies and services are needed for the most vulnerable youths, including young people not in employment, education or training (NEETs); young migrants; homeless youth; and young women, adolescents and children facing increased risks of domestic violence.

Structural issues

  • Making social protection more responsive and addressing structural issues[3]:
  • The COVID‑19 is accentuating  a  range  of  structural  challenges  of  social  protection  systems that need to be addressed to ensure that social protection serves inclusive  growth. For example, even in countries with the most advanced systems of social protection, some workers and their families miss out: workers with non-standard jobs –the self-employed, temporary, and informal workers, and those who work very short hours –are often not covered while others already out of work before the crisis face protracted hardship. In countries with large informal sectors and weak social protection systems, where growing numbers of people lose work without any access to income support, the situation is worse.
  • Policymakers need to get money into the hands of people who need it as quick as possible and deign new programmes to capture all. OECD countries have adopted different approaches from means-tested support to temporary transfers, universal transfers, and targeted relief. For example, the US and Japan have provided money transfers to citizens, and France, Finland, Japan and the UK have extended deadlines for tax submissions.
  • Careful consideration of how support programmes can be made as effective and as sustainable as possible is needed, over the coming months and possibly years. For example, making minimum-income protection more responsive, through timely reassessments of entitlements in the face of rapidly changing circumstances.
  • On supporting Vulnerable Workers and Companies[4]:
  • Paid sick leave is a crucial tool in slowing the infection: Extending paid sick leave coverage to non-standard workers, including the self-employed is important and SME need to be provided financial compensation.
  • Immediate measures are needed to secure jobs and incomes, and grant firms flexibility to recruit staff replacements, where necessary.  Low-skilled, low-wage, and young people may be the most vulnerable to job losses because they are in the sectors most at  risk. They are less likely to hold jobs that allow them to telework.  
  • Important lesson learned from the Great Recession is the positive role that short-time work (STW) schemes can play in mitigating the economic and social costs of major economic crises. For instance, Korea relaxed the requirements for its employment retention subsidy programme and raised for six months the wage subsidy that companies can claim if they keep their employees on paid-leave or leave-of-absence programmes.
  • Many firms need financial support, particularly small firms. Several countries have taken rapid steps to help firms to cut costs or to provide them with liquidity by permitting a deferral of tax and social contribution payments, and provisions of temporary loans and grants. Australia, for instance, announced a package to reduce the financial burden to SMEs including changes in depreciation rules and the possibility for businesses hit hard by the downturn to defer tax obligations.

[1] Joint projection by UNICEF and Save the Children

[2] Taken from Schooling disrupted, schooling rethought: How the Covid-19 pandemic is changing education (2020)

[3] Taken from Supporting Livelihoods Brief

[4] Taken from supporting people and companies brief

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s