The latest economic forecasts from the Organisation for Economic Cooperation and Development show that current global recovery is benefiting the rich but doing very little for the poorer members of society.
In its Interim Forecast released on 13 March 2018, the OECD predicts that GDP growth in the eurozone will remain robust, at around 2-2.25%, in 2018-19, although in the UK this figure falls to 1% by 2019. “High inflation continues to damp real household income growth and consumer spending, and business investment is slowing, amidst continued uncertainty about the future relationship between the United Kingdom and the European Union,” it warns.
In its forecast assessment, the Trade Union Advisory Committee (TUAC) to the OECD points out that economic recovery has been uneven and has mainly benefited the richest. “Whereas the real disposable income of the 10% top households has increased significantly and is exceeding its pre-crisis level, this is not the case for the median and bottom 10% households. Incomes of the bottom 10% are still below the level they were before the crisis.”
At the same time, reports the OECD, labour markets have become more polarised, with fewer mid-range jobs in relation to work demanding higher or lower skill levels. Despite steady declines in unemployment, wage growth remains weak, and this is contributing to popular dissatisfaction. “Many households have seen little growth in real disposable incomes over the past decade, particularly those with low incomes.”
The Interim Forecast argues that a “modest increase in inflation from subdued levels would be welcome” and that this depends on wage growth picking up. Yet wage dynamics remain weak despite falling unemployment rates, which TUAC links to past structural reforms that have increased labour market insecurity and undermined the bargaining position of labour.
Soft productivity growth, past low inflation, the shift towards part-time work and the rising employment of lower-skilled workers all continue to check wage growth. Falling unemployment statistics mask the high levels of involuntary part-time work and the need to bring more people into the labour market. The OECD calls for measures to create a more inclusive labour market, and to help displaced workers transition to new jobs and acquire new skills.
Employment recovery is also uneven. Whereas more older people are in work, employment rates of 15 to 24-year-olds remain at, or below, pre-crisis levels in many countries.
The OECD urges policy-makers to focus on achieving real improvements in living standards. “Against the backdrop of the stronger global economy, the priorities for policy are to foster productivity, make growth more inclusive, and enhance resilience against possible risks, especially financial vulnerabilities. Fiscal and structural measures should be focused on the medium term and be used to strengthen investment and productivity growth and ensure that the benefits from growth are distributed more widely.”