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OECD Economic Outlook recommendations will weaken economies and widen inequality warn unions

07 June 2023

The OECD’s Economic Outlook 2023 offers a quality analysis of the many risks facing the global economy today but supports controversial recommendations that will weaken the economy and widen inequality warn trade unions.

The OECD forecasts continuing economic slowdown throughout 2023 and an upturn on the economy only in the course of 2024.

OECD policy recommendations continue to offer controversial support for maintaining a “restrictive monetary policy”, including further interest rate increases in some cases and keeping interest rates “higher for longer”. OECD also suggest a first return to fiscal austerity by its recommendation to phase out fiscal support to mitigate the cost of living crisis and to target support to vulnerable households inadequately covered by social protection.

Unions believe that none of these recommendations will help working people struggling to pay for energy and food and will, on the contrary, deepen the economic slowdown, increase unemployment and exacerbate inequality.

Unions also fear a recession with a slow and hesitant recovery if central banks, after slamming the monetary brakes, hesitate too long in reducing interest rates to pull the economy back from recession.

Unions consider strict targeting of cost-of-living support only to the most vulnerable households – when the purchasing power of wages has plummeted and too many households report struggling to afford basic essentials – to be mistaken and inadequate for tackling the widening inequality created by high inflation and higher interest rates.

While the OECD’s Economic Outlook acknowledges that inflation is also being fuelled by corporate pricing strategy to increase profits it surprisingly fails to make any recommendations about strengthening worker bargaining power to redistribute income back from profits to wages and about taxing profits curbing excess profits.

“A wide menu of more appropriate policies is available but has been overlooked by the OECD, Unions are concerned that the economic slowdown in recent quarters is just the start and that the full force of recent interest rate hikes will hit economies and jobs in coming quarters and risk creating more instability in the financial market.”

— Veronica Nilsson, Acting General Secretary of TUAC.

“Record profits show that there is room for wage increases to claw back the purchasing power lost by workers to business profits. If the OECD really wants to empower women workers as they say, they should also urge governments to promote collective bargaining and raise minimum wages to tackle the gender pay gap, especially for women stuck in low-paid jobs with prohibitively high childcare costs.”

— Liz Shuler, President of TUAC (and the American union AFL-CIO)

Unions welcome and strongly support the OECD’s call for more affordable childcare, which is substantiated by the OECD’s shocking statistic that taking up a job can cost up to over 120% of the wage when childcare costs are added!

Policy solutions to inflation driven by supply-side shocks and increasing profits supported by trade unions include

  • An immediate stop to increasing interest rates
  • Renewed industrial policy, selective price controls, and short and medium-term public investments to increase capacity and secure supply
  • Governments promoting collective bargaining and tri-partite social dialogue to enable real wages to recover lost purchasing power.
  • Governments investing in infrastructure, health, and education and expanding social safety nets