Meet the Author: Michael Kaufman The Time Has Come: Why Men Must Join the Gender Equality Revolution

Meet the Author Session with Michael Kaufman, author of The Time Has Come: Why Men Must Join the Gender Equality Revolution at the 2019 OECD Forum.                    

Ladies and Gentlemen,

Can I just begin by saying that I am so delighted to be introducing a male champion of gender equality. Michael is one of the foremost Ambassadors for men to join the effort to empower women.

He is the co-founder of the White Ribbon Campaign—the largest international network of men working to end violence against women.

For decades he has been an advisor on gender equality to the United Nations, governments, NGOs, schools, and workplaces around the world.

His new book, The Time Has Come: Why Men Must Join the Gender Equality Revolution, is a timely manifesto for why men must take a stand in the fight for gender equality, and a reminder of everything society has to gain from it, including what men have to gain.

Michael, this goes to the core of the OECD’s work on gender.

For decades, the OECD has been applying the gender lens across policy areas, designing, developing and delivering the best policies to advance equality. This includes non-discrimination laws; dual parental leave; policies related to taxes, infrastructure, environment; and promoting gender representation in the high ranks of the public and the private sectors, including through quotas and targets.

We have child policies with excellent impact in terms of supporting women to work, and we have led the charge with gender neutral text books. We have brought this to the G20 with the 25×25 gender target in 2014, to help bring 100 million women into the workforce, and more recently with the findings on Bridging the Digital Gender Divide in 2018. And we are constantly tracking progress on all these issues.

However, change is very slow, and it is low because the first thing that has to change is our mindset. The gender stereotyping and cultural norms, what is good for a girl and what is good for a boy, and the expectations societies put in girls are a major obstacle for change.

And this is where the story of men is so relevant and I would like to thank Michael.

I was not a gender champion a decade ago, but when you get to know the facts, it’s about nothing more than fighting for what is fair.

But my conclusion is similar to what Michael tells us in his book. The same cultural norms that hold women behind, put a lot of pressure on men to conform to ideas and ‘rules’ about masculinity that prevent them having more meaningful lives.

An OECD study on “engaging boys and men” concluded that when fathers spend more time at home, there are great benefits: fathers’ involvement has a positive effect on children’s academic performance as well as on their behavioural, social, and emotional wellbeing.

Fathers who spend more time caring for and being with their children are also more satisfied with their lives than those who engage less.

Once when I was in Japan I was addressing a mostly male audience, and when I was asked something about gender, given the context, I just said that more humane working hours, and time to enjoy your children was good for men and women.

But getting the policy settings right involves a wide range of measures. OECD evidence on masculinities shows that of course family friendly policies, including paid parental leave are key.

But it’s also important to change curricula, including for early childhood education, to stop gender stereotypes even before they can take hold. It’s also important to promote media and awareness-raising campaigns to challenge stereotypes, including in adverts.

Michael, now I pass the floor to you, changing stereotypes is the core of your book, so please we look forward to hearing from you about why should men join the gender equality revolution?

Follow-up question 1:

What will it take to change these masculinities and the role models for men so that we can really build better more liveable societies?

Follow-up question 2:

How do we push back on the push back against women rights, as the UN Women Executive Director, Phumzile Mlambo-Ngcuka would say?

Follow-up question 3:

We’ve seen enormous changes in women’s lives over the past fifty years. Are we seeing any comparable changes among men?

Follow-up question 4:

There’s been a backlash against women’s right going up to the highest levels of government. Are you optimistic about the future of gender equality?

2019 OECD Forum Panel on “Towards a New Societal Contract”

Remarks as delivered in Paris, France at the 2019 OECD Forum. Opening remarks for the panel on “Towards a New Societal Contract” with panelists:

  • CEO and Chairman of the Executive Board and Management Board, Aegon N.V.
  • Maria João Rodrigues, Vice-President of the S&D Group, European Parliament; President, Foundation for European Progressive Studies
  • Dennis Snower, President, Global Solutions Initiative
  • Matthew Taylor, Chief Executive of the Royal Society of the Arts (RSA), UK

Opening Remarks

  • Thomas Hobbes theorised the notion of a “social contract” in 17th century England, during the Civil War, as a way to clarify the rights and responsibilities that bind citizens to one another and to the State.
  • In the first half the twentieth century, countries radically re-thought the social contrat and undertook massive welfare reforms. We need ambition on this scale.
  • In our interconnected world, this will require action at the international level. Paradoxically, we are seeing a retreat from multilateral approaches.
  • But people want a stronger social contract. Across 19 countries covered by the OECD Risks That Matter survey in 2018, 70% of respondents said government should do more to ensure their economic and social security. We have to listen to that call!
  • Why are people angry? Let’s take a look at the numbers:
  • We are seeing rising inequalities. Across the OECD the richest 10% now earn on average nine and a half times more than the poorest 10%, up from seven times in the 1980s. Wages have been stagnating for a decade.
  • Wealth inequalities are even worse with the top 10% capturing almost half of total wealth, and the bottom only 3%.
  • Economic vulnerability has risen. Over one-third of people in OECD countries would fall into poverty if they had to forgo 3 months of their income.
  • The digital revolution brings additional fears and may deepen divides.
  • According to our estimates, 14% of jobs are at high risk of automation across OECD and a further 32% will undergo significant changes, with low-skilled workers most at risk.
  • We are also seeing the rise of non-standard work, impacting job security, protection and collective bargaining and bringing negative impacts on career prospects and earnings.
  • Many of the traditional pillars supporting the social contract are under pressure.
  • Social mobility has stalled in many OECD countries. In an “average OECD country”, it could take up to five generations (or 150 years) for children of poor families to reach the average level of income.
  • Even the middle class is struggling. The OECD’s Squeezed Middle report found that over the past 30 years across OECD countries the median income has grown a third less than the average income of the top 10%. Half of middle-income households struggle to make ends meet.
  • We need to adapt our social contract to the 21st century:
  • Digitalisation is exposing gaps in our current education, training and social protection systems. In some OECD countries, non-standard workers are 40 to 50% less likely to receive income support during a period of unemployment.
  • The capacity for social dialogue has weakened. The share of workers who are members of a trade union has shrunk from 30% in 1985 to 16% in 2016.
  • To restore social mobility, education, health and family policies all have a role to play, so do effective social protection and tax and transfer systems.
  • The OECD is helping to address these challenges through our Inclusive Growth Initiative and our New Approaches to Economic Challenges (NAEC)
    • When Robert Skidelsky came to the OECD he said that ‘bad economics makes bad policies’. He hit the nail on the head.
    • We need to rethink our economic assumptions, models and frameworks, and put people at the centre, drawing on a range of social sciences.
    • We need a growth model that introduces equity and sustainability considerations ex ante, instead of assuming you can distribute or clean after you grow.
    • Through its Framework for Policy Action on Inclusive Growth, the OECD has developed a dashboard of 24 inclusive growth indicators to monitor progress.
  • To rebuild our social contract for the digital age, we must focus on restoring trust:
    • Trust has been one of the casualties of the crisis. Only 4 in 10 citizens in the OECD trust their Government.
    • To promote trust, policy-making must become more inclusive. Digital technology can help make governments more responsive and accountable through open government initiatives, participatory democracy and public sector innovation.

Discussion Points:

How would you define the social contract?

  • Social contract is a complex notion but to simplify one could say that it boils down to people’s expectations around what rights and responsibilities should look like, with respect to both their individual and collective dimension.
  • At the OECD we look at these areas in terms of “outcomes that matter to people”, as in our Well-Being Framework. Our focus on inclusive growth, and going beyond GDP, is about putting the social contract into action.
  • When defining the social contract, it is equally important to understand what are the risks against which people want to be protected.
  • The OECD is working to map social protection and risks, notably through its Risks that Matter survey, in order deliver more effective social policies and better adapted safety nets. The new OECD Jobs Strategy puts emphasis on the risks and challenges created by digitalisation and the Future of Work. It also focuses on the role that social dialogue and collective bargaining can play in mitigating these risks and responding to these challenges, which is why we are supporting the Global Deal.

Wage stagnation

  • Headline message: Wages have stagnated for large segments of the labour force, despite the recovery in employment following the Global Financial Crisis.
  • Data: In OECD countries, annual growth in nominal hourly wages dropped from 4.8% on average in the pre-crisis period to 2.1% in recent years.

Trade Union membership and Collective Bargaining Coverage

  • Headline message: Trade union membership and collective bargaining coverage have been declining in most advanced economies.
  • Data: The share of workers who are members of a trade union has shrunk from 30% in 1985 to 16% in 2016; the share of workers covered by a collective agreement has shrunk from 45% to 32% over the same period.
  • Recommendations:

Facilitating the emergence of new forms of social dialogue and accompanying the efforts of unions and employer organisations to expand their membership – also to non-standard workers – will be critical.

On the situation of the Middle Class

  • Headline message: Increasingly, pressures on the middle class are translating into a sense of anxiety about their economic situation.
  • Data and facts: Many middle class households view the socio-economic system as unfair: 58% of middle-income households in OECD countries feel that, given the taxes they pay, they do not receive their fair share of benefits and public services.
  • The cost of education, healthcare and especially housing have risen well above inflation over the past 25 years. House prices alone have grown 3 times faster than the median household income.
  • Labour market prospects are increasingly uncertain for many in the middle class. Mid-level skills no longer guarantee making it to the middle-income group. Moreover, one in six middle-income workers are in jobs that are at high risk of automation.

Social mobility

  • Headline message: As income inequality has increased since the 1990s, social mobility has stalled, meaning that fewer people at the bottom have moved up while the richest have largely kept their fortunes.
  • Data and facts: Families and communities in many countries seem to be trapped on the bottom rungs of the social ladder, particularly since the early 1980s. This means that children born into the bottom of the income distribution have less chance to move up and improve their occupational status and earnings than their parents and previous generations (“sticky floor”). At the other end of the scale, there is a “sticky ceiling” because inequality also means that those at the top of the income distribution may remain there for a long time.
  • In an “average OECD country”, it could take five generations (or up to 150 years) for children of poor families to reach the average income in their country.
  • Socio-economic status heavily influences employment prospects, job quality, health outcomes and education. For example, children whose parents did not complete secondary school have only a 15% chance of making it to university compared to a 60% chance for their peers with at least one parent who achieved tertiary-level education.

 

 

Launch of OECD Report “Addressing problematic opioid use in OECD countries”

Opioids Cover

Thank you to Sharon Armstrong – Chargée d’affaires at the Canadian Permanent Delegation to the OECD. I am grateful to Canada and to Deputy Minister Kennedy for the support they provided to the OECD for this work on this critical health emergency unfolding across countries, which is the opioid crisis.

I am grateful that we have this opportunity to  discuss it together today, to look at the scale of the problem, the root causes and the policy solutions.

The report we are releasing today – Addressing problematic opioid use in OECD countries – paints a very stark; a very worrying; a very tragic picture. A major opioid crisis has emerged over the past few years, especially in North America, which is devastating families and communities.

  • In Canada alone there were more than ten thousand opioid-related deaths between January 2016 and September 2018. Death rates increased from 8.4 per 100,000 people in 2016 to 11.8 in 2018, in just two years.
  • In the United States, more than 13 persons per 100,000 people died because of opioids in 2016 alone. Between 1999 and 2017 399 230 people have died from an opioid overdose in the US.
  • Other countries are not immune either, Australia also is suffering a high number of opioid-related deaths. So is Estonia, Sweden and Norway among European countries.
  • Use of opioids has been rising in many population groups, in some cases even in unexpected groups of people. For example, the United States have seen a raise of opioid abuse among pregnant women, especially among those with a lower level of education and a lower income.
  • Some groups are particularly vulnerable. In the United States, having a mental health disorder is also associated with a two-fold greater use of prescription opioids. Prisoners too are vulnerable. The prevalence rate of opioid use disorders in Europe was less than 1% among the general public but 30% in the prison population.

There are a number of factors that have fueled this crisis.

First, it has not occurred in a vacuum but in a specific context. Social and economic conditions, particularly of vulnerable groups of the population, have contributed to the opioid crisis. A recent study in the United States found that as county unemployment rates increase by one percentage point, the opioid death rate per 100 000 rises by 3.6%.

However, causality is complex, with some studies suggesting a reverse causality, claiming that it is problematic use that leads to an increase in unemployment. Clearly we need to get a better understanding of the forces at work.

The report also highlights the lack of housing as a factor, showing that an unstable housing situation increases problematic use of opioids and other drugs by preventing people from accessing treatment and exacerbating psychiatric symptoms.

Without a doubt, a key factor has been the increase in prescription and over-prescription of opioids for pain management.

The estimated amount of prescription analgesic opioids that is used annually has increased over the past 15 years in OECD countries. The sharpest increase happened in the 2000s, when a growth of around 58% was observed between 2002 and 2007!

The second contributing factor is a growing illicit drug market – which has greatly increased the availability of cheap and high-purity illicit opioids.

Finally, the crisis is also a result of limited access to preventive actions and treatments to minimize the terrible consequences of Opioid Use Disorder. And of the stigma and unemployment and housing problems suffered by these persons.

The message of this report is clear: Opioid Use Disorder needs to be considered a chronic health condition and we need to treat the opioid crisis as a public health crisis with an integrated people-centred set of policies.

More specifically, countries need to prevent overuse of opioids with actions to steer the behavior of patients and prescribers, while providing adequate access to pain management treatment and information about problematic use.

Of course, we have to look at the role opioid manufacturers have played in escalating the crisis. During the late 1990s and the 2000s, opioids manufacturers conducted marketing campaigns and funded third party advocacy groups, targeted at physicians, patients and policymakers, downplaying the problematic effect of opioids and opposing tighter regulations. We have to get the regulatory settings right to protect people from harm.

Countries need to improve treatment received by people with Opioid Use Disorder by strengthening the integration of health services, social policy interventions – such as unemployment and housing support – and criminal justice systems. Finally, there is a need for better research and strong health information systems.

It is urgent to take decisive action to stop the tragic loss of life and address the terrible social, emotional and economic costs of addiction with better treatment and health policy solutions.

I look forward to hearing about today’s discussion and the national perspective on what can be done to end this terrible crisis.

Remarks on “The Evolving Global Order in the Next 25 Years” at the 30th Anniversary of the Global School of Policy and Strategy (UC-San Diego)

Ladies and Gentlemen,

I am delighted to celebrate this great school’s 30th anniversary by looking to the future.

The philosopher Søren Kierkegaard said that “Life can only be understood backwards; but it must be lived forwards”.

So to talk about the future evolution of the world order, we have to understand where we are coming from.

First, we have to recognise that the recovery is struggling: the OECD has revised down its growth projections for almost all G20 economies. Trade tensions are intensifying: global trade growth last year dropped to 4% from 5¼% in 2017. And growth in China will moderate to around 6% by 2020.

Second, we have to recognise that the geo-economic compass is recalibrating. The world economy’s centre of gravity is shifting south and east. The OECD share of world GDP,[1] which stood at over 60% at the turn of the century and about 50% ten years ago, is now below 45%. This is why remaining an open, relevant and welcoming Organisation with an effective accession process is vital.

Thirdly, we must recognise that the policies, models and approaches we have been promoting have failed to deliver sufficiently for people. This is contributing to fuel a crisis of trust in governance which has translated into very concerning electoral outcomes.

Let’s look at some of numbers from the OECD.

The income gap in the OECD between the top and bottom deciles has grown over the past three decades in most OECD countries. The average disposable income of the richest 10% of the population is now around nine and a half times that of the poorest 10% across the OECD, up from seven times in the 1980s.

Inequality of wealth is even more pronounced: the top 10% holds half of total wealth while the bottom 40% holds only 3%.

Social mobility is stalling. The OECD’s Broken Social Elevator report shows that in an average OECD country, it would take around four to five generations or 150 years for children from a family in the bottom earnings decile to reach the level of mean earnings.

I just launched the OECD’s report “Under Pressure: The Squeezed Middle Class”. It revealed that the median income in the OECD has grown a third less over the last three decades than the average income of the richest 10% and half of middle-income households struggle to make ends meet.

Most people feel they need more support from their government: The OECD’s “Risks that Matter” study found that 70% of respondents believe that government should be doing more to ensure their economic and social security.

The digital revolution is bringing additional anxieties about the future: The OECD estimates 14% of jobs are at high risk of automation, and an additional third face changes, with the low-skilled most at risk.

So we are in a situation where people have lost faith in the core tenets of the post-war global order and they are scared for their futures and their children’s futures.

Spurred on by populists, who exploit this sense of distrust, anger and betrayal with false promises and narratives of blame, people are turning their back on globalisation, on multilateralism, even on experts and academics!

We are in a paradox: never has multilateralism been so essential to address the inherently cross-border challenges of our interconnected world; and yet never has it been so under attack.

So where do we go from here? To save our multilateral system, we must improve it. And to improve it, we must ensure that it works to the benefit of all.

The OECD has been reflecting on this since the creation of our New Approaches to Economic Challenges Initiative (NAEC) in 2012. This is an organisational-wide effort to challenge our models and assumptions and upgrade our analytical frameworks.

We need to move away from simplistic neoliberalism – from general equilibrium models and rational agents. We saw with the crisis the inadequacy of those models. They did not capture the complex interconnections and contagion mechanisms in the global economy and they failed to understand that shocks do not always come from outside. The system itself produces the shocks that destabilise it.

We need more granular information, data and metrics to be able to check how policies will inter-react and impact different income groups, communities, regions and firms. We need to get away from growth first and distribute later, or clean later. We need to include equity considerations ex-ante, not ex-post.

This goes to the heart of the OECD’s work today. Let me just give a few broad lines:

At our Ministerial Council Meeting (MCM) last year on “Reshaping the Foundations of Multilateralism for more Responsible, Effective and Inclusive outcomes” we presented the OECD’s Framework for Policy Action on Inclusive Growth, with a dashboard of 24 indicators to help empower the people, places and firms that have been left behind.

The OECD’s Inclusive Growth Framework and Well-Being Framework aim to put people at the centre. Korea is currently testing the first inclusive growth country study and New Zealand is implementing the world’s first Well-Being budget this year. Where they lead, others will follow.

We are also getting business on board with the B4IG Platform.

We are helping countries harness the digital transformation through our Going Digital initiative, which offers an integrated policy response across seven dimensions [improving access, boosting use, unleashing innovation, ensuring quality jobs, promoting social prosperity, strengthening trust, and fostering openness].

We will go into this with Leaders at our Ministerial next month, so expect major outcomes.

Key for this agenda is to give people the right skills, not just for the future of work, but for the world of tomorrow – a world of universal connectivity, ubiquitous social media and fake news. This is why the OECD is creating the PISA Global Competence Framework to promote critical thinking, tolerance and socio-emotional skills and why we are looking at issues like the effects of the media on children.

We are also working to make the global order fairer, by tackling corruption, and concentrations of power and wealth. Here again, multilateral co-operation is essential and delivers results.

Take an issue like tax evasion and avoidance – the OECD/G20 Base Erosion and Profit Shifting project (BEPS) and common reporting standard for the automatic exchange of tax information, has already led to 93 billion euros in revenues.

But we need to push further on the toughest most divisive issues, like with the G20 through the Global Forum on Steel Excess Capacity, and now, taxing the digital economy and looking at market concentration, data security, privacy and ethics. We just adopted the AI Principles, for example.

And I could not leave out climate change – the mother of all multilateral challenges. We have to spark ambition by making the economic case for low emissions pathways. That is our focus with Financing Climate Futures: Rethinking Infrastructure.

So, in sum, I would say that globalisation and multilateralism are not ends in themselves, they are only worth defending if they improve people’s lives and protect our natural environments. So we have to get this right!

[1] Measured in PPP terms

Keynote at Economic Transition in the Anthropocene Conference at University of California Irvine

Keynote address as delivered on 25 April 2019 at the Economic Transition in the Anthropocene: Ensuring a Just and Sustainable Future for Humanity at the University of California Irvine.

Gabriela P4NE

Ladies and Gentlemen,

I am delighted to join you for this conference on Economic Transition in the Anthropocene. I’d like to thank Leslie Harroun from Partners for a New Economy for the invitation and UC-Irvine for putting on this rich programme of speakers.

We gather here at the height of the Anthropocene. Human activity is having a  decisive  influence on climate and the environment.

We know from last year’s IPCC special report on the impacts of global warming of 1.5°C that we have barely a decade to radically transform our economies and societies. We must slash emissions by 45% by 2030 if we are to have any chance of restricting temperature increases to 1.5°C.[i]

And yet, the World Meteorological Organisation has announced that the 20 warmest years since records began have been in the past 22 years, and the last four years have been the warmest on record.[ii]

For the first time in several years carbon emissions are rising again.[iii] Natural systems are moving beyond the boundaries that agriculture and ecosystems evolved within. This presents an existential dager to our civilisation and calls for radical action.

However, the level of ambition at the international level is wholly inadequate. To date, only 11 of the 197 UNFCCC parties have communicated their long-term, low-emission development strategies.

The prevailing economic models that pushed us to abuse the resources and upset the balance of our natural environment, also led us towards unsustainable and unjust approaches to the economy and society.

We gather here more than a decade since the subprime crisis triggered a cascade of events that ripped through the global economy and almost caused the total collapse of the world financial system.

Few saw this coming. Nor did they foresee how the financial crisis would lead to the Great Recession, nor how this Recession would produce a crippling social crisis and derail our politics, in turn threatening the recovery further.

This is a tough lesson in political economy, the likes of which we have not seen in Europe since the 1930s.

The economic crisis has turned into a social crisis. As Dennis Snower says, social prosperity has become decoupled from economic prosperity. This, in fact, predates the crisis, so there can be no question of just fixing a few bugs or imbalances in the global financial system and going back to business as usual.

Sustainable, inclusive growth will only be achieved if we coordinate economic, environmental and social policies to make them work towards a common goal, and not, as can often be the case, in conflict with each other.

We cannot do that if we continue to use the traditional methods, based on silos, treating problems as if they were distinct from each other, and seeing economic growth as a goal in itself.

In fact, our common goal is, or should be, well-being, but when we look at the different areas that well-being covers, the signs are worrying.

They are telling us that we need radical change. Policy-as-usual will not do. We didn’t do enough to address inequalities and global interconnections, and the world is manifesting this failure.

Let’s take a look at some of the headline numbers.

The income gap in the OECD between the top and bottom deciles has grown over the past three decades in most OECD countries. The average disposable income of the richest 10% of the population is now around nine and a half times that of the poorest 10% across the OECD, up from seven times in the 1980s.

Social mobility is stalling. The OECD has estimated that it would take four to five generations (around 150 years) for children from the bottom earnings decile to reach the level of mean earnings !

Economic inequalities are translating into social divides, with compounded effects. The OECD report Equity in Education: Breaking Down Barriers to Social Mobility, released last October, shows that by the age of 15 disadvantaged pupils have fallen on average two-and-a-half years behind their more affluent peers. This ends up being almost impossible to make up in the short years of education that are still ahead of them. The damage is done.

There is also evidence that some negative economic trends are now affecting new layers of the population, as shown by the report we released last week: Under Pressure: The Squeezed Middle Class.

The study found that over the past 30 years  across OECD countries the median income has grown a third less than the average income of households in the top 10%.

Half of middle-income households struggle to make ends meet and four in ten are financially vulnerable, meaning they are in arrears or unable to cope with unexpected expenses or sudden falls in income.

The cost of housing, education and healthcare has risen well above inflation and with every generation the middle class lifestyle is becoming less and less accessible to young people.

The middle-income group has grown smaller with each successive generation: 70% of the baby boomers were part of the middle class in their twenties, compared to 64% of generation X and 60% of the millennials today.

People have been left behind, and unsurprisingly we are seeing anger at unfair outcomes translating into a decline in trust.

In the OECD’s work on going beyond GDP to measure progress, we show that trust between individuals (interpersonal trust) and trust in institutions (institutional trust) are a decisive determinant of economic growth, social cohesion and well-being.

Countries with higher levels of trust tend to have higher income. High-trusting societies are more equal, while low-trusting societies show typically higher levels of income inequality.

Institutional trust is a key element of a resilient society and is critical for implementing effective policies, since public programmes, regulations and reforms depend on the co-operation and compliance of citizens. Trust is therefore a crucial component for policy reform and for the legitimacy and sustainability of any political system.

Yet in OECD, only 43% of citizens trust their government.[iv] In the absence of trust our societies have fragmented.

This in turn is producing worrisome democratic outcomes, including gains in nationalist, extremist and populist parties.

Populism, which brings no solutions, only blame and conflict, is making governance even more difficult and it is contributing to mounting protectionism, which in the long-run will do even greater harm.

Protectionist measures are harmful to the economy and costly precisely to those that it claims to protect. Recent OECD data has estimated that each dollar of new tariffs costs global households 40 cents, while each dollar of tariff reduction adds 90 cents to global household incomes. [v]

We can close our borders and try to shut our eyes to the reality of an interconnected world, but in the end, we will all be worse off if we deny ourselves the benefits of co-operation and common solutions to shared challenges.

Many of the challenges we face are inherently international, from migration flows, to epidemics and the implications of technological change.

Digital technologies are having a profound global impact, transforming all sectors of the economy, not only those that are ICT intensive. The digital economy is fast becoming the whole economy. This transformation is changing practically every aspect of life, from the way individuals work and study, to how they communicate, buy goods and services, or spend their free time.

Digital transformation alters the way businesses, governments and other organisations interact and operate. And it is changing the global landscape of science, technology and innovation, with emerging economies playing a growing role, especially China.

Many people compare these changes with earlier industrial revolutions, steam or electronic technologies for example. However, this transformation is truly gobal and is taking place at an unprecedented pace. More than 50% of the world’s population is now connected to the Internet, with the share in developing countries increasing from under 8% in 2005 to over 45% at the end of 2018.[vi] In the OECD, the number of mobile broadband subscriptions has increased by more than 50% since 2012, so that there are now more subscriptions than people.[vii]

Digital transformation is bringing many opportunities for sustainable and inclusive growth. Despite fears of technological unemployment, we also know that four out of ten jobs were created in highly digital-intensive sectors over the past decade. Yet these are not necessarily being created in regions and among populations where jobs are being displaced or lost.

Gabriela P4Ne 2

Many workers are worried about automation. The OECD estimates that automation could threaten up to 14% of jobs on average, with the low skilled and low-paid most at risk. We expect another 32% of jobs to see significant changes in how they are carried out.

If skills demand shift at the speed these estimates suggest, workers would have to continuously adapt their skill set over a working lifetime. This has major implications for education and training systems and underscores the importance of building the adaptive capacity of students and developing robust systems for lifelong learning.

This is not just about promoting digital skills but also a broader and softer skills set. Evidence points to the fact that the future is about pairing digital technologies with cognitive, social and emotional skills, and values of human beings. Educational success will no longer be about reproducing content knowledge, but about integrating what we know and applying that knowledge creatively.

Digital disruption is also bringing profound implications for competition dynamics. Today, new technology and the big players in the platform economy are highly concentrated. Only 250 firms globally generate 70% of R&D and patents, and 44% of trademarks.

Firms in the most digital-intensive sectors enjoy a 55% higher mark-up than firms operating in less digital-intensive sectors, and global acquisitions of digital-intensive firms grew by more than 40% over 2007-15, compared to 20% for acquisitions in less digitally-intensive sectors.

For this reason, we need to address weak competition frameworks in the digital and knowledge-based economies, which can unleash “winner takes all” dynamics.

As Joe Stiglitz points out in a new book to be published this week, People, Power, and Profits: Progressive capitalism for an age of discontent, growing concentration of market power allows dominant firms to exploit their customers and squeeze their employees, whose own bargaining power and legal protections are being weakened.

The OECD is taking action to help countries steer technological change for good. In particular, we have been working on a global multistakeholder response to the challenge of how to achieve transparent and accountable artificial intelligence systems.

We have developed a Recommendation to underpin responsible stewardship of trustworthy AI, which will facilitate innovation, adoption of, and trust in AI, to maximise potential, while minimising risk.

This Recommendation has at its core a focus on inclusive sustainable growth; human-centred values and fairness; transparency and explainability; robustness, security and safety; and accountability. It also identifies critical actions for governments, and importantly, calls for international co-operation, so that we can progress together on AI policy and related technical, ethical and legal issues.

The question is not just about how to ensure participation and skills for the digital revolution, but also how to ensure that we shape the evolution of technology so that it contributes to our well-being goals and opens up opportunities for those who risk being left behind.

In short, how to put in place structures and strategies to ensure everybody wins and can participate, not only as technology takers, but as technology shapers, including women, who make up less than a quarter of ICT graduates.

So this is the context of spiralling inequalities and emerging challenges in which “we need new approaches to economic thinking and acting”.

Simplistic neoliberal economic models, which do not capture reality or reflect the importance of inclusiveness and multidimensional well-being, are incapable of addressing these problems. Just as they failed to anticipate or prevent the financial crisis.

This is why the OECD has fundamentally changed the way that it understands, analyses and promotes economic growth. Growth is not an end in itself, it is a means to an end. It is a means to achieve better lives. We have put people, their well-being, their needs and aspirations at the centre of our approach.

The OECD has worked hard to address the shortcomings of traditional economic models and to develop a systemic perspective on interconnected challenges.

This is why in 2012 we established the New Approaches to Economic Challenges initiative (NAEC), to better understand the nature of the global economy, and its level of complexity and interconnectedness. Working with strategic partners like P4NE, we are identifying the analytical and policy tools needed to deliver inclusive and sustainable growth. With this knowledge we are bringing new models and we are also crafting the narratives best able to convey solutions to policymakers.

However, despite this effort, we continue to see in many countries, sectors and institutions a lack of understanding about the level of interconnectedness and interdependence in our economies, as well as an overemphasis on quantitative economics to inform policy.

Traditional models that are still widely used to study today’s economy make too many assumptions that are at odds with the facts, while at the same time wrapping themselves in claims to objectivity and scientific rigour, which make them very difficult to contest.

The very name of these models, general equilibrium, shows that they assume that the economy is in balance until an outside shock upsets it. These models are based on assumptions that people are rational, take the best decisions according to the information they have to maximize utility, and that the accumulation of rational decisions will deliver the best outcome.

We know that this does not reflect reality. Look at the referendum on Brexit. People’s lives and choices are shaped by their hopes, aspirations, history, culture, tradition, family, friends, language, identity, community and other influences, some of them are relatively new, like social media.

Macroeconomic models neglect these elements. The social and human sciences like psychology, history and sociology, for example, that can explain these variables with depth and nuance have been left out of the equation, quite literally.

This traditional view is essentially linear, and the policy advice it generates is tailored to a linear system where an action produces a fairly predictable reaction. It looks at aggregate outcomes and at average results. It does not capture the richness, the contingence, the interdependence and the complexity of human actors and the economies they operate in. This is what we are trying to revisit with NAEC.

Economic models that rely only on inputs such as GDP, income per capita, trade flows, resource allocation, productivity and representative agents tell part of the story, but they do not paint the whole picture.

Crucially, they fail to capture the distributional consequences of the policies we make, and do not address the fact that the growth process has left too many people behind. They do not capture natural resource depletion, or incorporate environmental damage as liabilities. On the contrary, they assume that, by growing the pie, inequality of income and opportunities will trickle-down, or that you can always clean up the environment after you grow. In fact, much of the damage we are seeing to biodiversity, like coral bleaching and species extinction, is irreversible.

Traditional models do not integrate important dimensions such as fairness, trust or social cohesion that are not easily measurable. As our Chief Statistician says, we need to measure what we treasure, not just treasure what we measure.

Above all, we need a new approach to economics that goes beyond the quantitative dimension. This requires a full re-vamp of our analytical frameworks and assumptions and it also requires a broader shift towards a more empowering state.

We need a high level of ambition to respond to the current situation, on a scale of those enlightened leaders who created the welfare state in the first half of the last century. With the rapidly-changing landscape and policy challenges we are facing in the twenty-first century, there is a need to change the scope of the State. We need to overcome the frameworks of liberal economic theories that dictate that the state only intervenes in the event of a market failure. We can do better than that. We do not propose an overwhelming State, but we need to shape a new role for the state, an empowering State, one that ensures that it levels the playing field for people and addresses concentrations of income, opportunities and wealth.

Our mission must be to redefine the purpose of the economy, to ensure governments, corporations and banks serve society’s interests, and not the other way around. We have to broaden the objectives of policies to include not only material well-being but dimensions such as health, quality jobs, a sense of belonging, social cohesion, and environmental outcomes.

Integrating these proposals into a coherent synthesis ultimately means proposing a new framework that redefines the nature of well-being to balance economic, social and environmental capabilities. This requires leadership, theoretical debate, institutional change, new tools and methodologies.

We know that the world we live in is a system of systems, physical or not, that is complex.

That means you have to take a systemic approach that can deal with tipping points, phase changes, emergent properties, and – very important for us – the fact that shocks do not always come from outside. The system itself produces the shocks that destabilise it.

New approaches, tools and metrics will be adopted and mainstreamed more easily if they are embedded within a broader narrative of inclusion and empowerment.

Hannah Arendt put it very well in her book Men in Dark Times when she wrote that: “No philosophy can compare in intensity and richness of meaning with a properly narrated story”. Stories are one of the most pervasive features of human culture. They are how we make sense of the world, how we see our own role within it, and how we pass our cultures onto the next generation. Narrative is the bridge between what we feel as individuals and how we formulate and explain that experience.

Stories may be as old as time itself, but they are as important today as ever. Narrative has direct relevance for the policy options we favour and the people we choose to formulate and implement them. We are seeing time and time again in the current political context that facts do not speak for themselves. They need someone to give them a voice by crafting the narrative.

Unfortunately, some populists do this very well. The narrative of the populists is very straightforward. They play on people’s fears and emotions, offering a simple explanation for and simplistic solution to complex problems.

For populists there is always someone out there to blame. They exploit people’s sense of injustice, loss of trust and feelings of betrayal. They use action-oriented but nebulous slogans like take back control or close the borders to undue influences.

It may be hard for us to admit it, but these are empowering narratives, promoting the idea that the person who hears them can do something. It makes them feel part of the story. It connects with their emotions and values.

So we need an empowering narrative too. One that connects with people and brings them together around common values of inclusiveness, fairness and solidarity.

So, what might a new, empowering narrative look like? One that moves people and leaders towards more inclusive and sustainable growth models and that builds a caring world. We need a narrative that champions values which may be difficult to measure but which are integral for well-being, opportunities and outcomes – fairness, trust, cohesion, a sense of solidarity, community and belonging.

This empowering narrative should be based on the best facts and science available and should contribute to the global effort to produce a new social contract that brings back hope and trust.

At the OECD we are making the call to turn this analysis into action, but this will require a re-engineering of the institutional settings in OECD economies, getting rid of silos and having a holistic approach for the well-being of people, that is multidimensional.

We are bringing an array of new tools to help policymakers do this. Just last year the OECD produced the Framework for Policy Action on Inclusive Growth, including detailed recommendations and a dashboard of 24 inclusive growth indicators to monitor progress over time.

It’s not just about GINI co-efficient, which is important, but does not tell you everything. Let’s look at the bottom 20% to the bottom 80% and see how that figure evolves.

We need to look at gender gaps, not just in income and other outcomes, but also in emerging areas like digital skills. We need to tackle gender stereotypes and understand better how they are perpetuated by the media, especially social media.

We need to look at how easy it is for children aged 0 to 5 years to access high quality education and let’s look at how socio-economic background affects school performance and let’s measure socio-emotional skills and well-being amongst students, not just cognitive skills.

This is one of the important directions in which our Programme for International Student Assessment (PISA) is moving, in particular with the Global Competence Framework, because we understand that it’s not just about what you know, it’s about your adaptability, your flexibility, your critical thinking, your ability to tell fact from fiction, detect fake news and to cope with pressures from social media, for example, particularly in the case of girls.

There are concrete actions which can make a huge difference.  Like significant investment in early childhood education and care, or to mention another area in education, like putting the best, most experienced teachers in the toughest schools or using gender neutral textbooks.

To promote fairness and ensure the services have the resources to function effectively and ambitiously, we have to take measures to ensure top earners pay their fair share of tax. This is an area where the OECD has been a world leaders, with our Common Reporting Standard for Automatic Exchange of Tax Information; almost 100 jurisdictions have now commenced exchanging automatically, returning 93 billion euros to public coffers.

The OECD’s Base Erosion and Profit Shifting (BEPS) project has also been a game-changer for tackling tax avoidance and evasion, when you consider that annual global revenue losses from base erosion and profit shifting amount to between 100 billion and 240 billion US dollars. And that’s the conservative estimate!

So everyone has to pay their fair share, but if we are to succeed in shaping the empowering state, we also need business on side, not just as tax payer, but as an advocate and agent for inclusive growth.

This is why we recently developed our Business for Inclusive Growth Platform (B4IG) to unite businesses and governments behind a common agenda.

These policies are helping make advance the agenda, but we need more than incremental change, more than tinkering at the edges of the status quo. Meaningful progress will require a re-engineering of the institutional settings in OECD economies, getting rid of silos and having a holistic approach for the well-being of people, that is multidimensional.

The OECD is bringing an array of new tools to help policymakers do this. Just last week, NAEC convened some of the world’s finest experts to show the OECD policy community how network analysis, agent-based models, machine learning and other state-of-the art techniques could help to improve their policy advice.

It is deeply encouraging to see that so many people across the world are interested in what we are doing, with 800,000 viewers following the seminar, which we livecast online.

This demonstrated, including to our own Members and Directors, that the work of NAEC goes to the heart of what our citizens need and the radical change so many of them are asking for.

NAEC can federate and focus this positive energy for change. It has already changed the face of the OECD, but this is just the beginning. With your ideas, your help and support we can grow and empower NAEC to reach more people and centres of decision-making power and influence.

I very much look forward to hearing over the course of this conference how we can work together to design, develop and deliver new approaches to economic thinking and acting.

Thank you.

[i] “In model pathways with no or limited overshoot of 1.5°C, global net anthropogenic CO2 emissions decline by about 45% from 2010 levels by 2030 (40–60% interquartile range), reaching net zero around 2050 (2045–2055 interquartile range).” From https://www.ipcc.ch/site/assets/uploads/sites/2/2018/07/SR15_SPM_version_stand_alone_LR.pdf

[ii] https://public.wmo.int/en/media/press-release/wmo-confirms-past-4-years-were-warmest-record

[iii] https://www.bbc.com/news/science-environment-46347453

[iv] http://www.oecd.org/gov/trust-in-government.htm

[v] In-house calculations, TAD, 2018

[vi] ITU (2018), “New ITU statistics show more than half the world is now using the Internet”, December 6, https://news.itu.int/itu-statistics-leaving-no-one-offline/

[vii] Going Digital: Shaping Policies, Improving Lives (OECD, 2019) p.38

Launch of “Under Pressure: The Struggling Middle Class” Report at the UN Headquarters

Remarks and presentation as delivered at the joint UNDP-OECD Launch of the “Under Pressure: The Squeezed Middle Class” Report in New York City on 10 April 2019.

Slide1

Ladies and Gentlemen,

I am delighted to kick start this panel on the “The Squeezed Middle Class” and I’d like to thank UNDP for hosting this event.

As the Secretary-General emphasized, the aspiration to join the middle classes has been a powerful engine for social mobility. The presence of a strong and prosperous middle class supports healthy economies and societies.

At the global level, the middle class has been doing well.

Slide2

This chart (the so-called “Elephant curve”, by Branko Milanović) shows real income growth for the global middle-income class over time.

Real income growth was strongest around the 40th to 60th percentile of the world distribution.

The rise of the middle of the world income distribution was driven mainly by very strong economic growth in large countries such as China, India and Indonesia. In Latin America, the rise of the global middle-income class has been associated with an increase in years of schooling, labour market formalisation, female labour participation and family and demographic dynamics.

However, you can see on the graph the very small rise experienced by middle-income households around the 85th to 90th percentile of the world distribution – i.e. mostly households in OECD countries.

Slide3

In this graph showing income growth by income position over the last three decades, you can see the median incomes and the bottom 20-40% lagging far behind the top 10%. The bottom 10% fare even worse, and have barely recovered from the crisis.

As the Secretary General mentioned, the report identifies three main challenges faced by the middle class in OECD countries, which are putting them under pressure.

These are unfairness, expensiveness and uncertainty.

Firstly, we turn to the perception of unfairness. This is a source of anger for many citizens, as we have seen play out on the streets, on social media and in ballot boxes.

This feeling of unfairness is justified. As you can see on the graph, the income of the middle classes have grown a third less than those of households in the top 10% of the distribution over the past three decades.

It has also become more difficult for younger generations to make it to the middle class.

Slide4

This slide shows the relative size of the population who are in the middle income group at age 20-30 for 3 generations: baby boomers, generation X and millennials.

As you can see, the middle-income group has grown smaller with each successive generation: 70% of the baby boomers were part of the middle class in their twenties, compared to 64% of generation X and 60% of the millennials.

As well as unfairness, the report identifies rising costs associated with the middle class lifestyle as a further challenge pressuring the middle class. For example, middle income households spend around one-third of their disposable income on housing, up from around a quarter in the 1990s.

Slide5

This chart shows the number of years it takes a median income household to buy a 60 square meter flat (or 645 square foot). It has increased from 6.8 years in 1985 to 10.2 in 2015. This means that a family of four earning the median income would need to save all its income for 10.2 years in order to buy this appartment.

Housing is more than just a standard consumption good. In many countries, being middle class is traditionally associated with owning a home, so soaring house prices have touched on the very meaning of being part of the middle class. Rising house prices also hinder upward social mobility and labour mobility towards the most dynamic urban areas.

It’s not just housing that has become more expensive.

Slide6

As you can see in this chart, the cost of education and healthcare has also risen faster than inflation.

As living costs rise and expenses increase faster than incomes, the middle class are being tightly squeezed.

Slide7

Half of middle-income households struggle to make ends meet and four in ten are financially vulnerable, meaning they are in arrears or unable to cope with unexpected expenses or sudden falls in income.

Last but not least, the third challenge for the middle class highlighted by the report is labour market instability and uncertainty.

Many middle income workers worry that their jobs may be destroyed by the digital transformation. And, unfortunately, these fears are justified.

Slide8

This chart shows the share of workers in occupations that is at high risk of automation by income class. One-in-six current middle-income workers are in jobs that are at high risk of automation, a risk much closer to that of low-income (one-in-five) than that of high-income workers (one-in-nine).

Slide9

In addition to diagnosing the squeeze on middle income households and the risks that they face, the report also makes policy recommendations to address the sense of unfairness, the expensiveness, and uncertainty affecting the middle class.

The main tool to foster fairness is the tax and benefit system.

In many countries the income tax system could be made more progressive, in particular for top income earners, and fairer for the middle class.

More generally, the tax burden should be shifted from labour to broader bases, including income from capital and capital gains, property and inheritance. And there should be efforts to fight tax avoidance and tax exemptions that tend to benefit wealthy individuals and corporations.

To address the growing expensiveness of the middle class lifestyle, encouraging the supply of affordable housing is essential. Targeted grants, financial support for loans and tax relief for lower middle-income home buyers will help.

To tackle labour market insecurity, policy makers need to offer a wider range of learning opportunities from early childhood education to vocational education. They should also target more and innovative adult learning programmes at people employed in mid-skill jobs.

Extending social insurance and collective bargaining coverage to non-standard workers will also be important to provide social protection and good working conditions for middle-income households in a changing world of work.

I very much look forward to hearing the views of my fellow panelists on all these issues.

Thank you