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October - November 1997


Introduction and Summary

1. In March 1994, Ministers attending the first G7 Jobs Conference in Detroit set their goal to "strengthen growth to create more jobs, better jobs and reduce unemployment" (1). Yet, in 1997 there are still 36 million unemployed in the OECD, unemployment rates in most European countries have increased, real pay for the bottom 60 per cent of wage earners in the United States is still lower than in 1973, and Japan faces a recession.

2. For many working families increasing international economic integration has been accompanied by growing insecurity, rationalisation, competitive pressure and fear of unemployment. In this situation, there is a real danger of social cohesion unravelling and a public backlash developing against the global trade and investment system.

3. The cause of the social malaise is not globalisation as such but the failure to manage global markets effectively and develop appropriate domestic policies. The industrialised countries must achieve faster growth which is environmentally sustainable. They must ensure that this is translated into more jobs. They must rebuild the link between more jobs and better jobs with rising wages and they must ensure that labour rights are protected in the multilateral system. They must also ensure the inclusion of developing countries in the benefits of sustainable growth.

4. Trade unions have a central role in enabling these objectives to be met. Unions are needed to give protection to workers faced with growing insecurity, to regulate the spread of contingent employment, help fight low pay and organise the growing number of women workers and new professional groups. In their collective bargaining strategies unions have taken the lead in negotiations to give priority to employment. In many countries they are the active partners in implementing systems to provide life-long learning, and in the operation of active labour market policies. At workplace level they can play a key role in ensuring that the employee voice is heard in organisational and technological change. Governments and employers must accept and encourage the active partnership of unions in managing work place change.

5. The series of high level international meetings on employment:- the OECD Labour Ministerial (October); the European Union Employment Summit (November); the Kobe G7 Jobs Conference (November); the London G8 Jobs Conference (February 1998) must be used by governments to demonstrate convincing progress in implementing these objectives. The task goes beyond the traditional remit of Labour Ministers. Action to reduce unemployment, create good quality jobs and fight social exclusion must be a collective government responsibility involving cooperation between all Ministries and Central Banks. Acting in concertation with the social partners governments must commit themselves to:-

- a sustainable growth initiative;

- a strategy to translate growth into good jobs through:-

. combatting low pay,

. the expansion of service sector employment,

. encouraging sustainable employment,

. active labour market policies,

. implementing lifelong learning,

. a partnership for change at the workplace,

. managing the organisation of working time and extension of learning time;

- adapting to an ageing society; and

- enforcing the rights of workers in the global trade and investment system.

A sustainable growth initiative

6. Labour markets cannot solve the problems generated elsewhere in the economy. Sustained faster growth and buoyant economic conditions are essential for creating well paying jobs. The deficiency in the mechanisms governing policy formation have to be overcome. Currently there is an incentive for individual governments to pursue policies of austerity that give them an individual advantage in world bond markets. When all countries pursue such policies the result is a profound deflationary bias to economic policy.

7. Genuine macroeconomic coordination is needed to raise growth. In Japan domestic demand must be expanded. In the United States an expansionary monetary policy has shown that growth can be sustained. There is room for Europe to grow much faster without inflation. Concerted action is needed to ensure low real interest rates in Europe and an effective post-EMU framework for growth and employment has to be put in place. European Union reserves should be used to implement environmentally sound propositions for infrastructure investment. Such a strategy would also help maintain growth worldwide. It must also dovetail with strategies for environmental sustainability and the reduction of greenhouse gas emissions.

8. Governments must maintain a sound tax base for public finances against a background of globalisation. The failure to tax adequately multinational corporations and capital income and profits has led to an erosion of the tax base and a disproportionate shift of the tax burden onto labour. The shift from income to consumption taxes has made systems more regressive. International agreements are needed to ensure balanced taxation of capital and profits, whilst public support for fair tax systems must be built up. The OECD must play a pioneering role in preventing harmful tax competition.

Translate growth into good jobs

9. Joint action by the social partners and government is needed to ensure that faster economic growth is translated into quality employment growth that avoids inflationary bottlenecks. This requires adaptable labour markets, which encourage innovation, facilitate investment in human capital throughout the workforce and working life, which work against social exclusion and which produce results which are both efficient and fair. This is very different from the crude deregulation of labour markets with higher inequality, less job protection and more insecurity. Workers need to be given confidence and security in the change process. Trade unions are a key element in achieving this.

Combatting low pay

10. The growth of low paid jobs is not an acceptable solution to unemployment. Unemployed poverty is shifted to working poverty and countries and firms develop strategies of competition based on low wages and outmoded work organisation. Low paid workers often remain trapped in these jobs, family poverty increases and there is a threat to social cohesion.

11. A strategy is needed for creating jobs and combatting low pay. This must recognise the role for legally set and collectively bargained minimum wages to set wage floors which eliminate the exploitation of low paid workers. A fairly set wage floor can stimulate joint action to raise worker productivity, particularly in low paid sectors. Experience from a range of countries has shown that minimum wages can be an effective instrument against poverty without damaging employment prospects. The tax and benefit system has an important complementary role to play. In some countries tax credit systems have worked effectively to reduce poverty amongst low income working families. They are a central form of solidarity, but not a panacea for dealing alone with any problem of inequality created by the labour market.

The expansion of service sector employment

12. There is almost limitless job creation potential in areas of unmet social needs. There is increasing demand for improved community care for the elderly and for care for pre-school-age children. Education, health care and environmental services can also each provide sources of new jobs. In many cases, the market cannot meet these needs. Public policy and active employment programmes must fill the gap. The public sector will have to continue to generate employment both as direct employer and as a regulator and facilitator of private sector employment. There are areas where new and innovative systems of government intervention (job subsidies, user charges and public procurement) can allow the public sector to identify needs to be met by a mixture of public and private provision. In some countries innovative approaches have been adopted in the social and cooperative sectors. Whether or not services are public or private, the public authorities will need to guarantee standards. The skills and ability of workers in these sectors is often high as is productivity. Measurement systems, therefore, need adjusting to reflect the true skill content and higher productivity of these jobs. In the future, "feminised" professions will no longer accept low pay. Society must put a fair price on the provision of services.

Encouraging sustainable employment

13. Alongside the task of restoring full employment, achieving sustainable development and avoiding global climate change is one of the biggest challenges facing OECD countries. It will also confront labour markets with rapid change. Policies for sustainable development must go hand in hand with policies for sustainable employment. Ministers of Labour should take part far more directly in the debates over sustainable development, integrating the workplace agenda on both health and safety and environment issues into the programmes for achieving sustainable development targets.

14. Governments should seek a "double dividend" by substituting taxes on labour with taxes on environmental resources and consumption. However, eco-taxes are not a panacea and scepticism remains as to the feasibility of complete tax switching. There can be negative employment and income effects of new taxes, they affect national competitiveness unless part of multilateral agreements, and doubts exist as to whether environmental resources provide a long-term stable tax base. Despite these reservations it is recognised that the present fiscal and regulatory systems often give perverse price signals which restrict innovation and deter long-term environmental investments. The overemphasis in financial decision-making on labour costs as opposed to resource use is also an obstacle to sustainable production. It is important therefore for the OECD to examine more the effectiveness of tax programmes that have been developed in certain OECD countries, and to promote the employment aspects of eco-tax reform.

Active labour market policies

15. The main goal of active policies must be to get the unemployed back into work as fast as possible and are a far better alternative to passive income support when they are successful. However, they can only work when there is a growing and buoyant labour market. They need to be proactive - targeting retraining and job placement measures before change takes place and certainly before unemployment becomes long-term. Experience has shown that linking employment services and training agencies and decentralised services works best. Trade union involvement in the design and implementation of policies is essential.

16. Trade union attitudes to employment services and agencies depend on their impartiality and their ability to serve workers. Where workers perceive employment services as siding with the employer alone or as being used to discipline them, the services will be less effective. The 1997 tripartite ILO Convention on private employment agencies provides a set of safeguards for the operation of private employment agencies ensuring that public authorities retain the final authority for formulating labour market policy.

Implementing lifelong learning

17. The 1996 OECD meeting of Education Ministers called for a "social partnership" to deliver lifelong learning involving trade unions, employers, parents and teachers. This must now be acted upon with cooperation between Labour and Education Ministers. Otherwise, lifelong learning will remain an empty slogan. In particular, there needs to be:-

- increased public investment in basic education targeted to raising educational quality particularly for the potential drop-outs and underprivileged in the system;

- a partnership for continuous change and improvement in educational practices;

- the widening of access to further and higher education and the integration of adult education;

- the introduction of ambitious targets for training and retraining;

- the involvement of trade unions in the design, monitoring, assessment and promotion of systems to recognise qualifications and skills thus enabling individuals to have portable skills over a lifetime;

- the expansion of job rotation schemes between long-term unemployed and workers wishing to take training leave;

- the setting up of training banks for small and medium sized enterprises with the involvement of the social partners.

A partnership for change at the workplace

18. Enterprises can increase their competitiveness by becoming "high performance and knowledge intensive workplaces" through technological innovation and new forms of work organisation based on higher and more diversified skills of workers, high trust relations within firms and less hierarchy. Too few firms have followed such a path, too many remain obsessed with short-term flexibility, characterised by "downsizing", "delayering" and "outsourcing". Fear and insecurity are created in the workplace; training is neglected and workers oppose change, rather than embrace it. OECD work has shown that managerial failure is a major barrier to "high performance" workplace. Worker involvement and the recognition and active involvement of trade unions is necessary to bring about this "high route" to workplace change.

19. Governments can facilitate this. They should create a climate of security through a guaranteed floor of employment rights. Through a combination of innovation policy and incentives, they can encourage good practice in workplace change.

Managing the organisation of working time and extension of learning time

20. Average working time per employee in many OECD countries has increased over the last 15 years. Elsewhere, the historical rate of decline has slowed. These trends worsen the employment situation. Productivity gains in firms should be more widely distributed as a general reduction in working hours and job creation. This can be achieved where workers have a joint say over work reorganisation and working time. Across a range of countries and sectors, as part of wider negotiations, trade unions have agreed to flexible working time arrangements in exchange for working time reductions.

21. There should be equal employment rights for part-time workers so as to put part-time work on the same footing as full time work and eliminate involuntary part-time and temporary work. This would facilitate socially acceptable job-sharing and opportunities for voluntary chosen part-time work. Forms of crude exploitation such as "zero-hour contracts" and casual work must be regulated.

22. The "knowledge-based" economy and the move towards the information society requires more learning time for workers to adapt to structural change and innovation in workplace organisation. A reduction and reorganisation of working time should therefore also be used for an extension of learning time and training by and in firms. It can be an active part of a strategy for lifelong learning.

Adapting to an ageing society

23. Demographic change presents a major challenge with significant ageing of the population in much of the OECD area. The key development is what happens to dependency ratios rather than the age of the population as such. Paradoxically there has been a marked decline in labour force participation among older workers over the last twenty years. The average age at which workers leave the labour force has fallen, and older workers have been amongst those laid­off first in cases of redundancy with the effect that their unemployment rates and rates of non­activity is above average.

24. Compulsory early retirement of workers by firms should not be encouraged. Insufficient use is being made of the work experience of older workers. Yet there are cases of "good practice", where following the introduction of new technology in enterprises a "mixed" workplace design has contributed to improved production and quality control. Incentives for enterprises could also be given in order to provide opportunities for older workers to act as instructors in company training measures as an active part of lifelong learning.

25. The development of "smooth" pathways for voluntary retirement arrangements is desirable, and in particular approaches for achieving a gradual transition of the work force from work to retirement should be further developed. This should be part of a broader approach to managing lifetime working. There is a need to develop more flexible working time schedules, career breaks, training and educational leave for both men and women as a response to the pressures on family policy arising from changing demographics and women's labour force participation.

26. The financing of provisions for old age depends first and foremost on macroeconomic developments and social solidarity. Economic growth, labour productivity and the level of employment and labour force participation determine together the future room for manoeuvre. However, a long­term adjustment to respond to the changing social and demographic conditions may be required. Hence the principle of equal rights and opportunities for all generations and social justice must be applied. This calls for an overall public responsibility for overseeing pension systems. In all cases pensions have to be financed by transfers from working people to retired people today. Privatisation of state systems has been represented as an easy way out of governments financial obligation, yet systems of capitalised pension funds transfer risk to financial markets. Access to and provision of social security in general will have to be shaped in universal, publicly accountable system.

27 In OECD countries where private pension funds play an important role in the provision of benefits, a tighter regulation of fund management and prudential control is indispensable. Pension fund security is even more important given the globalisation of financial markets. Deregulation has in many cases led company fund management either to invest in highly speculative activities with the correspondent level of risk or to use fund stocks for other improper investment. Pensions are a form of deferred wages and therefore workers and their trade unions should have the right to co-manage pension funds.

Guarantee Core Labour Standards in Trade and Investment Agreements

28. Governments are extending their systems of national laws governing intellectual property and investor rights to the global level. They have not shown the same willingness to guarantee basic labour and human rights worldwide. This is wrong. It will reinforce the view of globalisation as a "race to the bottom" which puts property ahead of people. The multilateral system relies on domestic support. That support will erode if it does not address the concerns of working people. Sweat shop labour must be eradicated on a global basis. Core labour standards must be guaranteed in trade and investment agreements.

29. There is recognition on the definition of core labour rights as shown by the World Trade Organisation's (WTO) December 1996 Singapore Declaration, which highlighted:- freedom of association and protection of the right to organise, the right to organise and bargain collectively, freedom from forced or compulsory labour and the abolition of forced labour, freedom from child labour, and equal remuneration for men and women and freedom from discrimination in respect of employment and occupation. The OECD Study on Trade and Labour Standards has shown that there can be a positive two way relationship between these standards and open-trading policies. The issue of enforcement however remains. In export processing zones, as well as elsewhere, trade union rights are increasingly violated. In Korea the governments' and employers' attempt to further restrict freedom of association as a response to global competition was rejected by Korean workers.

30. The "Singapore declaration" provided a mandate for further work on labour standards by the WTO and ILO, which must be followed up. The ILO should strengthen its machinery for the ratification and supervision of core labour standards. The WTO's Trade Policy Reviews should report on violations of core labour rights. A dialogue between the WTO and the ILO has to deepen so as to prepare the May 1998 WTO Ministerial Council. Hemispheric and regional trade agreements must include labour rights clauses. The World Bank and the International Monetary Fund should integrate obligations of respect for core labour standards into all their lending and structural adjustment policies.

31. The OECD must develop its monitoring and peer group pressure system for the respect of core standards in Member countries and ensure Korea's early implementation of the commitments given. The OECD's Multilateral Agreement on Investment must incorporate the OECD Guidelines for Multinational Enterprises and include a binding labour clause based on internationally recognised core standards. The OECD must follow up the mandate it has to work further on labour rights issues, with regard to investment, Export Processing Zones and in its dialogue with non Member countries.


(1) "Chair's Summary Statement on G7 Jobs Conference", Detroit, March 15, 1994.

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