Secretary-General of the Organisation for Economic Co-operation and Development (OECD)
The OECD welcomes the priorities of the German Presidency of the EU, which address the future of work, economic and upward convergence in Europe and human rights and decent work in global supply chains. The COVID-19 crisis brings new challenges for achieving these goals, but also highlights the importance of these areas and calls for reinforcing the engagement between Germany, the EU and the OECD.
Germany continues to take the lead in discussions around the future of work
Germany has been at the forefront of discussions around the future of work, notably with Industrie 4.0, and its Strategie Künstliche Intelligenz (Artificial Intelligence Strategy), and it has been instrumental in bringing these issues to the top of the international policy agenda. During its Presidency of the G20 in 2017, Germany made important strides putting the future of work on the G20 agenda, including through the adoption – by G20 Employment and Labour Ministers – of a set of priorities on the future of work. Leaders recognised the need to ‘educate and train people with the necessary skills for the future of work, the importance of opportunities to re- and upskill throughout their working lives, and assist them to successfully adapt to change, in accordance with each member’s domestic social framework’. The OECD and Germany worked closely together on this agenda and the OECD provided the analytical input for the technical debate.
This legacy was taken up by the Presidency of Argentina in 2018, which made the future of work a cross-cutting theme and endorsed a menu of policy options for the future of work. It was further built upon by the Presidencies of Japan (2019) and Saudi Arabia (2020). The Saudi Presidency has prioritised adapting social protection to changing patterns of work. I congratulate Germany for these efforts in raising the level of ambition at the international level, and Germany can count on the OECD’s support on this topic under the German EU Council Presidency, and explore synergies with the G20 and G7 agendas.
The world of work is changing profoundly
Rapidly changing technologies, including artificial intelligence but also new business models, ageing societies and the evolution of international connections, are changing our societies and labour markets. They bring exciting opportunities for creating new and better jobs, boosting productivity and efficiency and raising living standards.
They also bring new risks such as precarious work and job loss through automation. Moreover, as highlighted in the OECD Employment Outlook 2019, the risks and benefits that megatrends bring will not be equally distributed. Groups that have already been left behind in the labour market are likely to bear the brunt of the adjustment costs, while groups that are already better off are best placed to benefit from new opportunities.
The COVID-19 crisis is exacerbating many pre-existing challenges. Overnight, strong labour markets have suffered the largest increases in unemployment benefit claimants on record. The crisis is affecting the most vulnerable in particular and it is laying bare gaps in the fabric of our social protection systems. More than ever, it will be important that countries support individuals through these difficult times: first, by protecting jobs and providing income support, but later also through other measures (e.g. training) to ensure that laid-off workers can return to work as soon as the epidemiological situation allows.
Promoting a future that works for all
Ensuring that the future works for all will require a whole-of-government approach that targets interventions on those who need them most. Governments should ensure that adult learning, social protection, labour market regulation and social dialogue continue to achieve the goals for which they were intended.
Adult learning and skills, in particular, will play a critical role in shaping the future of work. The extent to which individuals, firms and economies can benefit from the changes in the labour market will depend on the readiness of each country’s adult learning system to help people develop relevant skills.
„Ensuring that the future works for all will require a whole-of-government approach that targets interventions on those who need them most. “
In 2016, the OECD prepared a report on the future of work and skills – in support of Germany’s G20 Presidency priority to shape the future of work through skills development. Our report put forward policy priorities for governments that mitigate the disruptive impact of megatrends while enhancing opportunities for workers to benefit from them. As shown in the 2019 OECD report Future-Ready Adult Learning Systems, all countries have room to improve, although for some the challenges are bigger and more pressing than for others. Germany has recognised the importance of adult learning to address the challenges posed by digitalisation and launched a Nationale Weiterbildungsstrategie (National Skills Strategy) in 2019. Efforts should even start at a lower rung on the education ladder. Key competencies such as adaptability and self-regulation, as well as socio-emotional skills, values and open-mindedness, should be part of the early efforts to equip individuals to cope with a highly changeable and interconnected world.
The OECD will continue to work with Germany, the European Union and global fora like the G20 and G7 to improve international efforts to shape an inclusive future of work. This includes adapting our policy tools to the new digital reality.
New challenges to convergence
Despite rapid technological change, rising education levels and increasing participation of firms and countries in global value chains, productivity growth has slowed across nearly all advanced economies. Following the financial crisis – and before the COVID-19 crisis – productivity growth was particularly slow in some Southern European countries and so-called lagging regions. Moreover, several countries experienced a slowdown in real average wage growth relative to productivity growth, which has been reflected in a falling share of wages in GDP. At the same time, growth in low and middle wages has been lagging behind average wage growth, contributing to rising wage inequality. Technological change and the exposure to income and employment risks as a result of the COVID-19 crisis risk further widening these divides.
Further convergence will require action on multiple fronts
Keeping Europe’s convergence machine going requires action on multiple fronts. Fostering productivity growth in all European countries and regions is the first priority. However, just re-igniting productivity growth will not be enough as productivity gains do not necessarily translate into improvements in living standards. A good set of European and national policies can help ensure that they do.
Stronger competition in some markets will reduce the excessive gains of a few, while benefiting all consumers and opening new opportunities for businesses. Investment in skills will ensure that the fruits of technological progress are broadly shared. Active labour market policies help workers find new and better jobs. Adequate minimum wages and well-functioning collective bargaining systems, together with effective minimum income schemes and balanced employment protection rules, will also help ensure that benefits are spread fairly throughout society.
Promoting sustainable growth and improving the economic and social well-being of people has been the raison d’être of the OECD since its foundation. The European Pillar of Social Rights, the recent communication on a strong social Europe for just transitions, the directive on posted workers, the new instrument for temporary support to mitigate unemployment risks in an emergency (SURE) and the ongoing work on fair minimum wages are clear signs that the EU is committed to building a fairer and more united Europe. Moreover, the COVID-19 crisis represents a unique opportunity for Europe, and in particular the euro area, to consolidate its economic and financial architecture, and to promote Europe as the engine of “shared prosperity”. Germany’s Presidency of the Council of the European Union can ensure that this happens, building on the unique success of its reunification and its role as the leading economic power in the European Union.
Germany is an influential advocate for promoting human rights and decent work in global supply chains
Germany put sustainable and inclusive supply chains at the core of its G7 Presidency (2015) and its G20 Presidency (2017). At the G20 Labour and Employment Ministers Meeting in Bad Neunahr in 2017, Ministers committed to action on eradicating modern slavery, forced labour and human trafficking, and to end child labour in all its forms. They mandated international organisations, including the OECD, to provide proposals on how to accelerate actions, which were delivered last year under Japan’s Presidency. The OECD, with its due diligence work and in partnership with champions like Nobel Peace Prize Laureate Kailash Satyarthi, has made the safety of children a priority. The OECD’s Business for Inclusive Growth Initiative (B4IG), launched through the French G7 Presidency, also incorporates the fight against child slavery.
Almost all EU governments adhere to the OECD Guidelines for Multinational Enterprises while under Germany’s presidency, G20 leaders committed to fostering these Guidelines and welcomed others to follow. A range of international tools to help business implement those standards is also in place, notably the OECD Due Diligence Guidance for Responsible Business Conduct (RBC) and associated sectoral guidance, as well as access to non-judicial grievance mechanisms such as the National Contact Points (NCPs) for the MNE Guidelines.
Significant scope remains for strengthening human rights and decent work in global supply chains
Many of the existing policy tools are still not sufficiently known or implemented by governments, while the voluntary implementation of global standards of RBC by companies also remains weak. As a result, serious human rights abuses are still present across global supply chains.
There is an increasing expectation that governments support the implementation of international standards through policies involving a mix of voluntary and mandatory, domestic and international measures. The COVID-19 crisis is having unprecedented impacts on workers and on companies’ own operations or in their supply chains, highlighting the need to protect human rights and decent work as business and government responses to the crisis continue to intensify. For a company, observing RBC standards and implementing due diligence in its response to the COVD-19 crisis will help ensure that its business decisions avoid and address potential adverse impacts on people and the planet, including in its supply chain.
For governments, ensuring that their response to the COVID-19 crisis is guided by RBC standards is essential to ensure that measures do not exacerbate the adverse socio-economic impacts of the crisis, but rather incentivise companies to mitigate any potential harms and maximise the positive impacts of their response.
Government measures on RBC should be reflected in trade agreements, public procurement policies, development aid and export finance, but they can also serve as a standard to condition government support to businesses in response to the COVID-19 crisis, so that benefits are not creating further negative impacts nor being abused. EU governments should also ensure that their National Contact Points (NCPs) effectively provide secure non-judicial avenues to raise complaints against irresponsible business practices.
„Just re-igniting productivity growth will not be enough as productivity gains do not necessarily translate into improvements in living standards. A good set of European and national policies can help ensure that they do. “
Mandatory due diligence expectations
With this in mind, it may be time for the EU to consider introducing stronger incentives, including regulation requiring companies to carry out due diligence.
If introduced, mandatory regulation should align with standards like the OECD Due Diligence Guidance for RBC. This would contribute to a level playing field and help companies to streamline cross-border processes and avoid conflicting laws and unnecessary compliance costs. Furthermore, RBC and due diligence in global supply chains is inherently connected to appropriate environmental protection, which could drive a “just transition” and support the vision for a European Green Deal.
The OECD will continue to provide its expertise to support Germany and the EU in leading global efforts to promote RBC, human rights and decent work in global supply chains.