International Women’s Day: What fathers can do for gender equality

IWDMonika Queisser, Willem Adema and Chris Clarke, OECD Directorate for Employment, Labour and Social Affairs. This article is also being published by the EUROPP blog at the London School of Economics.

Prince William did it, Justin Timberlake did it, and so did David Cameron and Mark Zuckerberg. All four took paternity leave to spend time with babies George, Charlotte, Silas, Florence and Max. These trailblazers are great role models in combining family and work – at least when a new baby arrives – but men around the world are still too slow in following their example. And this despite the fact that more than half of OECD countries grant fathers paid paternity leave when a child is born; and paid parental leave, i.e. a longer period of job-protected leave open to both parents, is also available in more and more countries.

Parental leave for fathers typically lasts between two and three months and comes in different forms. Most common are “daddy quotas”, or specific portions of paid leave reserved for the father only. Some countries offer “bonus periods”, meaning that a couple may qualify for extra weeks of paid leave if the father uses up a certain period of a sharable leave. Other countries simply provide both parents with their own individual entitlement with no sharable period at all. So, in theory, more dads could be at home taking care of their kids and making it easier for both the mothers and themselves to live up to the expectations of babies and bosses.

The reality, however, looks very different. Fathers usually take a few days off right after the birth of a baby, but only the most committed and bravest use their right to longer parental leave. In many countries, fathers account for less than 20 per cent of those taking paid parental leave. Scandinavian and Portuguese men are more progressive: their share among paid parental leave users goes up to 40 per cent or more. Fathers in Australia, the Czech Republic and Poland, by contrast, shun parental leave; only about one in fifty paid leave takers is male. The most generous leave entitlements exist in Japan and Korea: a full year of paid leave is reserved just for the father – but very few men take advantage of it.

Figure 1: Fathers’ leave entitlements

IWD 1

Source: OECD

Why are we seeing so little movement in breaking up traditional gender roles? We are told that Generations X,Y and Z are looking for better balance of work and family life. So why are young fathers not even taking the days to which they are legally entitled?

Financial considerations are powerful factors in making leave decisions. Women still make about 15 per cent less than men, on average in OECD countries. So economically speaking it often simply makes more sense for fathers to continue working, especially if parental leave is paid at much lower rates than previous earnings or not paid at all. The period around childbirth is often a time of considerable stress on household budgets. Many families may feel that they cannot make that sacrifice. Arguably, neither Prince William nor Mark Zuckerberg had to lose sleep over making serious dents in family income when deciding to spend their time cuddling and changing diapers for a while.

Figure 2: Gender wage gap

IWD 2

Source: OECD

Not surprisingly, research suggests that fathers’ use of parental leave is highest when leave is not just paid but well paid – perhaps around half or more of previous earnings. The father quotas in Iceland and Sweden are relatively well paid at over 60 per cent of last earnings. Similarly, a 2007 policy reform in Germany introduced well-paid bonus months for partners; as a result the share of children whose father took leave increased by over 50 per cent in Germany between 2008 and 2013, reaching 32 per cent.

But gender norms and cultural traditions still present serious obstacles to fathers taking leave. A 2013 survey by the Korean trade unions asked Korean fathers why they decided not to take leave; it showed that more than half were worried about the negative prejudices that they would be exposed to. In France, where men account for only 4 per cent of parents claiming parental leave benefits, 46 per cent of the fathers who did not take their full leave entitlement said that they were simply “not interested”. And in all but 6 OECD countries, at least 50 per cent of people surveyed by the International Social Survey Programme believe that paid leave should be taken ‘entirely’ or ‘mostly’ by the mother; and in the Czech Republic, the Slovak Republic and Turkey a whopping 80 per cent of respondents agreed with this statement.

Finally, employers’ opinions and the environment in the company obviously play a crucial role. Some employers may regard a father taking long leave as not being committed to his job, leading fathers contemplating a longer break to fear for their career and promotion prospects. In Japan and Korea, fathers taking paid parental leave are concerned this would have negative effects on their career and their relationship with colleagues. Such workplace attitudes may be less pronounced in many other OECD countries, but even in Sweden, working in a small workplace or in one with a long-hours culture can keep fathers from using parental leave.

Public policy can provide the best conditions to enable fathers to spend more time with their children. But change needs to come both from employers and fathers themselves if we want to succeed in a better sharing of paid and unpaid work between men and women. This is not only about promoting gender equality at work and at home; it is also about improving the quality of life – for men, women and children.

Useful links

OECD Gender Portal

OECD work on families and children

OECD work on social policies and data

OECD work on gender and development

Understanding and Managing the Unequal Consequences of Environment Pressures and Policies

NAECShardul Agrawala and Rob Dellink, OECD Environment Directorate

The consequences of degradation of environmental quality as well as the consequences of environmental policies are typically unevenly distributed. In general, poorer countries and lower income households are more severely affected by environmental degradation and at the same time have less capacity to adapt.

Outdoor air pollution kills more than 3.5 million people a year globally (WHO, 2012). Poor health caused by air pollution is especially problematic for children and the elderly in major emerging economies. Between 2005 and 2010, the number of premature deaths in China and India increased by 5 and 10 percent, respectively. Road transport is a significant source of air pollutant emissions, and rapid growth in traffic has outpaced the adoption of tighter regulations, leading to increased vulnerability of the urban population. The welfare costs of road transport alone are projected to amount to around USD 1.7 trillion in the OECD countries, USD 1.4 trillion in China and USD 0.5 trillion in India (OECD, 2014).

Despite the role of international trade in smoothing the economic costs of environmental feedbacks across regions, OECD estimates suggest that climate change impacts will be substantially more severe in most countries in Africa and Asia than in most of Europe and America. Despite large regional differences, market consequences from climate change are projected to be negative in almost all regions, and the economic consequences of greenhouse gas emissions are unavoidable and enduring for a century or more. Changes in crop yields and in labour productivity are projected to affect the economy most strongly, each amounting to several percent of GDP loss in the most vulnerable regions. Moreover, there are significant non-market impacts as well as risks of crossing essential tipping points and moving towards a climate system with the potential for very severe impacts on regional economies over the longer term.

In OECD countries the sectoral shifts in employment, resulting from global climate mitigation policies, are substantially larger than the effect on overall employment. Moreover as skill requirements differ across sectors, skills mismatches could appear thereby significantly increasing the transition costs associated with these policies, and increasing inequality between skilled and unskilled workers.

Mitigation and adaptation policies can reduce the negative impacts of climate change globally, yet the costs of these policies will not be borne by all sectors and regions proportionally to their expected benefits, that is they are unequally distributed. These differential impacts pose key political economy challenges to policy reform.

Distributional aspects are often used as an argument against implementing or reforming environmental policies. A key economic question then becomes whether policy reforms can be designed in such a way that they are not regressive. For instance, OECD work finds large differences in regressiveness of different energy taxes between energy carriers and between regions in 21 OECD countries.

The case of Indonesia is particularly illustrative: the country is facing severe environmental challenges, not least from climate change and air pollution, and until very recently had significant subsidies for fossil fuel consumption. As part of the NAEC initiative, an innovative analytical framework was developed to simultaneously assess the macroeconomic, environmental and distributional consequences of energy subsidy reforms in Indonesia. The study found that if Indonesia were to remove its fossil fuel and electricity consumption subsidies, it could record real GDP gains of around half a percent in 2020, while also substantially reducing a range of energy-related emissions. The simulations showed that replacing the fuel subsidies with cash transfers, and to a lesser extent food subsidies, can make reform more attractive for poorer households and reduce poverty. Food subsidies tend to create other inefficiencies, however. Mechanisms that compensate households via payments proportional to labour income were, on the contrary, found to be more beneficial to middle and higher income households and increase poverty. This is because households with informal labour earnings, which are not eligible for these payments, are more represented among the poor.

Indonesia has reformed its subsidies to fossil fuel consumption providing real world evidence of what policy reform can achieve. The conclusion from OECD work – confirmed in practice by the way Indonesia went about its reforms – is that the design of any redistribution scheme will be crucial in determining the overall distributional performance of the reform. Well-designed policies with adequate accompanying measures can ensure a triple win on economic efficiency, environmental effectiveness and reduced inequality. The right policy mix is very sensitive to local circumstances, but the OECD’s analysis confirms that inequality concerns do not have to hamper environmental policy.

Both environmental pressures and environmental policies clearly affect different countries and different groups within them unequally. These differences are essential to take into account in the design of more targeted and more equitable policies, but in order to do so measurement and quantification of these differential effects is an important first step. The tools and frameworks developed in this area particularly as part of the NAEC exercise are an important methodological contribution in this regard.

Useful links

 Making Reform Happen in Environmental Policy

OECD work on environmental policy tools and evaluation

The productivity and equality nexus: is there a benefit in addressing them together?

NAECGabriela Ramos, Special Counsellor to the OECD Secretary-General, Chief of Staff and G20 Sherpa

Productivity growth has slowed since the crisis and inequality has been getting worse. Could they be influencing each other?

The linkages between the productivity and inequality challenges are still to be fully explored. Each may have its own solution, but there is also good reason to think that there is a nexus between them. For instance, OECD evidence suggests that wage dispersion between firms, which reflects diverging rates of productivity growth, has contributed to rising inequality of incomes between workers. At the same time, the increased prevalence of knowledge-based capital and digitalisation may have unleashed winner-take-all dynamics in key network markets, which in turn may have led, in some instances, to an increase in rent-seeking behaviour.

OECD research has highlighted how the rise in inequality over the last three decades has slowed long-term growth through its negative impact on human capital accumulation by low income families.

Since the crisis, stalled business dynamics have seen resources, including workers, being trapped in firms where they are not using their full potential. In particular, individuals with fewer skills and poorer access to opportunities are often confined to precarious and low productivity jobs or – in many emerging countries – informal ones.

In the spirit of our integrated framework on inclusive growth and our New Approaches to Economic Challenges (NAEC) initiative, at the OECD we believe that our efforts to address productivity and inequality challenges could have a better chance of succeeding if we looked at the synergies and trade-offs emerging from policies to address them. This means designing policies for each of these two core issues bearing in mind how they might impact one another and avoiding the “silo” approach through more effective and comprehensive policy packages.

We must also learn from previous policies. Traditional measures to boost productivity in competition, labour market, or regulatory frameworks would allow for the reallocation of resources to more productive activities, or for increasing productivity in specific sectors. But this may have an adverse impact on inequalities of income and opportunities, as workers better equipped to cope with change are usually those with higher skill sets. For instance, in the past, the drive towards flexible labour markets has benefited many employers, and particularly the most productive firms that have gained from an improved allocation of labour resources. But increased flexibility has also brought a greater prevalence of non-standard work. Recent OECD work on job quality highlights how low skilled individuals can be trapped in precarious low wage jobs, and receive less training.

Our approach to designing policies to ensure that individuals, firms and regions that are left behind can fulfil their full potential and contribute to a more dynamic economy, draws on OECD work from diverse policy areas. It starts from the Inclusive Growth agenda, by focusing on well-being as an ultimate objective of policy. It builds on OECD productivity work via The Future of Productivity report and efforts Towards an OECD Productivity Network. It also synchronises with the Organisation’s efforts to measure productivity more accurately at a time when traditional measures are ill-adapted to account for the full effects of rapid technological change and innovation centred on knowledge based capital, the increasing prominence of the services sector, and productivity in the public sector.

The ultimate outcome is for governments to focus on the extensive range of win-win policies that can reduce inequalities while supporting productivity growth, thereby creating a virtuous cycle for inclusive and sustainable growth. This calls for distinct but complementary policy interventions at the individual, firm, regional and country levels. What this entails in practice will vary for each country depending on its circumstances. But broadly speaking, a number of policy areas are worth considering:

First, a new approach is needed to boost productivity at the individual level so that everyone has the opportunity to realise their full productive potential. Expanding the supply of skills in the population through more equal access to basic quality education is crucial, but not enough. With rapid technological change, skills need to keep up with the demands of the market to avoid the skills mismatches which have contributed to the productivity slowdown. A broad strategy is also needed to ensure a better functioning of the labour market, promote job quality, reduce informality, allow for the mobility of workers and inclusion of underrepresented groups such as women and youth, and promote better health outcomes for everyone.

Second, for people to realise their full productivity potential, businesses have to realise theirs. While heterogeneity among firms is normal, the widening dispersion in productivity levels and its implications for aggregate productivity and workers is a cause for concern. According to our productivity report, the early 2000s saw labour productivity at the global technological frontier increase at an average annual rate of 3.5% in the manufacturing sector, compared to just 0.5% for non-frontier firms. The gap was even more pronounced in the services sector. The larger the share of business that can thrive, the more productive and inclusive our economies will be. Achieving this requires a reassessment of competition, regulatory and financial policies to ensure a level playing field for new firms relative to incumbents. It also requires policies to facilitate the diffusion of frontier innovations from leading to lagging firms.

Third, policy prescriptions will be ineffective unless they take regional and local circumstances into account. Inequalities that play out in regions, like housing segregation by income or social background, poor public transport, and poor infrastructure, can lock individuals and firms in low-productivity traps. This means that some policies to promote both productivity and inclusiveness are best undertaken at the regional level.

Finally, adopting a more holistic approach to policy requires fundamental changes to public governance and institutional structure to strengthen the ability of national governments to design policy that promotes synergies and deals with trade-offs. In highly unequal societies, governments also need to address political economy issues including the capture of the regulatory and political processes by elites that benefit from the status quo, and policies that favour the incumbents.

None of this will be easy, but it is nevertheless essential. At the OECD we believe it is time to develop a better understanding of the dynamics between two of the key issues of our time – productivity and inequality – in order to build a more resilient, inclusive and sustainable future.

Useful links

OECD Inclusive Growth Initiative

OECD Centre for Equality and Opportunity

OECD Inequality webpage

OECD Future of Productivity

OECD Productivity Statistics

Turning the Tide towards Inclusiveness

NAECStefano Scarpetta, Director of the OECD Employment, Labour and Social Affairs Directorate

A rising tide lifts all boats, or so many used to think. But the evidence suggests that over the past three decades in a large number of advanced and emerging countries economic growth has disproportionally benefited people who are already relatively well-off, leaving the lower- middle-class lagging behind.

Today the average income of the richest 10% of the population across the OECD is almost ten times that of the poorest 10%. We observe also a worrying pattern: in each of the past three decades the gap has increased by one factor – it was 7:1 in the 1980s, 8:1 in the 1990s and 9:1 in the 2000s.

These averages hide large differences across countries, from a ratio to 6:1 in Nordic countries, to 19:1 in the US, almost 30:1 in Mexico and Chile and beyond 50:1 in South Africa and other emerging economies. But over the past decades we have observed a convergence towards higher levels of income inequality (although some emerging economies have managed to reduce income inequality, albeit from very high levels). The situation is even worse when we look at the distribution of household wealth. Comparable data collected for the first time by the OECD for 18 OECD countries show that the top 10% of households owned half of all total household wealth in 2012, while the bottom 40% owned a meagre 3%.

Not only do high levels of income inequality challenge social cohesion, they also tend to reproduce themselves from one generation to the next. This happens largely because they hinder the opportunities of the lower middle-class to access the same education and health opportunities as their better-off counterparts. The gap in educational outcomes between individuals from a low socio-economic background and those with median and high background increases dramatically as one moves from a more egalitarian to more unequal country. Similarly, a new set of OECD data shows that at age 25, men with university education can expect to live almost 10 years longer than men with primary education. Surely we can agree that people’s life chances should not essentially boil down to their wealth, age, gender, or place of residence.

The risks posed by such lopsided growth are evident. Our recent publication In it Together revealed that economies grow more slowly when lower earners get left behind – and we are talking about as much as 40% of the population. The rise in inequality observed between 1985 and 2005 in 19 OECD countries knocked 4.7 percentage points off their cumulative growth between 1990 and 2010.

The implication is that if we want to achieve our full growth potential, we need to promote equality of opportunities rather than just relying on redistribution of income and wealth. In all countries, and particularly in advanced ones, redistribution still greatly reduces income inequality – typically through taxes and transfers such as unemployment and other social benefits. Yet, in recent decades, the effectiveness of redistribution has weakened in many countries. It is important to put a renewed focus on it, through effective and well-targeted transfers as well as by making sure that the rich and the very rich in particular pay their fair share of taxes.

But policies also need to do more to address inequalities at their roots, ensuring that people can access high-quality education and health services while having a reasonable prospect of finding good-quality jobs, regardless of their social backgrounds.

Improving access to pre-school care and education – and its quality – for children and youth in lower-income households is a key first step in all countries. Too many young people are leaving education without basic skills, even in some of the richest countries. The proportion is put at 24% in the United States, 22% in Norway and 14% in Switzerland.

But promoting equality of opportunities is not just about education. It is also important to promote inclusion in the labour market for underrepresented groups, like women and youth. Concerning women, for example, we need to stop talking about equal pay for equal work and just make it happen. We also need to better support families in areas like parental leave and childcare to ensure that both parents can balance their work-life commitments.

The situation of young people in labour markets has become a growing cause of concern since the financial crisis struck. In 2014, 14% of youth were not working, studying or in training in the OECD, but this share reaches 25% in Italy and Greece and even higher in some emerging economies. To avoid scarring effects on their long-term employment prospects, and for the sake of intergenerational justice and social stability, our societies need to offer our young people a better deal, especially those with low skills and from migrant families. To tackle high youth unemployment, we need to be ambitious and use well-targeted activation strategies and measures to encourage firms to provide high-quality apprenticeships, internship programmes and training opportunities.

Moreover, only focusing on increasing the number of jobs is not enough. To make sure that growth is inclusive, countries need to ensure that good education is rewarded by access to productive and rewarding jobs; jobs that offer career and investment possibilities; jobs that are stepping stones rather than dead ends. There is a lot that labour market policies can and should do to address labour market segmentation, improve working conditions and foster skills recognition and a better match of wages with productivity.

Inevitably, policy mixes will vary between countries, responding to their individual economic and political circumstances. There are a number of win-win policies – good for growth and inclusiveness. But, equally inevitably, countries may also face trade-offs between policies to boost growth in the short-run and those to improve the distribution of growth dividends. However, given the scale of the inequality challenges we face and its impact on long-term growth, we need to exploit synergies and complementarities of policy in different areas, while addressing possible short-term trade-offs, for a better and more inclusive future.

Useful links

OECD Centre for Opportunity and Equality.

In It Together: Why Less Inequality Benefits All OECD (2015)

Rich or poor? We’re not sure…

launch-event
COPE launch event

Back in May, we asked you a simple question – are you rich or poor? For once, this question wasn’t rhetorical. Thanks to the OECD’s Compare Your Income tool, you could actually check for yourself where you stood on the income scale – rolling around in money or struggling to make ends meet.

Since the launch of Compare Your Income, more than a million people worldwide have completed the survey. And the answer we’ve all given to that question – are you rich or poor? – is absolutely clear: We’ve no idea.

In other words, if we’re rich, we think we’re poorer than we are; if we’re poor, we think we’re richer.

It’s true that these are still early findings and cover just three countries – France, Mexico and the United States. But, they do suggest that many of us have only a dim understanding of whether we’re doing better or worse than our neighbours. In France, only 1 in 6 people correctly guessed if they were high, medium or low earners; in Mexico it was 1 in 8; and in the United States it was just 1 in 10.

The people who were most likely to guess their position on the income scale correctly were middle-earners. By contrast, the people who most often got it wrong were the very highest and lowest earners. Among low earners, most underestimated just how far behind they were compared to everyone else. But the well-off, too, were almost as likely to get it wrong, often dramatically so. More than half of top earners in the U.S. and Mexico actually thought they belonged down in the bottom half of the income distribution.

 

Presumably, these top earners didn’t comprehend just how well they were doing compared with everyone else. If that’s the case, it seems to echo other research suggesting that a high income may not bring much of a sense of economic security. For example, a few years ago Boston College managed the rare feat of getting some millionaires and a couple of billionaires to talk frankly about the joys and dilemmas of being rich. Amid the findings, perhaps the most surprising aspect of being well off was that people still seemed to worry a lot about money. As Graeme Wood wrote in The Atlantic, despite sitting on assets worth tens of millions of dollars, most said “they would require on average one-quarter more wealth than they currently possess”. One heir to a vast fortune admitted that “he wouldn’t feel financially secure until he had $1 billion in the bank”.

Income perceptions aren’t the only issue under examination in the Compare Your Income survey. Among a number of issues, it also looks at people’s attitudes to how the economic pie is sliced up – what percentage of national income goes to top earners and how much should they earn?

Here, again, people’s understanding of the facts seemed to be at odds with reality. For example, French respondents believed that about 60% of the country’s income goes to the top 10% of earners. The actual figure is rather lower – around 25%. And when respondents were asked how large a share of income should go to top earners, they actually opted for a figure in excess of the reality – about 30%.

Speculating again, it’s possible here that respondents are confusing income and wealth. In extremely basic terms, income is the money you receive at the end of every week or month in your paycheque and wealth is the money that’s – hopefully – building up over time in your bank account (as well as other assets). Wealth is, indeed, spread out much more unequally than income: In OECD countries, the top 10% of wealth owners hold about half of all household income, according to In It Together, a recent OECD report.

Think you can do better than the million-plus people who’ve already taken part in the Compare Your Income survey? There’s still time to have a go – just follow the link below.

Useful links

The OECD today launches its new Centre for Opportunity in Equality to take forward the organisation’s work on inclusive growth and inequality.

Compare Your Income

Too much money is bad for you

Finance and inclusive growthBefore the recent crisis, the biggest failure of a commercial bank in the UK was the City of Glasgow Bank in 1878. The CGB collapse was due to mismanagement and fraud, and the authorities set up a commission of inquiry that recommended a number of measures to improve corporate governance. No they didn’t. They arrested the bank’s directors and sent them to prison, and corporate governance improved remarkably. As this Bank of England paper argues, the CGB collapse had a lasting impact on the financial system, requiring banks to be externally audited, and prompting a move away from unlimited liability banking (too late for William Love, whose newly worthless £200 shareholding exposed him to £5500 liability). The crisis also led to a wave of mergers and the emergence of the banking structure dominated by big banks we know today, as well as a change in risk management, with banks increasing the share of more liquid, lower-risk assets on their balance sheets.

The Bank of England paper discusses the lessons for today from the CGB crisis, and how the financial sector should change. The Bank’s Governor, Mark Carney, came back to the question in a speech last week about “Building real markets for the good of the people”. Carney argues that in the City, “Unethical behaviour went unchecked, proliferated and eventually became the norm. Too many participants neither felt responsible for the system nor recognised the full impact of their actions.” He feels “let down” by this, and explains how it contributed to “ethical drift”. I strongly advise you to use this lovely concept in court next time you’re caught stealing.

Why did they start drifting? It wasn’t to feed their starving children if the data in a new OECD Economic Policy Paper are right. Finance and inclusive growth shows that the finance sector pays better than other sectors, even for workers with similar profiles, and the gap with people doing similar jobs widens as you scale the corporate ladder. The paper doesn’t say whether this is because traders and the like are paid more than they’re worth or because the rest of us are paid less than we deserve. (What do you think, readers?) And in more news, “male financial sector workers earn a substantial wage premium over female financial sector workers, especially at the top”.

Another finding reminds me of a scene in a film with Roberto Benigni when he goes to the bank to borrow money because he’s broke. The banker refuses, explaining that you need collateral. Furious and incredulous, Benigni protests that when he goes to get tomatoes, the greengrocer doesn’t expect him to have aubergines in the house before he’ll serve him. That translates as “The distribution of credit can be an additional source of income dispersion if it implies that low income people cannot finance the opportunities they identify to the same extent as their better-off counterparts”.

These then are the findings most of us would have guessed or noticed anyway. The real surprise in the paper is the argument that there can be too much finance in the economy. The authors show that the extravagant salaries paid to the ethical drifters are only one of the negative consequences of the way the sector has developed. The analysis uses two direct measures of financial activity: the volume of credit provided by financial intermediaries such as banks to the non-financial private sector, and stock market capitalisation.

Over the past half-century credit by banks and other financial institutions to households and businesses in OECD countries has grown three times as fast as economic activity. Stock market capitalisation has tripled relative to GDP over the past 40 years, but today the value of stock markets still only equals 65% of GDP, just over half that of financial sector credit.

The OECD economists looked at how this growth in the financial sector affects growth in the rest of the economy. Initially, an expanding financial sector is beneficial, but it eventually reaches its ideal weight, and apart from contributing to inequality, “further increases in its size usually slow long-term growth”. This conclusion holds even when you consider a range of other factors including country specificities, the business cycle, and even financial crises. In general, more credit to the private sector slows growth in most OECD countries, while more stock market financing boosts growth. Bank loans slow economic growth more than bonds. Credit is a stronger drag on growth when it goes to households rather than businesses.

The long-term increase in credit is linked to slowing growth through five channels, including bank lending increasing more than bond financing, and a disproportionate increase in household credit compared with business credit. The first channel the OECD identifies may however amuse those of you with good memories (or long-held grudges) – excessive financial deregulation. Compare and contrast that with this, from 2008: “Observing the changes that have taken place in the past 25 years, a consensus has emerged that a deregulated financial sector operating in a competitive, open environment with market-based supervision grounded in international norms, is optimal contribution for economic development.”

Still, we admit our mistakes and are trying to learn from them, and even have a whole programme called New Approaches to Economic Challenges (NAEC) that calls for “a serious reflection to revisit policy approaches” in the wake of the crisis. Can the financial sector and the policymakers who influence it do the same? The OECD strategy to reform the financial sector to stop it slowing growth and making inequality worse has three broad components.

First, use macro-prudential instruments (measures that address risks to the whole system rather than individual institutions) to prevent credit overexpansion, and make sure banks maintain sufficient capital buffers. Second, reduce subsidies to too-big-to-fail financial institutions through break-ups, structural separation, capital surcharges or credible resolution plans. Reduce the tax bias against equity financing and make value added tax neutral between lending to households and businesses.

We could also remind the financiers what The Spectator said in arguing against a national subscription to help William Love and the others: “The notion that a grand failure is a pure misfortune, and one for which the partners are irresponsible, is one far too widely diffused already, and one which it is wrong as well as inexpedient to make deeper.”

Useful links

Too Much Bank Lending Can Slow Economic Growth: OECD Chief Economist Catherine Mann talks about the impact of bank lending on finance practices and economic growth on Bloomberg Television’s “Market Makers.”

Macro-prudential policy, bank systemic risk and capital controls by Adrian Blundell-Wignall and Caroline Roulet in OECD Journal Financial market Trends 2014

Living on less than two dollars a day: OECD Forum Discovery Lab

René Xavier OCDEAt the OECD Forum on 2 June, Xavier Godinot, Delegate for International Affairs of ATD Quart Monde (ATD Fourth World ), and René Locqueneux, a member of this NGO in the north of France, led a lively debate with over 50 Forum participants on living on less than two dollars a day.
(Une version française de l’article est disponible ici.)

Xavier Godinot explained that they both took part in participatory research to evaluate the Millennium Development Goals with people living in poverty in 12 countries. Their report Vers un développement durable qui ne laisse personne de côté : le défi de l’après 2015 (Towards sustainable development that leaves nobody behind: the post-2015 challenge) is available here, in French.

Xavier Godinot. The World Bank defines poverty as living on less than two dollars a day per person. We don’t care much for this simplistic threshold, but we’ll talk about people with very little money to live on.

René Locqueneux. Here’s what I was told by Béatrice, a woman who lives near me and who gets the Revenu de Solidarité Active (RSA), a job-seekers allowance. “My RSA is €709 a month. I need €438 to pay the gas, electricity, rent, insurance, telephone and Internet and pay back a loan. That leaves 271 euros to feed my son Jessy and me. We have to go and beg for a food parcel from the St Vincent de Paul association.”

Xavier Godinot. When Béatrice has paid all her monthly bills, “left to live on” for food, clothing, transport, recreation, etc. is E4.5 per person per day. That’s better than $2, but it’s not much and Béatrice needs the help of the St Vincent de Paul food bank. Mr Locqueneux, what do you think of food aid?

René Locqueneux. In New York, 1 inhabitant in 5 needs food aid. In Europe, everybody is angry about the cuts to funding for the EU programme for the most needy. And every year, it’s the same old story: more demand than ever this year, and next year even more people will need help. Of course if people have nothing to eat, you have to feed them, but avoid making them welfare-dependent.

In developing countries, we helped the population to dig wells to irrigate and cultivate the land. In France, it would be interesting to give poor people a piece of land they could cultivate. But I think it’s easier to hand out a food parcel than to accompany them to get access to their basic rights, enable these men and women to have a decent job to bring up their families with dignity.

Xavier then presented five recommendations from ATD Quart Monde for post-2015 (when the UN’s new Sustainable Development Goals are to be implemented.

First, leave no person behind in development programmes. He asked René what activists do to make sure everyone was included.

René Locqueneux. To meet the poorest people, for the last few years in my local group we’ve been going to the Post Office on the day the minimum welfare payment comes through. We tell people that if they have trouble obtaining their rights, we in ATD Quart Monde can help them for free to get what they’re entitled to.

Second, involve people living in poverty in knowledge sharing. Xavier asked René to tell us about ATD’s People’s Universities (in French, Spanish and Portuguese) he’s been involved with for a number of years.

René Locqueneux. Every two years since 1989 there’s been a Quart Monde European People’s University, bringing together people living in poverty from all over Europe and enabling them to talk to officials from European institutions. We thought we had to make realistic proposals that could have an impact on European policies. To do that, you need to know what these policies are, and get to know and understand the people working on these policies in Brussels. We had to share the experiences of people who know poverty with people linked to the European institutions. So we created a group to prepare the People’s University and make proposals during the campaign for the European elections.

I’m an activist and a member of the local ATD Quart Monde Sambre-Avenois group in the north of France. We thought about “active inclusion”. We presented a summary to the working group in Brussels. All the members of our group took part in writing the proposals. We worked on it for several months. It was very tiring, but we overcame our tiredness thanks to the very interesting and constructive exchange of views. We were motivated by the fact that as actors in the fight against poverty, we wanted to make our ideas known, and make proposals to Europe.

Third, promote an economy that respects people and the environment.

René Locqueneux. With the solidarity-based economy, it’s very interesting to buy goods from developing countries at cost price or above to enable these countries to develop.

What means a lot to me is when we put insertion into this economy. After a training course, I worked as a technical organiser for insertion programmes. A law passed in 1998 against exclusion talked about the reinsertion of those people the farthest from employment, and insertion was supposed to be a stepping stone towards a job in the market sector. In reality, we took people on for a year or two then they went back to square one because there were no jobs at the end of it. And we started again with other people. That was the reality.

Xavier Godinot emphasised that ATD Quart Monde calls for social safety nets in every country because half the world’s population has no social protection. He then presented ATD quart Monde’s fourth post-2015 proposal: education and training for all, based on cooperation among all stakeholders.

René Locqueneux. Every child should be able to learn and succeed in school, without discrimination, and have the same opportunities for their future. All too often, children from underprivileged backgrounds are oriented towards a specialised education, sometimes even from pre-school.

If schools are to offer the same opportunities and the same quality to all children, you have to avoid orientation too early and a hierarchy among the different curricula that reinforces inequality. The changes needed should be defined along with the parents, especially those who are the most excluded.

ATD’s fifth recommendation is to promote peace through participatory governance.

René Locqueneux. To conclude, we want those without a voice to be heard, we’re fed up being treated as welfare cases, we have knowledge and ideas. Let’s construct a Europe where all citizens have their place.

Useful links

Growing Unequal? Income Distribution and Poverty in OECD Countries

OECD work on poverty reduction in developing countries