Slides

1. New Approaches to Economic Challenges
NAEC Group Meeting, 28 November 2014
SESSION 6
INCOME, JOBS AND HEALTH
IN THE INCLUSIVE
GROWTH FRAMEWORK
Stefano Scarpetta
Director for Employment, Labour and Social Affairs

2. Trade-offs and complementarities in promoting inclusive
growth: the focus on the level and distribution of income,
jobs and health
• How income inequality affects
growth, and through which
channels
• Beyond employment -
unemployment: the level and
distribution of job quality
• How health affects well being
and social and income
inequalities and vice versa

3. 3/6
Closing the loop: how inequalities affects
economic growth
• Growth equation estimated with panel data (33 OECD
countries, 1980-2010)
 Homogeneous set of countries
 Good quality data (Income Distribution Dataset)
 State-of-the-art estimation techniques
• Higher (net income) inequality lowers economic growth
 Increasing income inequality by 1 Gini pt. lowers yearly GDP per
capita growth by around 0.1 p.p. in long run (25 years), and by 0.8 p.p.
in the short-run (over 5 years)
• Result is driven by disparities at the lower end of the
distribution, involving lower middle classes, not just the poor.
• Redistribution (as captured by the data) has not led to lower
growth outcomes

4. 4
The role of human capital for the inequality-growth
• In presence of credit
constraints, inequality
undermines education
opportunities of the poor
• Evidence from PIAAC strongly
supports this mechanism:
– Both the quantity and the
quality of human capital of
people from poor socio-economic
background
deteriorate as inequality
rises
– Increasing inequality by ~6
Gini pts. lowers numeracy
score by ~ 6 points (nearly
40% of the baseline
differential between Low
and Medium PEB
individuals).
nexus

5. 5
Job Quality: a new way to look at labour
market outcomes
• Why does job quality matter?
– A key element of individual well-being (i.e. an end in its own right)
– Determines labour force participation, worker commitment and productivity (i.e. a
means to greater economic performance)
• Three key dimensions that are key for well-being and policy relevant:
– Earnings quality
– Labour market security
– Quality of the work environment
• Three main principles to ensure that indicators are readily interpretable and
comparable:
– Focus on outcomes experienced by workers;
– Concentrate on individual workers;
– Favours objective features of job quality
• Together with job quantity, these indicators allow for a comprehensive assessment of
the role of policies and institutions

6. 6
Job Quality: a new way to look at labour market
outcomes
Country rankings (1-32) from highest to lowest performance, 2010

7. 7
Socio economic differences lead to health
differences: the London Jubilee Line….

8. 8
…but poor health also drives to inequality
• This two way relation is
what we will look at:
• How socio-economic factors
affect health outcomes
• How health inequality
affects economic outcomes
20
18
16
14
12
10
8
6
4
2
0
A. Unemployment/labour force (in %), latest year available
None Mental ill-health
CHE NLD NOR GBR AUS USA AUT SWE DNK BEL
%
B. Share of people with a household-size adjusted net income below 60% of the median income, latest
year available
45
40
35
30
25
20
15
10
5
0
NOR CHE BEL SWE AUS AUT DNK USA GBR
%
For example, people with a mental disorder face a large risk of job loss and
unemployment (Panel A) and of falling into poverty (Panel B)