OECD launches new policy framework to support sustainable economic recovery
Countries emerging from pandemic-driven economic crises can steer their economies toward a more sustainable future by focusing policy reform on resilience, facilitating reallocation of resources, and better support for people adapting to change, according to a new report from the OECD.
“The pandemic is a painful reminder that the nature of our past growth was often unsustainable and left many people behind,” said OECD secretary-general Angel Gurría. “The recovery is an opportunity to set our policies right, to achieve growth that is stronger, equitable, sustainable and more resilient.”
This year’s edition of the annual report, Going for Growth, was published today. It offers three pillars to encourage sustainable economic recovery across the globe, as well as specific country notes for OECD members and some partner states.
The report also calls for “international policy action” in areas such as healthcare, vaccines, climate change, trade and taxation of multi-national companies.
A three-pronged approach
“Governments reacted [to the pandemic] with emergency measures, unprecedented in size and scope, to cushion the shock,” the report said. “Yet the measures will not fix the underlying structural problems which left us vulnerable in the first place.”
The first pillar of the OECD’s policy reform framework focuses on “building resilience and sustainability”. It aims to tackle deep-rooted insecurities highlighted by the pandemic in areas such as “supply chains of medical goods, uneven access to social safety nets and climate change.”
Policy recommendations include increasing healthcare and social benefits coverage. The report noted, for example, that gaps in social security are partly linked to “dualism” in labour markets between people with permanent work contracts and those on with other kinds of working arrangements.
Looking further into the future, the report also recommends incentivising the private sector to behave more sustainably. “This can be achieved by setting clear carbon price trajectories, and by phasing out of fossil fuel subsidies and tax expenditures,” it said.
People and productivity
The second pillar – “facilitating reallocation and boosting productivity” – warns that the post-pandemic recession “risks leaving considerable economic and social scars.”
“Past experience shows that labour market entry during a downturn can leave lasting scars on the earnings and employment prospects of young workers,” the report noted. “Scarring may also emerge from school closures and the switch to online learning.”
Policy measures to address these issues include reducing barriers to entry into the market for new businesses, particularly “in service sectors with large pent-up demand and low entry costs,” the report noted.
Supporting workers to move around “can increase the speed of employment gains in difficult times,” it adds. For example, the report suggests, cutting transaction taxes on house purchases can promote mobility.
Digital transformation
The final pillar – “supporting people through transitions” – focuses on increased digitalisation brought on by the pandemic. “On the one hand, this brings opportunities to revive productivity growth via technological adoption and within industry reallocation,” the report said.
“On the other hand, it is reshaping work relations and practices in a manner that aggravates digital divides as some do not have access and skills to fully benefit from such opportunities,” it added.
Policies recommended to cope with this dilemma include reforming job retention schemes — such as the “furlough” scheme instituted in the UK or the US Paycheck Protection Programme.
Such reforms might include requiring organisations increasingly to contribute to the schemes’ cost, so that they are only sustaining viable jobs. Better training for workers on the schemes is also suggested, and the report also separately recommends that governments introduce larger-scale retraining schemes.
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