OECD MINISTERS' CONFERENCE
ON BEST PRACTICE IN TACKLING POVERTY
AND SOCIAL EXCLUSION
London, 9-10 October 2000
TUAC DISCUSSION PAPER
- Inequality has grown in OECD countries over the last two decades. Persistent poverty and social exclusion have come to affect new
groups, notably single parent families. However significantly wider groups
of workers are touched by poverty as a result of job insecurity and corporate
- The "new economy" risks adding a digital divide to the existing
social divide, with a reduction of labour market regulation leading to
growing precarity of low-paying jobs.
Fundamental changes have occurred in the nature of poverty and social
exclusion. Over the past two decades, OECD countries have become more
divided. Alongside unemployment new forms of inequality, poverty and social
exclusion have emerged. Income inequality has risen sharply over the last
two decades in a number of countries and differences between the richest
and the poorest are now greater than they were a century ago. Poverty used
to be concentrated among the elderly, living on low pensions or in poor
housing conditions, it has switched to young households and is to a significant
extent due to the rise in unemployment. Those particularly vulnerable to
long-term poverty are female-headed households; single-adult households
with children; households headed by a young individual; households where
the head has only basic education and households where there is no person
employed. This occurred during a period when OECD countries have experienced
a significant rise in overall living standards.
- To meet the challenge of reducing social exclusion, economic policies
and the actions of the social partners must be geared to achieving and
maintaining full employment. Social policies are an investment not just
a drain on expenditure.
- Active labour market policies must be seen as preferable to the meek
acceptance of unemployment, but the goal must be to get people out of poverty
not out of welfare.
- Individual counselling and assistance must continue once workers are
in jobs and training must continue beyond pre-employment courses. It is
necessary to create career ladders for low-paid workers.
- Such "rewarding work" policies must be accompanied by increased minimum
wages in many countries, dovetailed with well-targeted in-work benefits
- Adequate child care and "family-friendly" policies have to be seen
as a social investment.
- Unions are key stakeholders and are ready to work in partnership with
governments and employers to reduce social exclusion.
Corporate restructuring is contributing to an extension of those
touched by poverty. Even if persistent poverty is concentrated in such
households, large sections of OECD societies are finding themselves at
different times falling into poverty. Of the countries surveyed by the
OECD between 12 and 40 per cent of the population had been touched by poverty
over a six-year period. One cause of this is a direct consequence of ongoing
corporate restructuring that targets professional and white-collar workers
for layoffs along with the traditional blue-collar workers, making job
and income instability a more generalised experience. High employment turnoverdominated
by layoffs rather than quitsleads to disrupted career paths, in turn resulting
in lower average earnings. For a significant number of families, the loss
of a job plunges a family at least temporarily into the ranks of the poor
or near poor.
The increase of poverty and social exclusion are not only features
of the "old economy". They are also related to the "new economy" which
risks creating a "digital divide" between those with information technology
skills and those without. People are excluded not just because they are
currently without a job or income but because they have few prospects for
the future or for acquiring new skills. This is underlined by the analysis
of the transitions between the different situations on the labour market.
Particularly striking is the growth of the numbers of workers in precarious
jobs. Workers who were in that situation some time ago are quite often
split between those who have found a stable job, those who remain in a
precarious job and those who are unemployed. However, lower down the scale
of qualifications, the probability for finding a stable job falls dramatically.
There is a generally low mobility in low-wage jobs, which are rarely stepping-stones
to better jobs.
Economic policies must have social objectives. Social policies
have a key role to play in developing the appropriate response. But social
policy is more than social programmes and coherence between different areas
of policy is essential. This is not just a one-way process. Social policy
has to take account of economic and employment policy objectives, but economic
policies have to integrate social objectives. For social policies to work,
economic policies must be directed at re-establishing and sustaining full
employment. This is particularly so with regard to policies aimed to "make
work pay". In this respect, features such as minimum wages, job security
legislation, unemployment benefits and strong unions should be thought
of as devices that provide workers with social insurance against the uncertainties
of the global market place. Set against the background of globalisation
and workers' demands for institutions that provide income protection as
well as social security, the OECD itself has warned that failure to keep
social progress in line with economic development puts at risk political
stability. This is demonstrated in the growth of political extremism and
racism, but also in the public backlash against the global trade and investment
system. The cause of the social and political malaise is not globalisation
as such but the failure to regulate and manage global markets effectively
and develop appropriate domestic policies.
The challenge of financing. Persistent unemployment, the growth
of precarious employment and the decrease of the effective retirement age
have each affected the way in which social security systems are organised,
financed and function. The repercussion of these trends on tax revenues
and on social security contributions as well as on the expenditure on benefits,
public pensions, and health care has been the main driving force behind
the OECD debate on the reform of social security systems. Trade unions
recognise that these changes put new and significant pressures upon the
welfare state, but the real purpose of the debate must be the effectiveness
of systems in meeting multiple objectives in a period of change.
Social expenditure is an investment. The 1992 OECD Social Ministers'
meeting correctly identified social expenditure as an investment. The welfare
state allows the market system to function. The whole of society and not
just those receiving benefits enjoy the advantages of the welfare state,
which include social cohesion, security and political stability. The individualisation
of forms of work and lifestyles, as well as the flexibilisation of working-time
systems, do not remove the need for social security systems, rather they
require the development of increased and new forms of social solidarity.
The conditionality of unemployment benefit. The linking of eligibility
of unemployment benefit to the acceptance of job or training offers has
long been a feature of many systems of active labour market policies. For
this to succeed in re-integrating the long-term unemployed into the labour
market and not be simply a way of reducing expenditure or penalising the
victims of unemployment, there have to be determined efforts by governments
and the social partners to maintain tight labour markets, in which sufficient
flows of appropriate job and training opportunities are available. Groups
at risk have to be given additional opportunities and not simply pushed
further into poverty.
The reform of the welfare state and of social security systems has
been partly driven by the wrong reasons. Among the main driving forces
has been the determination to cut social expenditure or to overcome alleged
benefit dependency. This has led to a broad range of policies, aimed to
provide for a successful transition of welfare into work and getting many
people off unemployment registers. In terms of getting people off welfare,
which was often celebrated as a reduction in case loads, a number of programmes
were certainly successful. But most programmes failed to help the working
poor get out of poverty and to improve their lives. Providing jobs is not
sufficient if they are poor-quality low-paying jobs.
Welfare-to-work policies - a new feature of social policy. The
reform of the welfare state and of social policy approaches has given rise
to welfare to work policies which share a common approach: They attempt
to make low-wage work "pay" by providing work incentives in the form of
monthly cash payments or tax credits. The idea was to create real, monetary
incentives to increase the payoff of low-wage work through work-conditioned
earnings supplements. However, the available studies evaluating the welfare-to-work
experiments seems to offer little ground for optimism about the ability
of welfare recipients to find and hold jobs, or to earn a decent living.
Without some added ingredients, the transition from welfare to work is
more likely to be from welfare into time-limited, often precarious employment
and low earnings. This does not mean that the substitution of work for
welfare, however desirable, is infeasible in practice. The conclusion is
that a decent welfare-to-work transition will require a more complicatedand
more expensivecombination of policies.
Policy discussion should not focus simply on how to get people into
work, but on how to get workers out of poverty. In order to boost the
prospect of low-income workers, they need first support services that don't
vanish when welfare expires. In particular, they need flexible formulas
that allow them to retain part of their benefits even as their earnings
grow. Workers also need access to more and better education and training,
to help them advance individually; they need strong unions, to help them
advance collectively. Moreover, an adequate number of jobs for displaced
welfare recipients will have to be created, either through some version
of public-service employment or through the extension of substantial special
incentives to the private sector (profit and non-profit).
It is essential to do more than put people to work. What is necessary
is to show that a job leads to a better job and then a career. "One stop"
employment offices are a positive development but it is also necessary
to shift the focus away from "case load reduction" and toward "poverty
reduction". Welfare recipients should not be forced to take the first available
job, instead, they must be allowed to enrol in pre-employment training
measures, providing at least instruction in "soft skills" as well as training
in a specific field. At the same time the training courses must be open
not only to welfare recipients but also to other workers who feel trapped
in their jobs, and who seek to move up a career ladder to better-paying
Pre-employment training is just the beginning of a sound policy.
It is essential to get workers into job training while they're working.
Because pre-employment training courses rarely produce lasting results,
training and guidance must continue long after the individual enters the
workplace. It is necessary to guide, monitor and help workers if they run
into problems at work.
Create career ladders to enable low-wage workers to advance through
a progression of higher-skilled and better-paid jobs. It is necessary
to create career ladders to enable low-wage workers to advance through
a progression of higher-skilled and better-paid jobs. Employers need to
depart from strategies relying on a casual, high-turnover, low-wage work
force. They have to make their internal labour market more explicit and
better structured. Moreover, they have to become more explicit about how
they structure jobs and routes to career advancement. In order to promote
the creation of career ladders and to improve pay levels and working conditions,
trade unions need to engage in this process. Even so, many low-wage jobs
do not logically lead to higher-paid ones, and a career-ladder strategy
is a complement, not a substitute, for better pay, professionalisation,
and security throughout the job chain. However, career ladders are not
necessarily rungs within a single business or even a sector. Rather, they
are based on clusters of transferable skills that could prepare students
for varied occupations.
Rewarding work policies must be accompanied by an increase in minimum
wages in many countries. Even if programmes are offering training opportunities,
they could be undermined by the persistence of low-wage jobs. To address
this, stronger unions and higher minimum wages are required. If welfare
recipients are pushed into employment without raising wages and benefits,
the main effect will be to increase the "working poor". Properly set minimum
wages have at least four positive features. Firstly, it is a way to increase
workers' earnings without placing a burden on the taxpayer. Secondly, it
provides increased income to workers who do not qualify for government
transfer programmes or tax credits. Thirdly, it is an incentive to work
in the "above ground" economy rather than in the "underground" economy.
Fourthly, a rising minimum wage may well lead to higher productivity in
the economy, giving an incentive for low-wage employers to introduce new
technology or find other ways to boost the output of their workforce.
The increase in minimum wages must be accompanied by additional well-targeted
measures and programmes. In order to assist the most disadvantaged
of the working poor, in addition to raising minimum wages, well-targeted
measures and programmes are needed, including refundable tax credits which
subsidise the wages of low-income workers or other in-work benefits. These
are a form of "family wage insurance" in an era of job instability and
Rewarding work policies must avoid promoting a low-road approach.
The combination of minimum-wage regulations and in-work benefits are necessary
for antipoverty policies, especially when the majority of poor people are
working-age adults and job insecurity has increased. This is not to say
that reliance on minimum wages, in-work-benefits or tax credits is the
ultimate answer to low wages and poverty, but they go some way toward creating
Family-friendly labour markets - but not at the expense of families.
Given the new work patterns of parents, labour markets need to be made
more "family-friendly". The provision of adequate child-care can no longer
be seen as a private matter, it has to be seen as a social investment.
With regard to the promotion of equal opportunities and to the increase
of female employment, governments and employers must contribute to the
reconciliation of family and working life. Collective bargaining agreements
concerning shorter working time, flexible working time systems and part-time
work are giving clear priority to this. But the establishment of family-friendly
labour markets cannot only be the responsibility of trade unions alone.
Trade unions are ready to work with employers and governments to contribute
to the provision of a sufficient infrastructure as well as to the extension
of options for employees.
Unions are key stakeholders. Many of the objectives of social
security systems are also pursued by trade unions in collective bargaining
strategies, which can complement and spread social protection. OECD surveys
have shown that countries with a higher collective bargaining coverage
have a smaller incidence of low pay. In several countries unions co-manage
social security systems. Unions provide a voice for many of the underprivileged
groups. They also represent those working in social security systems. Unions
through their lifelong learning policies and by providing access to internet
for working people can help reduce the digital divide. The trade union
movement is ready to work with OECD Social Policy Ministers to forge a
new consensus in policy.