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The Framework for Policy Action on Inclusive Growth

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The Framework for Policy Action on Inclusive Growth Meeting of the OECD Council at Ministerial Level Paris, 30-31 May 2018 THE FRAMEWORK FOR POLICY ACTION ON INCLUSIVE GROWTH This document is published under the responsibility of the Secretary-General of the OECD and does not necessarily reflect This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, the official views of OECD Members. to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The Framework for Policy Action on Inclusive Growth 2 │ Contents Part I. Executive Summary .................................................................................................................. 6 1. Main trends ........................................................................................................................................ 7 1.1. The global upswing provides an opportunity to set the foundations for sustainable growth that benefits all ............................................................................................................................................ 7 1.2. Opportunities for low-income groups are worsening ................................................................... 7 1.3. There is scope to improve business dynamism ............................................................................. 8 1.4. Digitalisation has not yet materialised into broad-based productivity growth ............................. 9 1.5. High levels of inequality have negatively affected confidence in markets, and could further weigh on long-term growth and macroeconomic stability ............................................................................. 9 2. New policy approaches .................................................................................................................... 10 2.1. The focus on stronger productivity growth is necessary, but may not be sufficient to sustain economic growth that benefits all ...................................................................................................... 10 2.2. Growth and inclusiveness cannot be achieved by governments alone ....................................... 11 2.3. The opportunities to grow at a global level can be leveraged by coherent domestic and international policies .......................................................................................................................... 13 3. The framework for policy action on inclusive growth ................................................................. 14 3.1. Key dynamics for policy action on inclusive growth ................................................................. 14 3.2. Dashboard of inclusive growth indicators .................................................................................. 20 3.3. Potential use of the framework for policy action on inclusive growth ....................................... 23 3.4. Reviewing the social contract in the context of a global economy ............................................. 26 References .......................................................................................................................................... 37 Part II. Analysis Underpinning the Framework for Policy Action on Inclusive Growth ............. 39 1. Sustain growth that benefits all ...................................................................................................... 40 1.1. Charting growth outcomes for people ......................................................................................... 41 1.2. Key dynamics and policies to enhance inclusive outcomes from growth .................................. 58 References .......................................................................................................................................... 69 2. Support business dynamism and inclusive labour markets ......................................................... 72 2.1. Jobs, productivity and equality in the face of digitalisation and trade ........................................ 73 2.2. Policies to enhance inclusive markets ......................................................................................... 90 References ........................................................................................................................................ 117 3. Invest in people and places left behind, providing equal opportunities ................................... 122 3.1. Trends in key opportunity and future prosperity outcomes ...................................................... 123 3.2. Policies to enhance opportunities and foundations for future prosperity .................................. 143 References ........................................................................................................................................ 159 4. Build efficient and responsive governments ................................................................................ 163 4.1. Inclusive policy-making............................................................................................................ 164 4.2. Effective governance of inclusive growth agendas ................................................................... 176 References ........................................................................................................................................ 186 THE FRAMEWORK FOR POLICY ACTION ON INCLUSIVE GROWTH For Official Use │ 3 Figures Figure 3.1 The Framework for Policy Action on Inclusive Growth...................................................... 15 Figure 3.2 Tracking progress by inclusive growth indicator ................................................................. 23 Figure 3.3 OECD trends by indicator: Growth and ensuring equitable sharing of benefits from growth28 Figure 3.4 OECD trends by indicator: Inclusive and well-functioning markets ................................... 29 Figure 3.5 OECD trends by indicator: Equal opportunities and foundations of future prosperity ........ 31 Figure 3.6 OECD trends by indicator: Governance .............................................................................. 33 Figure 1.1Growth in real median disposable income ............................................................................ 41 Figure 1.2 Growth in GDP per capita and real median disposable income ........................................... 42 Figure 1.3 Decoupling between labour productivity and wages ........................................................... 46 Figure 1.4 Labour income share evolutions .......................................................................................... 47 Figure 1.5 Trends in labour income share evolutions ........................................................................... 48 Figure 1.6 The ratio of median to average wages has declined ............................................................. 48 Figure 1.7 Wages of top income earners diverged from the average and median ................................. 49 Figure 1.8 Income share of the top 1% .................................................................................................. 50 Figure 1.9 Gini coefficient of disposable income .................................................................................. 51 Figure 1.10 Top and bottom wealth inequality...................................................................................... 51 Figure 1.11 Wealth shares of top percentiles of the net wealth distribution ......................................... 52 Figure 1.12 Change of mean net wealth between 2006 and 2016 or latest ........................................... 54 Figure 1.13 Regional disparities in mean disposable household income .............................................. 55 Figure 1.14 Change in disposable income regional disparity ................................................................ 55 Figure 1.15 Inequalities grow when regions fail to catch up ................................................................. 56 Figure 1.16 Income Gini index by cohort and age group ...................................................................... 57 Figure 1.17 Income inequality at the same age has increased from one generation to the next ............ 58 Figure 1.18 Average wages and productivity in the best firms and the rest, 2001=100 ....................... 59 Figure 1.19 Trends in collective bargaining coverage and trade union density .................................... 60 Figure 1.20 Redistribution has declined in OECD countries since mid-1990s ..................................... 63 Figure 1.21. The redistributive effect of transfers has declined in OECD countries ............................. 64 Figure 1.22. The tax burden on savings varies widely by asset type..................................................... 65 Figure 1.23. Taxes on income have risen since the crisis, while corporate taxes have fallen ............... 66 Figure 1.24. Many VAT tax expenditures provide more support to high income households .............. 67 Figure 2.1 Declining business dynamism across 20 OECD and non-OECD economies ...................... 74 Figure 2.2 Business dynamism and productivity growth ...................................................................... 75 Figure 2.3 Changes in the composition of firms in the economy .......................................................... 75 Figure 2.4 Diffusion of selected ICT tools and activities in enterprises
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