Perspectives on Global Development 2012 Social Cohesion in a Shifting World - Launch

OECD Development Centre

Paris, November 21th 2011

OECD Headquarters

2

Perspectives on Global Development

Trilogy through the lens of Shifting Wealth: 1. Shifting Wealth 2. Social Cohesion in a Shifting World 3. New Strategies for Growth

Consultation process: • Expert meeting co-organized with GIZ (April 2010) • International Conference in Paris (January 2011) • Regional consultations (Rabat, April 2011 and Bangkok, July 2011)

Partners:

• FIAPP, GIZ, Haut Commissariat au Plan (Maroc), Ministry of Foreign Affairs (Thailand)

3

A success story?

• A lower-middle income country

• Average 5% annual growth rate since 1990

• 60% of budget dedicated to social sectors

• Nearly 100% primary enrollment in 2008

• 80% health care coverage

• ‘Prudent public debt management’ (42.8% of GDP in 2009)

• 3% fiscal deficit

• Inflation at approx. 3% in the 2000s

4 Source: OECD/AfDB/UNECA (2010), African Economic Outlook

Tunisia

5

Main messages

1. As economic uncertainty deepens, now is the time for developing countries to channel their recent prosperity into a more ambitious social cohesion agenda.

2. A social cohesion agenda calls for different policy priorities.

3. It’s not only about what you do but also about how you do it

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1 Shifting Wealth: an unprecedented opportunity?

Challenges for social cohesion in fast growing countries 2

Outline

3 What policies for social cohesion?

4 The how matters

7

1 Shifting Wealth: an unprecedented opportunity?

Challenges for social cohesion in fast growing countries 2

Outline

3 What policies for social cohesion?

4 The how matters

8

The four-speed world in the 1990s

Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth

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The four-speed world in the 2000s

Source: OECD Development Centre, Perspectives on Global Development 2011 – Social Cohesion in a Shifting World

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Shifting Wealth: New resources for development

Greater fiscal space in the 2000s vis-à-vis the 1990s

Fiscal revenue to GDP ratio (%)

Source: Authors’ calculations based on World Bank (2011)

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1 Shifting Wealth: an unprecedented opportunity?

Challenges for social cohesion in fast growing countries 2

Outline

3 What policies for social cohesion?

4 The how matters

12

Growth in life satisfaction and income do not necessarily coincide

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Tunisia Thailand India Brazil South Africa Morocco

Annualized growth rates of life satisfaction and income 2006-2010 Life satisfaction GDP per capita

Sources: Authors‘ calculation based on Gallup World Poll (2010) and World Bank (2010)

13

The aspirations of the emerging middle class

Source: Author’s calculation based on Kharas (2010)

70% 54% 50% 32% 20%

30% 46% 50%

68%

80%

0

1

2

3

4

5

6

2000 2010 2012 2020 2030

Billion

OECD countries non-OECD economies

14

Conceptual framework: The Social Cohesion “Triangle”

15

Social inclusion: New distributional challenges Absolute poverty falls, but relative poverty stagnates or grows

Brazil China

Source: PGD 2012 based on Garroway and de Laiglesia (forthcoming)

0

5

10

15

20

25

30

1980 1990 2000 2010

50% of median 1.25 USD, PPP / day

0102030405060708090

1980 1990 2000 2010

50% of median 1.25 USD, PPP / day

16

Social capital at risk: Increase in labour disputes in China

Source: Cai and Wang (2011)

0

200

400

600

800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Num

ber o

f Lab

or D

ispu

te C

ases

(t

hous

and)

17

Social mobility: correlation of parent/child education

Source: OECD (2010) based on Hertz et al. (2007)

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1 Shifting Wealth: an unprecedented opportunity?

Challenges for social cohesion in fast growing countries 2

Outline

3 What policies for social cohesion?

4 The how matters

19

What can we do?

Policies can make a difference

Key levers: Fiscal, employment, social and educational policies

Exploiting linkages between different policies is crucial

20

Policies can make a difference for inequality

0

10

20

30

40

50

60A

rgen

tina

Bra

zil

Chile

Colo

mbi

a

Mex

ico

Peru

OEC

D-2

4 av

g.

Inequality before taxes and transfers Inequality after taxes and transfers

Gini coefficients before and after taxes and transfers in developing countries

Source: OECD (2008a and 2008b).

21

Resources for development in Africa

0

400

800

1200

1600

2000

Liby

aEq

uato

rial

Gui

nea

Seyc

helle

sG

abon

Alge

ria

Ango

laBo

tsw

ana

Sout

h Af

rica

Cong

oM

auri

tius

Nam

ibia

Swaz

iland

Tuni

sia

Cape

Ver

deM

oroc

coAF

RICA

N A

VERA

GE

Nig

eria

Egyp

tLe

soth

oSu

dan

Chad

Djib

outi

Zam

bia

Sene

gal

Cam

eroo

nKe

nya

Mau

rita

nia

Côte

d'Iv

oire

São

Tom

é &

Pri

ncip

eAF

RICA

N M

EDIA

NBe

nin

Gha

na**

Com

oros

**M

ali

Gam

bia

Togo

Burk

ina

Faso

Tanz

ania

Gui

nea

Uga

nda

Moz

ambi

que

Rwan

daM

adag

asca

rLi

beri

aM

alaw

i*Ce

ntra

l Afr.

Rep

.N

iger

Ethi

opia

Sier

ra L

eone

Cong

o D

em. R

ep.

Gui

nea-

Biss

auBu

rund

i

USD

Tax revenue per capita

ODA per capita

Source: OECD/AfDB/UNECA (2010), African Economic Outlook

22

With higher trust, tax evasion is less acceptable…

Source: PGD 2012

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

-0.3 -0.2 -0.1 0.1 0.2 0.3

Tax

evas

ion

is n

ever

just

ifiab

le

(fra

ctio

n of

resp

onde

nts)

Interpersonnal trust indicator

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…which in turns leads to higher revenues

AustraliaCanada

Finland

France

GermanyItaly

JapanKorea

Mexico

NetherlandsNew Zealand Norway

PolandSpain Sweden

Switzerland

Turkey

United KingdomUnited States

Argentina

BrazilChile

ColombiaCosta Rica

Dominican Republic

El Salvador

Guatemala

Peru

Venezuela

0

10

20

30

40

50

60

0 10 20 30 40 50 60

% o

f peo

ple

who

just

ify e

vasi

on

Tax revenue/GDP

Source: Daude and Melguizo (2011).

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Social protection and labour from the angle of social cohesion

A poverty reduction agenda: • Income support for the poor (e.g. CCT: Bolsa Familia) • Extending social services such as health to the poor • Separate treatment of labour market efficiency and social protection coverage

A social cohesion agenda:

• Equality of opportunity (especially between groups) • Avoid segmentation and dual systems • Institutions for wages to be set with less conflict

25

Duality and the emerging middle class (Brazil)

Source: da Costa et al (2011).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5

Out of labour force Unemployed Informal employeeSelf-employed Skilled self-employed Formal employee

The ‘missing middle’ in social protection coverage: informal middle class workers Population by income quintile and labour status (2006)

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Social protection from the social cohesion angle

The social cohesion perspective: a ‘missing middle’ reinforces duality and threatens social cohesion • How to provide social protection to that missing middle?

Experiences suggest three possible avenues

• Unbundling and de-mutualising (e.g. Unemployment savings accounts) • Subsidising contributions to the social security system • Universal entitlements

27

Labour markets: reforming labour institutions (China)

Source: Authors’ calculations based on Du and Pan (2009) and CASS. Source: Cai and Wang (2011).

0

10

20

30

40

50

60

70

80

90

100

0

100

200

300

400

500

600

700

800

900

1 000

1998 1999 2000 2001 2002 2009

Number of collective contracts (left axis)

Number of employees covered (right axis)

Thousand Million

0

50

100

150

200

250

300

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Average minimum wage in Chinese cities (1999 = 100)

Reponses: increase in minimum wages… …and wider use of collective bargaining

28

Labour institutions matter for social cohesion outcomes

ARG

AUS

AUT BEL

BRA

CAN

CHE

CHL

CHN

CRI

CZE

DEU

DNK

DOM

ESP

EST

FINFRA

GBRGRC

HUN

IRLITA

JAM

JPNKOR

LTU

LUX

LVA

MEX

NLDNOR

NZLPAK

PER

POL PRT

PRY

SLV

SVK

SVN

SWE

TURURY

USA

VEN

0.20

0.30

0.40

0.50

0.60

0 20 40 60 80 100

Gin

i coe

ffic

ient

Union density

%

Source: PGD 2012 based on OECD, PovCal and IILS data

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1 Shifting Wealth: an unprecedented opportunity?

Challenges for social cohesion in fast growing countries 2

Outline

3 What policies for social cohesion?

4 The how matters

30

The how also matters

Stop treating social cohesion as a by-product

Long term view is needed

Mobilizing domestic resources through establishing a citizens

– state contract Make the policy making process more inclusive

Working towards a comprehensive development strategy

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Summary

1. Shifting wealth: Opportunities and risks Growth, poverty reduction and human development More resources and unprecedented possibilities But, new opportunities are not necessarily equally shared

2. Response: Social cohesion as a framework for policy making Social cohesion as a means and an end Civic participation to reinforce the sense of belonging and responsibility

towards a social contract Leadership and commitment

Thank you

OECD Development Centre More information: www.oecd.org/dev/pgd webnet.oecd.org/pgdexplorer www.oecd.org