In many countries inequality is growing as the benefits of economic growth go to the richest members of society. Inclusive Growth is all about changing the rules so that more people can contribute to and benefit from economic growth. For more information see www.oecd.org/gov/inclusive-growth-and-public-governance.htm
1. Luiz de Mello and Paloma Baena Olabe
Directorate for Public Governance and Territorial
Development, OECD
Oxford, 3 February 2016
The Governance of
Inclusive Growth
1
2. Rising inequalities
demand new
approaches to
growth
There has been growing attention to the
links between growth and inequality
• In most OECD countries, productivity
growth has slowed, taking its toll on the
ability of our economies to grow over the
longer term
• Unemployment remains high in many
countries, especially among youth and the
hardest hit by the crisis
• Income inequality has been on the rise in
most OECD countries and EMEs
• Poverty has risen since the crisis, especially
among children and youth
2
3. Inclusive growth is
about improving the
growth prospects of
our economies
together with a
fairer distribution of
the benefits of
growth
Source: OECD, Economic Outlook database
3
Exhibit 1: GDP growth has slowed while income
inequality has increased in many countries since
the crisis
4. Gap in life expectancy at age 30 by education level, 2010 (or latest year)
Inequality goes far
beyond income and
includes other aspects
of life that matter for
people’s wellbeing,
like education and
health
Source: Eurostat database complemented with national data from Austria, Netherlands and Switzerland.
4
Exhibit 2: Outcomes in education correlate
strongly with health conditions
5. Source: OEC D (2014) How’s life in your region?
5
Life expectancy at birth, 2012
The regional
dimension of
inequality is often
neglected,
although “place-
based” policies are
often key to
addressing
inequality
Exhibit 3: Inequalities are often higher within than
between countries
6. What is needed to deliver IG
outcomes?
A broader analytical framework that
highlights linkages -- and therefore
trade-offs and synergies -- among
sectoral policy objectives and tools
An appropriate governance system
throughout the policy cycle (from
design to implementation and
evaluation)
6
7. Needed: a broader analytical framework to think about IG
Traditional approach Economics of inclusiveness
• Supply-sided: focus on GDP as the key
measure of performance
• Unidimensional: emphasis on material
living standards (income) as indicator of
well-being
• Attention to “representative agent”: focus
on averages (“per capita”)
• Going beyond GDP: focus on well-being as
key measure of performance
• Multidimensional in nature: focus on income
as well as non-material outcomes (health,
education, jobs)
• Attention to distributional impacts (different
social groups and scales) 7
Source: OEC D
8. Also needed: Governance systems to deliver IG outcomes; action is
needed beyond policy design to include implementation and evaluation
8
9. Policy Design Policy Implementation Policy Evaluation
• IG challenges are identified
and understood
• A whole-of-government vision
for IG that steers, aligns
objectives
• Policy frameworks tackle
multidimensionality and seek
policy coherence across
sectors and levels of
government
• Solid evidence (ex ante, ex
post) assesses distributional
impacts
• Spending decisions are
aligned with medium and
longer term objectives
• Co-ordination, whole-of-
government and
accountability mechanisms
enable pursuit of joined-up
outcomes
• Innovation in service delivery
facilitates access across
social groups and locations
• Assessment of distributional
impacts of policies on
outcomes that matter for well-
being
• Responsive changes are
made based on beneficiary
assessment of services &
service providers
• Comprehensive evaluation
approaches and feedback
loops inform new policy
packages (including from
independent audit and control
mechanisms).
Each phase of the policy cycle plays a role:
9
10. • Openness and engagement support inclusive problem identification
and decision making
• Transparency and integrity tools help avert policy decisions that
benefit the few
• Participatory mechanisms promote an inclusive policy
implementation process
• Inclusive public sector workforce reflects society and can better
engage in delivering
• Access to dispute resolution enables opportunities, particularly of
vulnerable groups
Inclusive institutions for inclusive policy making
Policy levers that promote inclusiveness:
10
11. What tools can we use to achieve
inclusive growth?
Multidimensional policy frameworks
Consultation and engagement:
understanding what citizens need
Integrated, outcomes-based performance
models
Mechanisms to inform policy-making
Access and reach of services
Mitigating the risk of capture
11
12. 12
qsdfdf
Assess the impact of policy across key living standards
d
HIGHER LIVING
STANDARDS
ECONOMIC CAPITAL
NATURAL CAPITAL
SOCIAL CAPITAL
HUMAN CAPITAL
Economic
Growth
Sustainability
for the Future
Managing
Risks
Increasing
Equity
Social
Cohesion
Multidimensional Policy Frameworks
Introduced in mid-2000s
Challenging staff to systematically consider
how any particular policy advice fits within
broader vision
Requires economic growth vision to calculate
distributional consequences and to other
policy objectives
Evaluating policies in terms of capacity to
increase “opportunities and capabilities for
participation in society”
The New Zealand Living Standards Framework
Source: NZ Treasury
13. Multidimensional Policy Frameworks
• Request from Parliament to
government: present wealth
and well-being indicators
other than GDP when tabling
the annual budget
• Law of 2015: 10
multidimensional KNIs
(include life satisfaction,
income inequality, carbon
footprint) that speak to 3
societal challenges:
economic, social and
environmental
• The goal: to report progress
but also to assess impact of
policies in early stages.
Source: Direction du Budget
Linking key government strategies to a set of well-being indicators in France
12
14. Consultation: understanding citizen
needs, engaging citizens
14
How can we better listen to citizens and businesses
to improve public policies and services for inclusive
growth?
How can we give voice to all and create conditions
for greater engagement in policy-making and
service delivery throughout the policy cycle?
How can we effectively engage with vulnerable
groups and the excluded?
How can we ensure timely engagement with
citizens and business?
15. Regulation: When does consultation happen?
Consultation on both primary and subordinate laws and regulations often happens too late in the regulatory cycle
Source: OECD (2015)
15
16. Source: Scottish Government, www.gov.scot/About/Performance/scotPerforms.
Outcomes-based (i.e. concerned with good end-states)
rather than output-based (i.e. concerned with
measuring the volume of services produced).
16
Integrated, outcomes based performance
Purpose – sets out the direction and ambition for Scotland
11 Purpose Targets – high level
targets that show progress
towards the Purpose
5 Strategic Objectives - describe where the Scottish
Government will focus its actions
16 National Outcomes – describe what the Scottish
Government wishes to achieve over the years to 2017
50 National Indicators– enable the Government to track its
progress towards the Purpose and the National Outcomes
The “Scotland Performs” framework:
17. Responsibility for IG outcomes lies across administrative units and ministerial lines
– how do we align incentives horizontally?
• In its move towards a national well-
being framework, horizontal teams to
develop indicators of “well-being,
resilience, and sustainability.”
• Together with other measures
(rotation, horizontal budgets) building
space for cooperation.
The case of Israel:
• Getting departments to work together
a major priority.
• 20% of remuneration package of
deputy ministers (department heads) is
based on performance and 75% of this
is based on performance on horizontal
issues.
• Assistant deputy ministers – 50%
performance pay.
The case of Alberta, Canada:
17
Integrated outcomes-based performance models:
performing across silos
18. Mechanisms to inform policy: can ex ante RIA better guide policy-
making for IG? Are other budgetary and regulatory tools needed?
Some regulations
Major regulations
All regulations
Number of jurisdictionsSource: OECD Regulatory Outlook (2015)
Distributional impacts are not among the most common objectives of RIA
19. Mechanisms to inform policy: few OECD countries have deployed
ex post evaluation systematically
While ex ante analysis is widespread, there is much room for increasing the use of ex post evaluation of regulations
Source: 2014 Regulatory Indicators Survey results
19
20. Access and reach of services: breaking cycles
of disadvantaged through opportunity
20
Action Purpose
Improve access to quality services
such as education, healthcare,
justice, etc.
• Breaks ingrained cycles of
disadvantage
• Delivers higher-paid jobs, better living
standards longer, more fulfilling lives
for marginalised groups
Accelerate digital transformation,
promote innovation, update public
sector skills
• Reduces fixed costs of service delivery
• Improves quality, reach and targeting
of services
Better understand user needs and
experiences
• Improves quality, reach and targeting
of services
Ensure collaboration between service
users, providers and professionals
• Public services that are better
designed and delivered
21. 21
Mitigating the risk of capture
Unregulated lobbying, conflicts of interest of public officials
and opacity in political finance may enable policy capture
Manage lobbying activities with implementation of a
lobbying registry, code of conduct and monitoring pre/post
public employment.
Ensure the integrity of policy making by implementing asset
and private interest disclosure requirements by public
officials.
Allocate sufficient human and financial resources to electoral
and other monitoring and accountability bodies and map
potential integrity and compliance risks.
Policy capture occurs when the interests of a narrow group
dominate those of other stakeholders
22. Summing up:
Growing number of countries and governments focusing on wider range
of objectives, including IG; solid methodological work under way (e.g.
well-being)
This change is requiring fundamental changes to how public sector works
and organizes itself (e.g. horizontality, coordination)
It also imposes new information needs to inform decisions and requires
new efforts to (i) articulate a centralised framework (e.g. in the hand of
Treasury or central government) with agency-specific frameworks, and (ii)
aligning high-level objectives and instruments with sectoral objectives
and policy tools.
This must be accompanied by an inclusive policy-making process (e.g.
consultation, avoidance of capture, transparency, openness, etc.)
22
23. Comparative data, good practice, policy
discussion and policy guidance
Building blocks for Multidimensional Policy
Frameworks
New approaches for traditional tools to better
inform policy-making
New forms of service delivery, through the
combined potential of data, digitization and
innovation
Better data on impact of public sector on outcomes
that matter for wellbeing
Deepen work on inclusive institutions (gender in
public life, integrity frameworks)