OECD18 THEMES: ‘Structural reform required to address the benefits of global economic growth’

By Sean Curran (Curtin University)

While the economic outlook of OECD nations is more favourable than it’s been in years, the benefits of this growth are not being felt by workers. Angel Gurria, Secretary-General of the OECD, has called on governments to introduce structural reforms designed to address this issue.   

On a larger scale, the state of the global economy is faring well: GDP growth among OECD nations has reached around 4% (a figure close to pre-crisis averages) while unemployment approaches its lowest level since 1980. Fiscal and monetary policy, such as low interest rates and fiscal easing, have strengthened this recent growth and the OECD expects this to also bring about “moderate rises in both wage growth and inflation”.

However, these benefits are not being felt. While there are signs of improvement on a broad scale, this post-crisis rebound is not sufficiently trickling down to workers. Jobs have been created, but the quality of these jobs has not been adequately addressed. Compared to pre-crisis levels in Australia, poverty among workers has increased, real hourly wages have decreased, and labour insecurity has risen. 

Gurria warned there could be worse to come. As geopolitical tensions become more fraught surrounding the US and potential trade wars, those most at risk are those with either high household debt or high house prices. There is little room globally for manoeuvring when it comes to monetary and fiscal policy and so any adjustment in response to global trade wars would have disastrous effects on these at-risk individuals. 

In an effort to counteract any impending fallout surrounding combative trade policies, Gurria called for structural change. Governments have been called upon to do more, to develop policies addressing the retraining of workers as their industries disappear. Such policies are long-needed in Australia where long-term unemployment has doubled since 2007, representing a significant skills depreciation. This, coupled with Gurria’s warnings regarding high house prices and household-debt, highlights Australia as a country which needs to pay particular attention to recommendations speaking to these concerns. 

While in some macro areas the global economy is heading in the right direction, it is clear the post-crisis recovery has not sufficiently repaired the living conditions of the workers it most disrupted. As the world limps back to pre-crisis economic conditions, pro-worker structural reform and reskilling policies are necessary to ensure the most at risk are insulated from any upcoming fallout brought about through high-debt and aggressive trade policy.