Pier Carlo Padoan, deputy secretary general and chief economist at the Organisation for Economic Cooperation and Development (OECD), who today was appointed Italian finance minister in the new government of Matteo Renzi, warned this week that "faster job creation is unlikely to be enough to bring employment rates back to pre-crisis levels, let alone to levels that would offset the impact of population ageing in advanced economies."
Padoan was commenting in the OECD’s latest Going for Growth report, which was launched in Sydney on Friday, at the start of a meeting of the finance ministers and central bankers of the G-20: a group comprising the world's 19 leading developed and emerging economies.
"The widespread deceleration in productivity since the crisis could presage the beginning of a new low-growth era," Padoan said. While the global economy’s momentum remains sluggish, heightening concerns that there has been a structural downshift in growth rates compared with pre-crisis levels, he said, "these concerns, already prevalent among advanced OECD countries for some time, now encompass emerging-market economies and are fuelled also by high unemployment and falling labour force participation in many countries."
“Signs of a broad-based recovery are becoming more tangible, but governments of advanced and emerging economies now face the risk of falling into a low-growth trap,” Angel Gurría, OECD secretary-general, said during the launch event in Sydney.
“Australia has focused its G-20 presidency on promoting stronger economic growth and employment while making the global economy more resilient to deal with future shocks. The structural reform recommendations the OECD puts forward today offer governments practical ways to boost productivity, lift growth, create jobs and avoid the low-growth trap,” Gurría said.
The OECD said the pace of reforms appears to have slowed somewhat but remains on average well above that observed prior to the crisis in most countries. Southern Eurozone, to a lesser extent, Central European countries have continued to be particularly active reformers in areas covered by OECD policy recommendations. This should not come as a surprise insofar as a number of these countries have been under market pressures or direct financial assistance programmes.
The think-tank for 34 mainly developed countries also said considerable action has been taken in areas such as labour market regulation, collective bargaining and welfare systems, which in the past have proved particularly difficult to reform. "Reforms of pension systems and early retirement schemes, as well as of active labour market programmes, have also ranked highly on the policy agenda in many other countries facing low employment rates."
The IMF said [pdf] this week in a report for the G-20:
Jack Lew, US Treasury secretary, told a business group meeting:
Ali Babacan, deputy prime minister of Turkey, blamed developed economies’ failure to introduce structural and financial reforms before the financial crisis that had required the easing of monetary policy that was now buffeting emerging markets: “It is now time for greater policy co-ordination,” he said.
The 'Going for Growth' report says that the
intensity of reform has remained highest in southern euro area countries like
Greece, Italy, Portugal and Spain, which are suffering from high long-term
unemployment and youth joblessness. Considerable action to reform the labour
market and break down barriers to job creation and mobility has been taken, in
particular in Spain in Portugal, which have begun growing again.
The report says that in OECD countries which face particularly rapid population ageing, such as Japan, Korea and Germany, bringing more women into the labour market and ensuring that they are fully integrated remains a key challenge.
Ireland gets a mention for "progress on bankruptcy reform and toward creating a more competitive business environment," but we Irish know too well that glacial speed change comes in Ireland, if at all.
The politicians are still trying to agree on reform of the well-heeled legal sector, which had a Troika deadline of 2011.
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