TUAC NEWS
New L20 Modelling shows how the G20 Growth Targets can be met in an inclusive way
03/09/2014
- L20 Economic Modelling Resultspdf
Current G20 economic policies are failing to
deliver for citizens. Austerity in many countries has depressed
demand and is pushing the global economy onto the brink of
deflation. Deepening inequality is producing economic as well as
social damage. High unemployment and slow growth in many G20
countries is scarring a generation of young people. The choice for
the G20 is more of the same or to shift policies.
As G20 members are setting targets for the Brisbane Leaders’ Summit
in November, the L20 releases modelling data (prepared by Professor
Ozlem Onaran of the University of Greenwich) that shows how it can
be done by raising wages and public investment.
The results show that a “coordinated mix of polices in the
G20 targeted to increase the share of wages in GDP by 1%-5% in the
next 5 years and to raise public investment in social and physical
infrastructure by 1% of GDP in each country can create up to 5.84%
more growth in G20 countries.”
The L20 delegation heading to the Labour Ministers’ Meeting in
Melbourne on September 10-11 will present the findings and urge for
action to raise wages and reduce inequality.
For all the results of the L20 modelling download the full
report on the right-hand side.
For the list of L20 Priorities to the Labour Ministers, click here.
If policies remain unchanged, a 1%-point simultaneous decline in
the wage share in the world leads to a decline in the global GDP by
0.36%-points. However, demand in the world economy in aggregate
is “wage led”, and jobs, minimum living wages and collective
bargaining are a key part of the solution towards resilient and
inclusive growth with increases in aggregate demand and living
standards.
When a coordinated rise in wages can achieve the 2% growth target
alone, leaders have to start investing in working families and take
the opportunity to both create growth and decrease inequality. The
propensity of wage-earners to spend is higher than that of
profit-earners, so that the attacks on the distributional tools
driving a just wage share has been economically counterproductive
as well as socially unjust.
When wages are raised and investments in physical and social
infrastructure are added to the policy mix, the positive spill-over
effect on all G20 economies will be significant in raising growth.
Our simulations confirm that a public investment stimulus of 1%
of GDP in each country can lead to 1.94-3.88% higher growth in the
G20 – compared to business as usual.