3 ways countries can boost social inclusion and economic growth

Traditionally, boosting growth has been seen as the best way to create job opportunities and raise living standards. But governments should now look at this the other way around: by better equipping their citizens to navigate the world of work, countries can most effectively boost their economic growth and development.

Growth is decelerating in Europe, the United States, China, Japan, and other leading economies, as the International Monetary Fund and World Bank recently highlighted by revising their global forecasts for this year substantially downward. At the same time, political and business leaders know they need to do more to prepare workforces for the labor market in an age of rising automation, stagnant wages, and greater part-time, temporary, and contingent employment.

These two challenges – reinvigorating economic growth and preparing people for the future of work – are linked, but not necessarily in the conventional sense that macroeconomic stimulus or improved efficiency constitutes the best way to create job opportunities and raise living standards. The experience of recent decades shows that growth alone is not enough to reduce the increased inequality and insecurity accompanying the transformation of work. Moreover, high debt levels and historically low interest rates have left policymakers with fewer traditional tools to stimulate the economy in the event of another recession.

In this new era, government and business leaders need to view the relationship between growth and labor markets the other way around. It is by upgrading their social contracts and better equipping their citizens to navigate the world of work that countries can most effectively boost their economic growth and development.

That is the conclusion recently reached by an independent Global Commission on the Future of Work, organized by the International Labour Organization and co-chaired by South African President Cyril Ramaphosa and Swedish Prime Minister Stefan Löfven.

The commission recommended three practical steps – all of which involve investing more in people – that countries can take to improve social inclusion and economic growth simultaneously. Investing more in people is not only essential to strengthen countries’ social contracts with citizens at a time of rapid technological change. It can also form the basis of a new, more human-centered growth and development model that may be the best hope for sustaining the world economy’s momentum as the two growth engines on which many countries have relied for years or even decades – extraordinary macroeconomic stimulus and export-led industrial production – continue to lose steam.

First, countries should increase public and private investment in their citizens’ capabilities, which is the most important way they can durably lift their rate of productivity growth. Some governments chronically underinvest in access to quality education and skills development. But policymakers everywhere need to do more as populations age and automation disrupts both manufacturing, on which developing economies have traditionally relied to industrialize, and services, in which much advanced-economy employment is concentrated. The commission therefore called on countries to build a universal framework to support lifelong learning – including stronger and better-financed labor-market training and adjustment policies, expanded public employment services, and a universal social-protection floor.

Second, governments, together with employers’ and workers’ organizations, should upgrade national rules and institutions relating to work. These influence the quantity and distribution of job opportunities and compensation, and thus the level of purchasing power and aggregate demand within the economy. Specifically, the commission called for a Universal Labor Guarantee under which all workers, regardless of their contractual arrangement or employment status, would enjoy fundamental rights, an “adequate living wage” as defined in the ILO’s founding constitution 100 years ago, maximum limits on working hours, and health and safety protection at work.

Moreover, collective representation of workers and employers through structured social dialogue should be ensured as a public good and actively promoted by government policies. From parental leave to public services, policies need to encourage the sharing of unpaid care work in the home to support gender equality in the workplace. Strengthening female voices and leadership, eliminating violence and harassment at work, and implementing pay transparency policies are also important in this regard.

Third, countries should increase public and private investment in labor-intensive economic sectors that generate wider benefits for society. These include sustainable water, energy, digital, and transport infrastructure, care sectors, the rural economy, and education and training. The Business and Sustainable Development Commission has estimated that achieving the UN Sustainable Development Goals could generate $12 trillion of market opportunities in four areas alone – food and agriculture, cities, energy and materials, and health and wellbeing – and create up to 380 million jobs by 2030. Capitalizing on these possibilities could help countries to compensate for the labor-displacing and potentially demand-suppressing effects of automation and economic integration.

These three steps constitute a strategy for all countries, regardless of their level of economic development, to strengthen both social justice and economic growth – and, by extension, public faith in political institutions.

In the heat of the financial crisis a decade ago, leaders of G20 countries pledged to build a more balanced and sustainable growth model that embodied lessons from the economic imbalances and policy mistakes of the past. The world has since made little progress toward realizing this goal. But the path it must take is clear: sustained, increased investment in people’s capabilities, purchasing power, and job opportunities.