29 November 2023
The OECD’s latest Economic Outlook downplays the impact of profits on inflation and instead expresses concerns about wage rises, calls for a return to austerity and underestimates the dangers of high interest rates says the Trade Union Advisory Committee to the OECD (TUAC).
The OECD’s Economic Outlook published today claims that labour costs are now contributing more than profits to prolonged inflation, despite the OECD’s recent Employment Outlook reporting that profits can absorb wage increases without further increasing prices.
‘’The OECD’s Economic Outlook is soft on profits and hard on wages. It has been conspicuously reluctant to criticise higher profit margins but is quick to claim that wages increases are a problem” said Veronica Nilsson, General Secretary of TUAC.
‘’The OECD’s approach to profits and wages is not balanced and should be more supportive of maintaining the real value of wages. The OECD should not be criticizing wages which drive consumption and economic growth.”
The Economic Outlook also calls fiscal policy to reduce public debt and “stronger near-term efforts to rebuild fiscal space” which in everyday language means a return to austerity. The OECD has not been so explicit in years in calling for austerity, marking a worrying return to the disastrous policies in the early 2010s that worsened the impact of the 2008 financial crisis and delayed the recovery by years.
Particularly worrying are OECD calls for “incentives to find work and work longer hours” and reform of pension and health systems.
“Countries need to invest in education, health care, social protection and climate action, not impose damaging cuts in public spending and force people to work longer hours.”
TUAC is also critical of OECD calls for monetary policy “to remain restrictive until there are clear signs that underlying inflationary pressures are durably lowered” and for suggesting that “some additional rate rises could still be needed”.
TUAC believes that OECD is downplaying the risks of high interest rates causing more damage to the economy in coming months, and that its low growth forecasts are over-optimistic.
For more on TUAC’s critique of current monetary policy see and https://www.oecd-forum.org/posts/the-monetary-policy-enigma-why-it-s-time-for-a-rethink (requires free log-in) and https://www.equaltimes.org/here-s-how-governments-can-tackle