The G20 needs to make the world’s economy work for working people

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The G20 leaders who will meet in Brisbane on 15 and 16 of November are still worried about a global economy that is faced with weak growth, high unemployment and rising income inequality.

But they should remind themselves that this is not inevitable.

The International Monetary Fund (IMF), while putting out another downward revision of growth forecasts, admitted that recovery is too slow and fragile, while recognising the problem of income inequality.

The OECD, in its New Approaches and Economic Challenges (NAEC) initiative and its 2014 OECD Employment Outlook report acknowledges that rising inequality affects economic growth and social cohesion, sapping trust in markets and institutions.

In the years since the beginning of the economic crisis, the Labour 20 (L20) has been calling for a move away from austerity.

If G20 governments want to meet the target agreed by finance ministers of achieving 2 per cent GDP growth in the next five years, they will need to shift their strategies.

Change is the only way to close the crisis-induced jobs gap by creating the 81 million jobs needed by 2018. This is a reality test. It needs clear answers.

L20 modelling shows that a mix of wage increases and investment in infrastructure in G20 countries can create up to 5.84 per cent more growth and 33 million jobs compared to business as usual.


The way forward

The world economy is mostly wages-led – the more you pay people the more they will spend on goods and services. In contrast, every one percentage point decline in wage share leads to a decline in global GDP by 0.36 percentage points.

Low wages, low skills and precarious jobs will not lead to sound economic recovery.

The G20 must shift away from the thinking that says the path to growth is cutting wages and maximising short-term business profit.

In short, the world needs a pay rise.

We need to invest: invest in good jobs; invest in sustainable infrastructure projects; and invest in our youth. It is not acceptable that one in four young people globally cannot find work for more than US$1.25 a day.

Trade unions have been constantly calling for measures for inclusive growth including strengthened workers’ rights, minimum wages, collective bargaining and social protection floors.

We need to enable women and young people to participate in secure jobs, and provide youth guarantees, and training with the scaling up of quality apprenticeships.

In the same vein, pro-growth policies need to push for more productive investment through a one per cent of GDP increase invested in infrastructure in every country.

Investment, including workers’ pension funds, must be on the basis of the G20/OECD High Level Principles on Long Term Investment.

There will be no jobs or growth on a dead planet either.

G20 leaders need to commit to an ambitious and fair share in reducing emissions to ensure the success of the UN Climate Conference in Paris in 2015.

Moreover, agreement on just transition strategies will be crucial to protect the livelihoods and jobs of workers.

We also look to the G20 for determined action on “safer workplaces” so that we can prevent another Rana Plaza disaster, when a substandard garment factory collapsed, killing over one thousand workers in Bangladesh in 2013.

Social upgrading in Global Value Chains (GVCs) is not a given: the OECD Guidelines on Multinational Enterprises could help drive progress in helping firms and their workers benefit from GVCs.

Production in developing and middle-income countries that is sustained through precarious labour and remuneration for executives beyond the living wage is not acceptable.

Working families are looking to the G20 to take on this responsibility.

Finally, efforts to prevent multinational corporations from shifting their profits around different jurisdictions – regardless of where their activity is located – in order to avoid taxation, must be supported.

The Base Erosion and Profit Shifting (BEPS) Action Plan launched in 2013 shows that institutional drive and political momentum can produce concrete results at the G20 level.

However, the current plan has some weaknesses to be addressed, including the need to allow for public disclosure of country-by-country tax reporting by multinationals, to institutionally support the participation of developing countries in the process, and to address the taxation of shadow banking and private pools of capital through collaboration with the Financial Stability Board (FSB).

The same commitment shown to the BEPS plan should also apply to the current jobs, inequality, climate change and investment crises.

A Brisbane Action Plan is essential and needs to include national job creation and investment targets, to be followed-up in consultation with social partners.

The L20 will hold its own summit in Brisbane, two days prior to the G20 Leaders’ meeting.

We are calling on leaders to put an end to years of stagnation and bring about the type of structural policies for job-rich, sustainable investment that workers can support.

The world needs that pay rise now.