Tag Archives: OECD

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OECD Secretary-General Angel Gurría expresses condolences after Manchester attack

 

23/05/17 – In a letter to British Prime Minister Theresa May, OECD Secretary-General Angel Gurría wrote today:

“I would like to convey my heartfelt condolences following the devastating attack that took place last night in Manchester, leaving many casualties. Our thoughts and sympathies are especially with the people who lost their lives, as well as their families and all those affected by this horrendous attack.

“The OECD family stands firmly with you during this moment of national grievance, and is ready to assist in any way we can. We will never be defeated by terror and are united with the international community in categorically condemning this sickening act of hatred.” 

Bridging the generational divide in the UK

People of my generation grew up with a set of intuitive assumptions about human progress: hatred and prejudice would give way to reason, democracy would displace authoritarianism, and the economic good times would roll and roll.

 

Among those assumptions was the strong sense that we would live to enjoy a better quality of life than our parents. For much of the 20th century, the statistics bore that out. Average incomes rose with each successive generation.

 

No more. For Generation Y–the so-called “millennials” born between 1980 and 2000–the new century has brought a historic reversal of fortunes and a growing sense of pessimism.

 

UK polling conducted in 2016 found that 54% of people think today’s 18-35 year olds will have a worse life than their parents’ generation, which is a dramatic collapse in confidence since 2003, when only 12% of the public held that view.

 

In large part, the differential impact of the financial crisis is to blame. While all ages have experienced wage stagnation since 2008, younger cohorts have been hit particularly hard. For many, the wage squeeze has come early in their careers when pay progression is normally at its most rapid. As a result, the oldest millennials (born 1981-85) are now earning some £40 (about US$50) per week less around the age of 30 than those born 10 years earlier earned at the same age.

 

At the same time, younger people are increasingly struggling to accumulate the two major assets that my generation always took for granted: a pension and a home.

 

Private pension schemes are now less generous on average, and the state pension will replace a smaller share of earnings.

 

But the real scandal is in housing. Here, the market is fundamentally broken, due to inadequate supply, and first time buyers are paying the price. The proportion of 25-34 year olds in the UK who own their own home was 67% in 1991, but had declined to 36% by 2013-14. The trend was even more striking for those aged 16-24, where home ownership has declined from 36% in 1991 to 9% in 2013-14. No wonder that the under-50s own only 18% of the UK’s property wealth.

 

By contrast, older generations have been very effectively sheltered from the economic headwinds. The over-60s are the only age group to have become better off since 2007/08. From 2010 to 2015, the average British household saw its income fall by about £500 as a result of tax increases and spending cuts, yet the average two-pensioner household took a hit of just £23.

 

Changes to welfare policy have exacerbated the divide. The Resolution Foundation estimates that by 2020, compared with pre-crisis levels, working-age benefits will be 9% lower per person, child benefits 12% lower and pensioner benefits per pensioner 19% higher. Other perks which are specific to pensioners persist: winter fuel allowance, free bus travel, free TV licences.

 

Intergenerational inequality is aided and abetted by the fact that younger people are much less likely to vote than older people. 43% of 18-24 year olds voted in the UK General Election in 2015, compared to 78% of over-65s. As populations age across the developed world, the “grey vote” can only become more significant.

 

I would like to offer some tentative first steps towards restoring balance to this desperately unbalanced state of affairs. Similar problems exist across the developed world, but the solutions offered here are specific to the UK.

 

First, we need to rebalance the welfare system. Further cuts cannot and should not come exclusively from working-age households. Universal, non means-tested pensioner benefits like universal TV licences and winter fuel payments are impossible to justify, while the “triple lock” (by which pensions are uprated annually by inflation, earnings, or 2.5%, whichever is greater) is prohibitively expensive in the long term. The task of finding a sustainable replacement–perhaps a “double lock” linking increases to prices and earnings, but not a guaranteed 2.5% in all circumstances–should fall to a cross-party commission.

 

Second, we must correct the chronic undersupply of housing through a massive, publicly-underwritten house-building programme. This will require not only money but innovative political solutions to prevent a stand-off between central government and local authorities opposed to new developments.

 

Finally, I believe it is time to consider giving young people the opportunity to shape the political future by considering compulsory voting (with an option to abstain on the ballot paper). The evidence from Australia suggests this can counter the “grey vote” bias and force politicians to appeal to the whole electorate.

 

As the Resolution Foundation has argued, renewing the intergenerational contract is a shared challenge for our times. It requires bold thinking and political courage from a generation of leaders who have enjoyed the good times, and must now act to prevent a worrying divide from becoming an unbridgeable gulf.  

©Alamy

Visit www.openreason.uk

 

References and further reading

Corlett, Adam (2017), “As time goes by: shifting incomes and inequality between and within generations”, Resolution Foundation’s fourth report for the Intergenerational Commission, February, see www.resolutionfoundation.org

Gardiner Laura and Paul Gregg (2017), Study, Work, Progress, Repeat? How and why pay and progression outcomes have differed across cohorts, Resolution Foundation-Intergenerational Commission, February, see www.intergencommission.org  

IFS (2013), “Elderly see incomes rise, whilst young adults see large falls”, Press release, Institute for Fiscal Studies,14 June, see www.ifs.org.uk 

Let’s House Britain, UK Housing Crisis report 2014, see http://metrofinance.co.uk/ 

Mori-Ipsos (2016), “Only a third of Generation Y think their generation will have better quality of life than their parents…”, Poll, March, see www.ipsos-mori.com/

Mori-Ipsos (2015), How Britain voted, August, see www.ipsos-mori.com/ 

Shelter policy library (2015), Housing affordability for first time buyers, March, see www.shelter.org.uk

The Economist (2015), “The granny state: Britain should stop subsidising the old and rich at the expense of the young and poor”, 26 Feb, see www.economist.com

 

 

OECD Forum 2017 issues

OECD work on youth

OECD work on social and welfare issues

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US manufacturing decline and the rise of new production innovation paradigms

Between 2000 and 2010, US manufacturing experienced a nightmare. The number of manufacturing jobs in the United States, which had been relatively stable at 17 million since 1965, declined by one third in that decade, falling by 5.8 million to below 12 million in 2010 (returning to just 12.3 million in 2016). Certainly, the 2007–08 recession accelerated the disruption, but the causes were also structural, not simply financial. There was trouble with capital investment, output, productivity, and trade deficits. Contrary to what many believed, productivity gains due to robotics or automation have not been the cause of manufacturing employment’s decline; the sector has been hollowing out. 


This economic disruption has resulted in growing social disruption. While most people in the US assumed the nation was becoming one big middle class, instead a working class facing declining incomes came into clear, angry view during the 2016 US presidential election. The median income of men without a secondary school diploma fell by 20% between 1990 and 2013; for men with secondary school diplomas or some college, median income fell by 13%. The decline of US manufacturing–traditionally a route to the middle class–hit these groups particularly hard. There is now a major income inequality problem. 


The question is: can the US manufacturing sector spring back? A core idea now being explored in the US is that new production paradigms could transform the sector. We have seen these new paradigms before: application of steam power in the UK, development of interchangeable machine-made parts, then mass production in the US, and the creation of quality manufacturing in Japan. The United States is now competing with low-wage, low-cost producers, particularly in Asia. Could the economy use its still strong innovation system to develop new production paradigms to drive up production efficiency and drive down costs so it can better compete? 


Innovation also carries its own rewards; production innovation can enable more innovative–and competitive–products. Scientists and engineers are now telling us that there may be breakthroughs–new paradigms–available in a series of fields that could significantly change the way we produce complex, high-value technologies and goods, enabling dramatic production efficiencies. Advanced materials, digital production, photonics, lightweight composites, 3D printing, assistive robotics, revolutionary fibres, nano and biofabrication, all offer breakthrough production paradigms. These new technological advances must, in turn, be accompanied by new processes and business models to implement them. While new jobs may not necessarily be created at the production moment, job growth upstream and downstream of production is likely, given manufacturing’s role as the major job multiplier in the connected value chains of firms. 


Developing such new paradigms is the core idea behind advanced manufacturing in the US. Advanced manufacturing institutes as a means to nurture such paradigms are now being explored in depth across 14 new institutes, each organised around a potential paradigm. Created through collaborations between industry, universities, and state and federal governments–and cost-shared by all–they are undertaking collaborative research on advanced technologies, shared test beds and demonstration facilities, and new approaches in workforce training. They are an attempt to apply Germany’s Fraunhofter Institute model in a US setting, and borrow from the earlier US Sematech collaborative model that in the 1980s and 1990s applied advanced production processes to revive its semiconductor leadership. 


This is a highly complex model: each institute typically joins over a hundred small and large firms, regional universities and community colleges, and state and regional agencies, with backing from federal R&D organisations. These R&D agencies are used for funding single scientist principal investigators, not a swarm of diverse collaborators. One federal official has compared creating a manufacturing institute to forming a new nation. The institutes must operate at a regional level because manufacturing firms are embedded in regional ecosystems, but must also bring their new production technologies into implementation at a national level, a complex regional-national balancing act. 


The institutes have also become a new delivery mechanism for workforce education, a growing challenge for US manufacturers. If advanced manufacturing is to be implemented, it must have workforce and engineering communities trained for it. The United States has perhaps the most decentralised labour market of any developed economy, which makes such a major “up-skilling” project difficult. The institutes, with their ability to bring together manufacturers, community colleges, state programmes, university curricula, and online tools, with new technology development and testbed facilities, are now pursuing this task. 


Perhaps the most interesting feature of the US advanced manufacturing effort is the wide range of diverse technologies aimed at by particular institutes. While some countries are working on single-shot efforts to bring the internet of things into a manufacturing setting, the United States has a shotgun approach, pursuing a wide range of technologies, from materials to digital, to bio, to nano. A big issue in this diverse approach will be pulling the individual institute strands together into a new system. The future factory will not be organised around single technologies; it will merge and connect a series. The institutes are starting to come together to form a network, called ManufacturingUSA. A critical task for this new network will be to turn the institutes’ advanced technology strands into an entirely new production system. Hopefully, the potential of this new innovation model will continue to be tested. 


References
 

Bonvillian, William and Singer, Peter (forthcoming), Advanced Manufacturing: The New American Innovation Policies, MIT Press, Boston. 

OECD (2017), The Next Production Revolution: Implications for Governments and Business, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/9789264271036-en 

OECD (2016), OECD Science, Technology and Innovation Outlook 2016, OECD Publishing, Paris.
DOI: http://dx.doi.org/10.1787/sti_in_outlook-2016-en

OECD Forum 2017 issues

OECD work on innovation

OECD work on industry and entrepreneurship 

OECD work on the United States

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William B. Bonvillian
Lecturer at MIT and Advisor to MIT’s Industrial Performance Center

© OECD Yearbook
2017

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