Chapter 1. Coherent approaches for empowerment, inclusiveness and equality

This chapter applies a policy coherence for sustainable (PCSD) lens to identify critical interlinkages between the Sustainable Development Goals (SDGs) to be reviewed by the High-Level Political Forum (HLPF) in 2019: Goal 4 on quality education, 8 on decent work and economic growth, 10 on reduced inequalities, 13 on climate action, and 16 on peace, justice and strong institutions. It draws on recent OECD work to explore each of these five Goals in terms of (i) context and challenges; (ii) critical interactions between the Goals, and the transmission mechanisms through which they operate; and (iii) potential policy and governance responses to ensure coherent implementation. The chapter aims to provide analytical input and inform the thematic review at the HLPF. This work is part of the OECD Action Plan on the Sustainable Development Goals, which calls on the OECD to contribute to policy analysis, guidance and tools to support countries’ efforts to implement the SDGs.

    

Introduction

In July 2019, the United Nations High-Level Political Forum (HLPF) will assess progress towards achieving the Sustainable Development Goals (SDGs) under the theme of “Empowering people and ensuring inclusiveness and equality”. In addition to SDG 17 on the Means of Implementation, which is reviewed every year, the 2019 review will focus on the following SDGs (Annex 1 provides a complete overview at target-level):

  • SDG 4: Ensure inclusive and equitable quality education and promote life-long learning opportunities for all;

  • SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all;

  • SDG 10: Reduce inequality within and among countries;

  • SDG 13: Take urgent action to combat climate change and its impacts; and

  • SDG 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

Recognising that the SDGs are indivisible and integrated – as stated in the 2030 Agenda – the chapter applies a Policy Coherence for Sustainable Development (PCSD) lens to highlight critical interlinkages among the group of SDGs under the 2019 HLPF review. PCSD is an approach and policy tool for integrating the economic, social, environmental and governance dimensions of sustainable development at all stages of policy making. It aims to: (i) foster synergies and address trade-offs across policy areas; (ii) reconcile domestic policy objectives with internationally agreed objectives; and (iii) address the transboundary and long-term impacts of policies. In a highly interconnected world, the transmission channels between countries are numerous – for example through financial flows, imports and exports of goods and services, migration or knowledge transfers.

Scope and purpose

Drawing on OECD work, this chapter explores each of the Goals under 2019 HLPF review in terms of: (i) context and challenges; (ii) critical interactions between the Goals, and the transmission mechanisms through which they operate; and (iii) potential policy and governance responses to ensure coherent implementation. Many goals and targets can contribute to empowering people and ensuring inclusiveness and equality in ways that are mutually reinforcing. For example, equal access to quality education (SDGs 4.1 and 4.3) promotes social mobility; contributes to economic empowerment by providing skills that help people find more qualified and decent jobs (SDG8.5); and increases their incomes (SDG10.1). Conversely, unequal access to land and other productive resources (SDG1.4), for example, will reduce employment opportunities for those who are excluded and also increase inequalities. Moreover, these types of interlinkages depend on specific country contexts and challenges.

This chapter aims to inform the thematic review at the 2019 HLPF. In response to the OECD Action Plan on the Sustainable Development Goals (2016), it seeks to provide analytical input and guidance to foster policy coherence for sustainable development in countries’ implementation of the 2030 Agenda with a view to accelerate progress. To this end, the chapter draws on the most recent OECD work on inclusive growth and sound public governance, as well as on topical expertise and policy advice in the areas of education, employment and social policies, and climate change.

Empowerment, inclusiveness and equality in the 2030 Agenda

Empowerment, inclusiveness and equality cannot be dealt with in isolation – just like the SDGs cannot be implemented independently from each other. They are closely interrelated concepts that cut across the 2030 Agenda (Figure ‎1.1).

Empowerment is essential for pursuing better lives for all persons. It involves personal choice and access to opportunities and resources. Inclusiveness is fundamental for recognising diversity and addressing the different needs of people – irrespective of sex, age, race or ethnicity, disabilities, whether they are migrants, indigenous peoples, children or youth. It involves increased participation and reduced exclusion of persons with economic, social, or political disadvantages, especially those in vulnerable situations. Equality is a multi-dimensional concept. It includes economic, social and environmental equality; equality before the law; equality at home and in the work place; and equality of outcomes.

Promoting empowerment, inclusiveness and equality requires integrated and coherent approaches that address their multiple dimensions. Policy coherence is essential to fully understand and address the interrelated causes of inequality, exclusion and disempowerment. These include, for example, structural factors, both at international and national levels, which limit people’s opportunities to benefit fully from economic assets and resources, or discriminatory laws, regulations and policies and regressive tax systems.

Context and challenges: An overview

The following sections provide a brief overview of global progress on the SDGs under HLPF review. They are intended to set the scene for the remainder of the chapter, which looks more closely at the interactions between the Goals.

Goal 4: Quality education

Sustainable Development Goal 4 calls on all countries to ensure inclusive and equitable quality education and promote life-long learning opportunities for all. It sets an ambitious agenda that emphasises quality learning and equity in education alongside the more traditional indicators of access and participation.

The past 15 years have seen considerable gains in education enrolment worldwide. Yet, in 2014, about 263 million children and youth were out of school, including 61 million children of primary school age. Sub-Saharan Africa and Southern Asia account for over 70% of the global out-of-school population in primary and secondary education (UN, 2018[1]).

According to the United Nations second progress report on the SDGs, equity issues constitute a major challenge in education. In all countries with data, children from the richest 20% of households achieved greater proficiency in reading at the end of their primary and lower secondary education than children from the poorest 20% of households (United Nations, 2017[2]). In most countries with data, there is also a geographical divide: urban children scored higher in reading than rural children.

Figure ‎1.1. SDG targets related to equal rights and equal access of all people
Figure ‎1.1. SDG targets related to equal rights and equal access of all people

Note: This figure depicts the SDGs horizontally across the top and the targets vertically, with a view to show the spread of targets across the 2030 Agenda that relate to equal rights and equal access of all people to various elements of sustainable development, e.g. education (SDG 4), water (SDG 6), energy (SDG 7), justice (SDG 16) and science, technology and innovation (SDG 17).

Another challenge relates to the lack of trained teachers and the poor condition of schools in many parts of the world, which are jeopardising prospects for quality education for all. Sub-Saharan Africa has a relatively low percentage of trained teachers in pre-primary, primary and secondary education. Moreover, the majority of schools in the region do not have access to electricity, computers and the Internet, or even potable water.

In OECD countries, key trends and challenges for education include rapidly evolving demand for qualification and skills, demographic, social and economic change and increasing system complexity.

Rapidly evolving skills needs can contribute to increasing social and economic disparities if education systems cannot respond quickly. Jobs involving routine cognitive or mechanical tasks are susceptible to substitution by technology, whereas many jobs involving non-routine tasks that cannot be carried out by technology occur at either the low or the high end of the skill distribution (Levy and Murnane, 2013[3]; OECD, 2017[4]).

Demographic change poses challenges on how to distribute limited education resources fairly among heterogeneous school profiles. Some countries face decreasing enrolment in some areas but increasing enrolment in others. Population ageing may result in larger shares of people attending post-secondary education than ever before, which raises the challenge of balancing quality of and access to education for all. Increased migration, in turn, involves challenges related to a more diverse and multicultural student population, including facilitating their integration into the labour market and society (OECD, 2018[5]).

Increasing system complexity requires ensuring coherence in policy design and implementation processes. People have high expectations on the quality of their education systems; the number of stakeholders in education systems is larger than ever before; and, with the progress of technology, engagement and accountability mechanisms are becoming more sophisticated. Responding to the dual requirements of involving stakeholders and generating evidence to inform the policy discourse is a key objective for OECD countries’ education systems (OECD, 2018[5]).

Goal 8: Decent work and economic growth

Promoting more inclusive access to good quality jobs, including for women, migrants and marginalised groups, increasing labour productivity and improving access to financial services and benefits are essential components of sustained and inclusive economic growth. This is at the core of SDG 8, which calls on all countries to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

For the first time in many years, all the major regions of the world are enjoying a widespread and largely synchronised economic upswing (OECD, 2018[6]). Digitalisation, globalisation, demographic and climate change are bringing about significant changes in the rate and composition of productivity growth, business dynamism and employment gains. While these changes offer potential for large economic gains, they also raise new challenges and policy needs. Notably, the impact of the current growth model, with unsustainable exploitation of natural resources and ecosystems, threatens the foundations of continued growth.

At the same time, recent decades have seen a persistent slowdown in productivity growth in developed economies and, more recently, also in emerging economies. Productivity growth is essential for reducing poverty and unemployment and for creating jobs. Behind this slowdown, there has been a growing dispersion of productivity performance within countries between firms and regions, with some of them enjoying fast productivity gains enabled by rapid technological progress, and others lagging behind. In other words, while the productivity frontier keeps advancing, these gains have not diffused throughout the rest of the economy (OECD, 2018[7]). A number of studies also show that wage dispersion is largely explained by an increase in wages between firms rather than within them.

Innovation is key to drive long-term productivity and income growth. Digitalisation in particular offers great scope for improving production methods, but firms’ uptake of new technologies is uneven. For digitalisation to strengthen overall growth performance, the divide between frontier and lagging firms needs to be closed. As advanced economies converge towards the frontier, growth should become increasingly innovation-driven. For emerging and developing countries that have come less far along the convergence process, the ability to adopt technologies is essential for raising productivity and speeding up structural change (OECD, 2018[8]). In many countries, poor access to finance and skilled labour undermine businesses’ potential for growth.

Jobs are being created, yet many people have seen little or no income growth during the last decade. Inequality is also persistent and on a longer-term trend rise within many countries: affluent households have seen their living standards increase faster than those of the poorest and the middle class (OECD, 2019[9]). This accumulation of disadvantages for certain income groups can have detrimental effects on the prosperity and well-being of all, as large degrees of inequality weigh on the potential for future economic and productivity growth (OECD, 2018[8]). The quality of people’s working environment matters too, as quality jobs are an important driver of increased labour force participation, productivity and economic performance. Responsible business conduct plays an important role here, as companies – through various national and international initiatives and agreements – have committed to uphold labour rights and standards in their activities.

In countries such as India, Indonesia and Turkey, but also Italy and Greece, labour informality remains a key challenge for boosting inclusive growth. Bringing more workers in formal jobs will offer better prospects to improve skills and productivity while providing them with better social protection (OECD, 2018[6]). Reducing gender pay gaps, in turn, could make it more financially attractive for women to work, thus making labour markets more inclusive.

Goal 10: Reduced inequalities

Globalisation, digitalisation, demographics and climate change are transforming the way economies work, providing new opportunities for growth. At the same time, they are raising the risk of deeper inequalities if the gains from growth are not evenly shared among people, firms and regions. Leaving no one behind, the 2030 Agenda’s cardinal principle, implies that the global economic recovery should benefit all people in all countries. Yet, the gap between rich and poor continues to widen, with growth disproportionately benefiting higher income groups. Arresting this trend has become a priority for policy makers around the world: with the adoption of SDG 10, they have made a collective commitment to reduce inequality within and between countries.

An important source of global income inequality is increasing income inequality within countries. In OECD countries, recent decades have seen median and lower incomes grow more slowly than top incomes (Figure ‎1.2). In emerging economies, a sustained period of strong economic growth has helped lift millions of people out of absolute poverty, but the benefits of growth have not been evenly distributed and high levels of income inequality have risen further. In developing countries, three of every four households are in societies where incomes are more unequally distributed now than in the early 1990s (UNDP, 2013[10]).

Figure ‎1.2. Real disposable income growth by income position
Average for 17 OECD countries, 1985-2016 (1985 = 100%)
Figure ‎1.2. Real disposable income growth by income position

Note: Unweighted average for 17 countries for which long-term data are available: Canada, Denmark, Finland, France, Germany, Greece, Israel, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Sweden, the United Kingdom and the United States.

Source: OECD (n.d.[11]), Income Distribution Database (IDD), www.oecd.org/social/income-distribution-database.htm.

In contrast to the trend seen in within-country inequality, income inequality between countries has been on a general trend towards convergence between developed and developing countries since the early 1990s, mainly as a result of rapid economic growth in Asia. Once Asia is excluded, however, income differentials between developed and developing countries remain large and have not changed significantly (UN DESA, 2015[12]).

Wealth inequality is equally high: globally, in 2014, the richest 5% held on average more than one third of the total wealth; and the richest 1% held nearly one-fifth (OECD, 2018[8]). High levels of wealth inequality may increase the risk that narrow interest groups could influence the policy making process and “capture” its benefits, especially if not counter-balanced by well-designed regulation on lobbying and campaign financing.

Inequalities have also undermined people’s confidence in open trade and markets and could further weigh on long-term growth and macro-economic stability. Making the international trading system work better for more people calls for an approach that puts improved well-being and stronger and more inclusive growth at the centre and empowers citizens, firms and communities to adjust to rapid changes and benefit from the opportunities created by technology, globalisation and trade (OECD, 2017[13]).

Gender gaps in employment and earnings have declined, but still remain large and there is a need for policies to eliminate the unequal treatment of men and women in the labour market (OECD, 2017[14]). In addition, earnings inequality among women is higher than among men, and one could expect this to drive up overall inequality (OECD, 2015[15]). In developing countries, women are often disproportionately affected by poor infrastructure or denied control and ownership of productive and economic resources, such as land. This reduces their educational and employment opportunities further.

Migration can offer important benefits to countries of origin and destination alike. But it can also create new inequalities and exacerbate existing ones. Not everyone has equal access to the benefits of migration: migration often reflects and reinforces existing spatial, structural and social inequalities including those related to gender, age and income. Inequalities can also result from increased barriers to migration, irregular and precarious migration, poor labour conditions, and a lack of rights for migrants and their families (Crawley, 2018[16]).

Goal 13: Climate action

Due to global economic growth, the surging use of fossil energy, and increases in worldwide consumption, transport and trade, global greenhouse gas emissions have more than doubled since the early 1970s (OECD, 2015[17]; 2008[18]). Recent studies suggest that human activities have already caused a rise in global temperatures of around 1.0°C from pre-industrial levels (IPCC, 2018[19]).

Climate change presents a threat to sustainable development everywhere, with disproportionate impacts on the poorest and most vulnerable. In fact, climate change could even accelerate inequality as poor and low-income people depend strongly on natural resources and functional ecosystems for their livelihood. They also tend to live and work in areas more susceptible to temperature extremes, in buildings less able to withstand them, and with little formal social protection.

Urgent action to combat climate change and its impacts, as called for by SDG 13, is thus integral to the successful implementation of the 2030 Agenda and for leaving no one behind. Indeed, pursuing climate action and sustainable development in an integrated and coherent way offers countries a strong opportunity to achieve their common objectives under all three post-2015 agendas for action: the Paris Agreement, the 2030 Agenda, and the Sendai Framework for Risk Reduction (UNFCCC, n.d.[20]).

Climate change has far-reaching, mainly negative, consequences on the global environment, economy and our societies as a whole. It will increasingly contribute to the already alarming loss of biodiversity; threaten agricultural production across the world; lead to rising sea levels and loss of land and capital in coastal areas. These effects will have negative consequences on the livelihoods and well-being of populations, thereby triggering population movements within and between countries (OECD, 2018[21]).

The 2015 Paris Agreement is a milestone of international co-operation on climate change, but current efforts must be accelerated in order to “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change”.

Goal 16: Peace, justice and strong institutions

In many countries, the financial crisis strained the relationship between government and citizens and weakened trust in public institutions. Lack of trust in government compromises the willingness of citizens and business to respond to public policies and contribute to economic recovery and sustainable development. Similarly, it can affect their compliance with regulations and tax obligations.

The most cited reason for lack of trust in government is corruption. Corruption undermines productivity through biased decisions in both the public and the private sector over the use of resources (OECD, 2018[22]). It facilitates illegal migration and the smuggling of arms, natural resources or other stolen consumer goods, as well as trafficking in drugs, cigarettes and alcohol, amongst others. Employment rights, decent pay and working conditions are also affected by corruption, as jobs in the production of counterfeit goods are unregulated and low-paid. Workers are placed in a vulnerable position and not granted the same form of protection as in the more regulated employment market (OECD, 2017[23]).

Weak rule of law undermines social, political and economic stability and increases the risk of geopolitical and social conflict (WEF, 2017[24]). Today, an estimated four billion people around the world live outside the protection of the law, mostly because they are poor or marginalised within their societies. Women, who often face multiple forms of discrimination, violence and sexual harassment, are particularly affected by legal exclusion.

Conflict and fragility adversely affect the lives of millions. Without action, more than 80% of the world’s poorest will be living in fragile contexts by 2030 (OECD, 2018[25]). In fragile contexts, rates of extreme poverty can increase as individuals are displaced, livelihoods are devastated, and opportunities for broader growth, development and prosperity are destroyed. Open, effective and accountable institutions, together with sound public governance, can make a real difference for citizens, economies and societies. This is at the heart of SDG 16, which calls on countries to promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

The destabilising effects of conflict, climate change and environmental degradation make it harder for leaders, institutions, and other stakeholders to reduce poverty and promote human development. Globally, progress promoting peace and justice, together with effective, accountable and inclusive institutions remains uneven, with recent years witnessing a deteriorating commitment to global co-operation (WEF, 2017[24]). In 2016, more countries experienced some form of violent conflict than at any time in the past 30 years and the number of displaced people in the world is the highest since the end of the Second World War (OECD, 2018[25]).

An integrated agenda: Capturing critical interactions between the Goals

The interconnected challenges that the SDGs aim to address cut across multiple policy areas, scales and levels of government. The SDGs cannot be achieved applying single-sectoral approaches. There is an urgent need for more integrated and coordinated approaches in planning and policy: failure to recognise critical interlinkages between the SDGs today may slow down progress in implementation tomorrow. Taking into consideration how the SDGs interact with each other is also essential for addressing core cross-cutting priorities of the 2030 Agenda, such as empowerment, inclusiveness and equality.

For example:

  • Education (SDG 4) and life-long learning opportunities are fundamental enablers for nearly every other goal and key for breaking the circle of poverty (SDG 1). Inequality-reducing policies in education and labour markets will generate greater total welfare returns as they spill over into other areas. Equal access to quality education (SDGs 4.1, 4.2 and 4.3) can empower people and help them find decent employment (SDG 8.5), increase their incomes, and achieve higher levels of economic productivity (SDG8.2). Education also fosters equality (SDG 10) by promoting the social, economic and political inclusion of all. Education in science, technology, engineering and mathematics (STEM) drives innovation and the development of environmentally sound technologies and ICTs (SDG 9. It helps to inform and build support for climate action (SDG 13), as well as for sustainable consumption and production (SDG 12), natural resource efficiency, and the transition to a circular economy.

  • Economic growth (SDG 8) that is distributed fairly across society and creates opportunities for all is crucial to reduce inequalities within and between countries (SDG 10). Inclusive growth helps to foster a more coherent approach to the economic, social and environmental determinants of inequalities at work, in income, educational attainment and many other areas. Well-organised and inclusive cities (SDG 11), for example, allow their dwellers to access opportunities regardless of their location within the city. More often than not, economic, social and environmental inequalities go hand-in-hand with socio-economic and residential segregation. Households facing economic difficulties are often marginalised, living in areas with lower access to education, transport, energy, water and waste-management infrastructure and higher environmental pollution. However, growth needs to be made sustainable if it is to be consistent with climate goals (SDG 13) and in particular low-emissions development pathways. Moreover, to ensure long-term prosperity, economic growth frameworks need to also consider natural resource efficiency and the critical interlinkages between water (SDG 6), energy (SGD 7), oceans (SDG 14) and biodiversity (SDG 15).

  • In terms of employment (SDG 8.5), labour market inequality and segregation can exacerbate broader economic, social and environmental inequality (SDG 10). Vulnerable groups often find themselves in low-income population segments, precarious informal employment and sectors most likely to suffer from climate change (SDG 13), such as agriculture, tourism and health. The lack of adequate resources, social protection and climate change impacts undermines their ability to fully participate in society, posing a significant risk of being left behind. Even in formal, regulated employment, discrimination based on gender, age, race, health or sexual orientation is a common occurrence (SDG 10.2). Ensuring equal opportunities and protection from discrimination can help tackle inequalities by fostering sustainable growth, reducing poverty risks (SDG 1), increasing resource availability at household level for education expenditure, foster social cohesion, as well as improving public health and well-being (SDG 3).

  • The effects of climate change (SDG 13) and environmental degradation are unevenly distributed between and within countries. Therefore, policies aimed at reducing environmental inequalities need to take a holistic approach and also address the social drivers of environmental footprints. For example, demand-based CO2 emission patterns hide behavioural traits linked to the inter-country and intra-country dynamics of inequality (SDG 10) and to economic opportunities through trade. Women and vulnerable groups are often particularly hard hit by environmental degradation. To the extent possible, governments should seek out policy complementarities between promoting greater resource efficiency and equity, along with sound mitigation of and adaptation to the associated risks across multiple SDGs (e.g. biodiversity loss, marine ecosystems, spatial planning and territorial cohesion, and better usage of soil).

  • Lack of trust in government, corruption (SDG 16.5) and unequal access to justice (SDG 16.3) compromises the willingness of citizens and business to respond to public policies and contribute to economic growth (SDG 8) and sustainable and inclusive development. Conflict and fragility reduce social, political and economic stability and opportunities further, and hinder people’s access to basic utilities and services. Conversely, strong institutions, equal access to justice and legal empowerment – one’s ability to understand and use the law – enables vulnerable and marginalised people to achieve justice, meet their basic needs, hold authorities to account, protect their interests and participate in economic activities in an inclusive manner.

Applying the OECD Framework on Policy Coherence for Sustainable Development to the Goals to be reviewed by the 2019 HLPF can help governments identify and address critical interlinkages between them, and provide a basis for prioritising action.

The purpose of the following sections is to explore some of these interactions in more detail, as well as the transmission channels through which they operate. While interactions with other SDGs are equally important, they are not the focus of this analysis. In recognition of this limitation, however, and to provide the broader context, the Annex provides an overview of potential interactions with all 17 Goals.

Inequality impacts on economic growth and sustainable development

One factor behind the impact of inequality (SDG 10) on growth (SDG 8) is the growing gap between lower income households and the rest of the population. This is true not just for the very lowest earners – the bottom 10% – but for a much broader group of low earners – the bottom 40% (OECD, 2015[15]). Countering the negative effect of inequality on growth, as illustrated in Figure ‎1.3, is thus not just about tackling poverty but also about addressing low incomes more broadly. The estimates presented in the figure are meant to be illustrative and should not be interpreted as the causal effect of the actual change in inequality in each country.

Looking at the growth consequences of inequality in different parts of the income distribution, in turn, shows that lowering inequality by reducing income disparities at the bottom of the income distribution has a greater positive impact on economic performance than if the focus were on reducing inequality at the top of the income distribution (OECD, 2015[15]).

Inequalities of income and opportunity tend to feed on each other, compounding disadvantages even further by reducing labour quality, undermining productivity diffusion, aggregate productivity and growth – all foundations of higher multidimensional living standards (OECD, 2018[7]). Many factors that drive these inequalities and weigh on productivity growth are cross-border in nature, so they affect economies in an interconnected way. At the same time, large inequalities may go hand in hand with environmentally unsustainable patterns of production and consumption, and inefficient use of already scarce natural resources (OECD, 2018[8]).

Human capital investment is a key transmission mechanism between inequality and growth

Quality education and equal learning opportunities are not only important objectives in their own right, but fundamental enablers for nearly every other goal. Education can boost the overall quality of life of each individual, as well as help economies to be stronger, fairer and more resilient. Conversely, shortfalls in academic achievement are extremely costly: governments must find ways to compensate for them and ensure the social and economic welfare of all. The impact of skills and skills inequality extends even further, going beyond a nation’s economic wealth. It ripples out to all aspects of society, such as in poorer health, in a climate of violence or social unrest (OECD, 2018[26]). This makes the need for policy coherence even more important.

Figure ‎1.3. Estimated consequences of changes in inequality (1985-2005) on subsequent cumulative growth (1990-2010)
Growth rates, in percentages
Figure ‎1.3. Estimated consequences of changes in inequality (1985-2005) on subsequent cumulative growth (1990-2010)

Note: The chart reports the estimated consequences of changes in inequality on the growth rate of GDP per capita (relative to the population aged 25-64) over the period 1990-2010. “Actual” is the actual growth rate of GDP per capita; “Estimated impact of inequality” is obtained based on the observed changes in inequality across OECD countries (in 1985-2005) and the average impact of inequality on growth across countries estimated in the analysis; “Without impact of inequality” is the difference “Actual - Impact of inequality”. It should be interpreted as the estimated growth rate that would have been observed had inequality not changed. Actual growth in Germany is computed starting in 1991; the changes in inequality are limited to the period 1985-2000 in the case of Austria, Belgium, Spain and Ireland. These estimates are meant to be illustrative and should not be interpreted as the causal effect of the actual change in inequality in each country.

Source: OECD (2014[27]), Focus on Inequality and Growth: Does Income Inequality Hurt Economic Growth?, http://oe.cd/idd (accessed on 14 May 2019).

Inequality (SDG 10) has a negative impact on growth (SDG 8) through the channel of human capital investment (SDG 4). Achieving stronger productivity growth and reduced inequality requires action to better ensure that all individuals have the skills to obtain rewarding and productive employment and that these skills are fully used. In unequal societies, low-income households are less able to invest in education and take advantage of opportunities than better-off households (OECD, 2015[15]). This is particularly likely to be the case when poor families are concentrated in remote regions or neighbourhoods within urban areas that are characterised by limited economic opportunities, poor social services and concentrated poverty (OECD, 2018[7]).

Comparing the education performance at different levels of inequality of three social groups – people whose parents come from high, medium and low educational backgrounds – across three areas, namely education attainment, skills and employment, shows that people from low socio-economic groups do less well in all three of these dimensions than people from higher socio-economic groups. But while there is always a gap in education outcomes across individuals with different socio-economic backgrounds, the gap widens in high-inequality countries as people in disadvantaged households struggle to access quality education. This implies large amounts of unused human potential and lower social mobility (OECD, 2015[15]). Moreover, intergenerational effects generate persistence in the negative feedback loop, lowering the skills of the poor even further (Figure ‎1.4). Children of asylum seekers, for example, are sometimes unable to benefit from education in the country where the asylum application was requested. This can lead to disparities in educational outcome both in the short- as well as in the long-term. To spare children from experiencing a long gap without formal education, some countries – such as Greece – focus on providing equal access to education for all, integrating asylum seeker’s children into regular classes.

Figure ‎1.4. Inequality lowers skills of the poor
Average numeracy score by parent educational background (PEB) and inequality
Figure ‎1.4. Inequality lowers skills of the poor

Note: The graph plots the average predicted numeracy score for individuals from low, medium and high family (educational) backgrounds, as a function of the degree of inequality (Gini points) in the country at the time they were around 14 years old. Low PEB: neither parent has attained upper secondary education; medium PEB: at least one parent has attained secondary and post-secondary, non-tertiary education; high PEB: at least one parent has attained tertiary education. The bars indicate 95% confidence intervals. The vertical dashed lines indicate the 25th, the median and the 75th percentiles of the underlying distribution of inequality.

Source: OECD (2015[15])In It Together: Why Less Inequality Benefits Allhttps://dx.doi.org/10.1787/9789264235120-en, based on PIAAC data.

Higher educational attainment contributes to reduced income inequality

SDG 4.1 calls for equitable and quality primary and secondary education for all girls and boys, while SDG 4.3 seeks to ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university. OECD research shows that the level of education has implications for income inequality (SDG 10.1): countries with a lower share of people with low educational attainment tend to enjoy lower income inequality. Income inequality is largest in countries with a high share of people without upper secondary education, such as Brazil, Costa Rica and Mexico, and smallest in countries with a low share of people without upper secondary education, such as the Czech Republic and the Slovak Republic (OECD, 2018[26]).

On average across OECD countries, adults (age 25-64) without upper secondary education earn about 20% less for part-time or full-time employment than those with upper secondary education, while those with a tertiary degree have an earnings advantage of about 55%. Similarly, the likelihood of earning more than the median1 increases with educational attainment (Figure ‎1.5).

Figure ‎1.5. Percentage of 25-64 year-olds without upper secondary education and income inequality (2015)
Figure ‎1.5. Percentage of 25-64 year-olds without upper secondary education and income inequality (2015)

Note: The P90/P10 decile ratio is the ratio of the upper bound value of the ninth decile (i.e. the 10% of people with highest income) to that of the upper bound value of the first decile. The income distribution is measured with regard to the disposable income of the population aged 18-65.

Sources: OECD (2018[28]), Education at a Glance Database, https://stats.oecd.org/; OECD (n.d.[11]), and Income Distribution database (IDD), www.oecd.org/social/income-distribution-database.htm.

Although there has been significant progress in increasing levels of educational attainment in many countries over recent years, in some countries this has been achieved at the expense of quality, leading to a decrease in the levels of basic skills acquired for each level of educational attainment (OECD, 2018[7]). This shows the need for policy coherence not only between SDG 4 and other goals, but also between individual education targets, e.g. access to education versus quality of education.

Skills imbalances and mismatches result in lower productivity

SDG 4.4 calls on all countries to substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship. Indeed, skills are a major driving force of growth through their effect on labour productivity. They are essential for young people to enter the labour market, access good-quality jobs and embark on successful careers. They are also crucial for adults to keep abreast of technological developments and maintain their employability in a rapidly changing and interdependent world. To address these imbalances, some countries have taken steps to promote high-quality life-long learning for all, including teachers. Denmark, for instance, provides teachers with training to obtain a pedagogical licence in information and communication technologies, that has recently been expanded to initial teacher education and general upper secondary education due to its success in equipping youth with key skills necessary for tackling future economic challenges (OECD, 2019[29]).

Yet, despite the increasing need for all citizens and workers to adapt their skills in the face of structural transformations, low- and medium-skill workers are the least likely to receive training in all OECD countries, even though they may be facing the greatest risk of job loss. This is partly the result of lower returns on training, but also a reflection of the limited opportunities offered to these groups and of the specific obstacles they face (OECD, 2019[30]). Ongoing labour market and economic changes are also generating significant imbalances between the demand and supply of skills. Such imbalances (shortages and surpluses) have several negative effects as they slow down the adoption of new technologies, delay production, increase labour turnover and reduce productivity and earnings potentials (OECD, 2018[31]).

Mismatches at work, where an individual’s skills are not actually used in his or her job, potentially have an even greater impact on wages and productivity than skills proficiency. At the individual level, it affects job satisfaction and wages. Better adapting skill utilisation to the competencies of workers could potentially reduce wage inequality by lifting wages in the bottom part of the distribution. At the firm level, it increases the rate of turnover and may reduce productivity. At the macro-economic level, it increases unemployment and reduces GDP growth through the waste of human capital and the implied reduction in productivity (OECD, 2016[32]).

Segmented and informal labour markets deepen inequality and lowers productivity

When labour markets are imperfectly competitive, inequalities do not just depend on the skill structure of labour demand and supply, but also on the composition of firms and contracts. Moreover, the persistence of inequalities depends on the extent to which workers can take advantage of the different opportunities offered to them by firms (OECD, 2018[33]).

Occupational inequality and segregation often translate into deeper economic, social and environmental inequalities. For example, segmented or dual labour markets – where opportunities to engage in full and productive employment (SDG 8.5) or benefit from labour protection (SDG 8.8) differ between people – deepen income inequality (SDG 10.1) further. Workers in precarious jobs tend to receive less training than those who are in well-protected regular contracts, despite the fact that those with temporary contracts are more likely to be low-skilled. This divide, whereby unprivileged workers fall increasingly behind, becomes even deeper in countries with large informal markets (OECD, 2018[7]).

Informality is closely related to low labour market inclusiveness, not least because large portions of the workforce (often women, low-skilled youth or older workers) are left unprotected from statutory or collectively agreed labour standards as well as social insurance. Typically small in size, informal firms are prevented from reaching an efficient scale of production, which holds down overall productivity growth. Informality also limits the capacity of the state to collect taxes and hence the resources that can be used to promote inclusive and sustainable growth, through for example public investment in infrastructure and education and the development of labour market programmes (OECD, 2018[33]).

People with low or irregular incomes easily become marginalised, living in areas with lower access to education (SDG 4), transport (SDG 9), energy (SDG 7), water (SDG 6) and waste management (SDG 12), amongst others. The geographical concentration of disadvantaged families, in turn, tends to reinforce some of the mechanisms responsible for the transmission of disadvantage across generations.

Productivity and inequality interact in multiple ways

Productivity gains are one of the major drivers of economic growth and development. SDG 8.2 encourages governments to achieve higher levels of productivity of economies through diversification, technological upgrading and innovation, including through a focus on high value added and labour-intensive sectors, while SDG 10 calls on governments to reduce inequality within and between countries. Addressing these twin challenges together is possible, but requires a good understanding of how they interact with one another.

Firstly, as discussed in previous sections, the slowdown in productivity growth and increase in inequality are linked through their negative impact on employment opportunities and human capital accumulation by low-income families. A policy environment where a considerable number of people have few resources and find it difficult to obtain and retain a good job, to save and invest in their own skills, and to support good quality education for their children, is also one where productivity growth is sub-optimal (OECD, 2018[7]). For example, notwithstanding recent improvements, Latin America is still the region with the highest income inequality in the world. While unemployment in the region is relatively low – and its workers put in long hours – there is a very high incidence of informality, and the productivity gap with respect to more advanced economies is daunting. The challenge for governments in the region is to put their economies back on a stronger, fairer and more sustainable growth trajectory by undertaking the comprehensive structural reforms needed to accelerate productivity growth while improving social cohesion (OECD, 2016[34]).

Secondly, there is evidence that technological change – which is a key driver of productivity growth – might exacerbate inequalities across individuals, firms and regions through at least four channels (c.f. OECD (2018, p. 95[7])):

  • Persistent digital divide. A lack of adequate skills combined with a lack of access to information and communications technology (ICT) implies that the digital divide among people may persist. For individuals, even as access to digital technologies has increased strongly, skills to effectively use ICT and drive associated wage increases have both lagged. By the same token, the uptake of ICT and knowledge-based capital (KBC) by smaller firms has also lagged, thus contributing to lagging diffusion of frontier productivity. Across regions too, those less connected fair worse in terms of equity and growth.

  • Labour market polarisation. Evidence from a number of countries suggests that the demand for labour is polarising at the two extremes – high, abstract skills and low, manual skills with a ‘hollowing out’ of the middle-skilled jobs dominated by intermediate, routine skills. The question is how far and fast this trend could further develop. Ongoing technological changes including developments in artificial intelligence and big data could lead to more dramatic changes than experienced in the past, and in particular, to a further hollowing out of employment and wages. At the same time, these innovations harbour great promise for more robust productivity growth and new jobs.

  • Rents and winner take all dynamics. The slowdown in productivity growth may be exacerbated by the nature of technological change and how firms and policies interact. Companies at today’s technological frontier in sectors characterised by network externalities (a type of natural monopoly) could gain a persistent competitive edge with little spill-over of the technological advances to the other firms that come later. Hence, some frontier firms may earn more excess returns – rent – that, if not competed away over time, can have negative effects on the diffusion of productivity. Apart from increasing capital incomes – themselves a source of inequality – these firms will be able to pay persistently higher wages to their staff, contributing to widening inequalities at the level of individuals (Box ‎1.1).

  • Financialisation. Technological tools and the expansion of the financial sector have enabled greater financialisation of business and the economy and have altered how firms and individuals behave. At the same time, finance is a core element of how reallocations within an economy proceed, to either enhance or inhibit productivity growth and equity. Poorly performing financial institutions can hold back the reallocation process of exit and entry of new firms, thus reducing productivity growth as well as capturing skilled workers in poorly matched jobs, and subsequently hindering equity. Individuals that start unequal with respect to income and wealth have greater difficulty accessing credit, thus compounding their situation.

Thirdly, the restructuring of firms and reallocation of resources is fundamental to productivity growth. However, the pace of technological change and its associated demand for restructuring and reallocation of firms and workers may be faster than the pace of adaptability of individuals, firms, and regions. Ensuring that productivity gains from resource allocation does not lead to higher levels of skills mismatches or unemployment thus requires simultaneous efforts across several policy areas.

Box ‎1.1. The link between growing productivity dispersion and wage inequality

With the renewed focus on sources of inequality in our economies, attention has turned towards differences in productivity across firms as a potential source of wage inequality. Indeed, a number of studies have shown that the dispersion in wages is largely explained by an increase in wages between firms rather than within them – that is, most of this dispersion comes from increasing differences in wages between the highest and lowest paying firms, rather than from an increasing gap between top- and bottom-earners within the same firm. Using firm-level data, recent research based on the OECD MultiProd project shows that:

  • The gap has increased between the most and least productive firms, and between the top-paying and bottom-paying firms.

  • Inequality in wages has grown faster in sectors in which the gap in productivity has increased the most.

  • Structural factors – globalisation and digitalisation – as well as labour market policies and institutions explain some of these differences. They also affect the link between productivity dispersion and wage dispersion, and can therefore affect the extent to which productivity differences translate into wage differences.

Sources: Berlingieri, G., P. Blanchenay and C. Criscuolo (2017[35]), “The great divergence(s)”https://doi.org/10.1787/953f3853-en; OECD (n.d.[36])MultiProd: The Micro Drivers of Aggregate Productivitywww.oecd.org/sti/ind/multiprod.htm.

Sustainable and inclusive growth requires resource efficiency

SDG 8.4 calls on all countries to improve progressively resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation. Improved resource efficiency and productivity have the potential to address inequality in the distribution, availability and use of natural resources and in the exposure to environmental risk factors across world regions and within countries and cities. In practice, this means adding greater value to resources, maintaining that value by keeping resources in use for longer, and reducing the environmental impacts associated with the whole life cycle of resources. This would contribute to reducing extraction and disposal and encouraging a more circular economy.

High-income countries currently consume ten times higher quantities of materials per person than low-income countries. The 1.2 billion poorest people account for 1% of the world’s consumption, while the billion richest consume 72% of the world’s resources (UN, 2018[1]; OECD, 2019[37]). Moreover, rich countries also create commensurate environmental pressures and impacts – footprints – in the countries of origin of the materials. For example, the consumption of coffee and cocoa result in large water footprints and imports of palm oil and soy bean risk contributing to deforestation in the countries that grow them. Adressing these transboundary impacts is a key element of efforts to enhance policy coherence for sustainable development.

Another example of transboundary impacts relates to carbon footprints: data shows that OECD countries in total are net importers of embodied carbon, while non-OECD countries are net exporters. In other words, OECD countries “consume” more CO2 than they actually emit within their own borders. Similarly, in many developed countries falling carbon intensity of GDP and lower emissions of other environmental “bads” in recent decades have been driven mainly by structural changes such as the shift from manufacturing to services. As a result, the carbon intensity of production in these countries falls while the carbon intensity of consumption rises, due to the increasing share of energy-intensive imported goods (OECD, 2013[38]).

Some countries have managed to decouple economic growth from resource consumption. Japan and Germany, two countries with a traditionally strong manufacturing sector, reduced their domestic material consumption by 30% and 21% between 1980 and 2010 respectively, curtailing negative impacts such as deforestation and climate change (OECD, 2015[39]).

Climate change affects poor and vulnerable people disproportionately

Climate change (SDG 13) and inequality (SDG 10) impact negatively on each other, feeding a vicious circle: initial socio-economic inequalities determine the disproportionate adverse effects of climate change on disadvantaged people; and the impact of climate change, in turn, results in greater inequality (Figure ‎1.6)

Figure ‎1.6. Climate change and inequality – a vicious circle
Figure ‎1.6. Climate change and inequality – a vicious circle

Source: UN DESA (2016[40]), Climate Change Resilience: An Opportunity for Reducing Inequalities, https://www.un.org/development/desa/dpad/publication/world-economic-and-social-survey-2016-climate-change-resilience-an-opportunity-for-reducing-inequalities/ (accessed on 11 March 2019).

The United Nations World Economic and Social Survey 2016 identifies three channels through which inequality aggravates the impact of climate hazards on disadvantaged groups:

  • It increases their exposure to climate hazards. Exposure to the adverse effects of climate change is generally determined by the location of one’s dwelling and the location of one’s work to secure a livelihood. Intersecting economic, political and social factors play a role in determining those locations. The ways in which these factors operate demonstrate that degrees of resilience to climate hazards are not equal. Asset positions and livelihoods determine whether people can afford to move away from areas of risk in the face of climate hazards. The problem of exposure is particularly acute in densely populated and land-scarce countries (e.g. Bangladesh, India and the Philippines) and affects both rural and urban areas. As households with higher incomes bid up the price of real estate, those with lower incomes are forced into living spaces and geographical areas that are more exposed (c.f. UN DESA (2016, p. 28[40])).

  • It increases their susceptibility to the damages caused by climate hazards. Even if they experienced the same level of exposure as the rest of the population, which runs counter to reality, disadvantaged groups would in general be more susceptible to damage from the adverse effects of climate hazards. Of the people living in the same floodplain, those residing in houses constructed with fragile materials are more susceptible to damage from floods than those in houses put together sturdily. Similarly, poor farmers and pastoralists are more susceptible to changing rain patterns because they lack the resources to adapt (c.f. UN DESA (2016, p. 33[40])).

  • It decreases their ability to cope with and recover from the damages caused by climate hazards. The situations and processes to which exposure and susceptibility apply are ex ante, while those to which coping and recovery refer are ex post. The persistence of multiple inequalities implies that disadvantaged groups will have access to fewer of the resources required to take coping and recovery measures. Those resources generally take any of four forms: (i) households’ own resources; (ii) community resources; (iii) resources provided by non-governmental organisations, private companies or citizens; and (iv) public resources provided by the government. Disadvantaged groups are likely to lack some – if not all – of the resources that are necessary for coping and recovery. As a result, their situation worsens after a climate hazard has materialised (c.f. UN DESA (2016, p. 38[40])).

With regard to geographies, vast discrepancies are observed between and within countries. For instance, small island developing states (SIDS) make up two-thirds of the countries with the highest relative annual losses due to climate-related disasters. According to the Global Climate Risk Index, Haiti, Zimbabwe and Fiji suffered the greatest losses worldwide from climate-related weather events (e.g. storms, floods, heat waves) in 2016; SIDS represented 25% of the top 20 countries that same year (OECD, 2018[21]).

In Korea, the Seoul Metropolitan Government (SMG) has been effective in linking energy-efficiency measures with those to address energy poverty. For example, in the context of the ‘Promise of Seoul’ initiative, SMG launched in 2015 the Energy Welfare Public-Private Partnership Programme, which targets vulnerable low-income families who would become even more at risk of energy poverty with the acceleration of climate change. The programme aims to increase the energy independence of energy-poor households by providing at-risk communities with home energy upgrades, including energy efficiency improvements, decentralised rooftop solar panels, and LED lights and mini-photovoltaic cells. It also supports disadvantaged job seekers through training and employment as energy consultants to assess energy performance of low-income households (OECD, 2018[41]).

Climate action can support economic growth and create new jobs

The current global economic environment provides governments with an opportunity to boost economic growth (SDG 8) and reduce poverty (SDG 1), while also addressing the challenges of climate change (SDG 13). In other words, ensuring that growth is low-emission, resilient and inclusive contributes to implementing the Paris Agreement and the 2030 Agenda concomitantly. Capitalising on the synergies between the climate and growth agendas, however, requires policy coherence across economic, environmental, social, education, training and labour portfolios to generate an enabling environment for the ‘green transition’.

Recent OECD work shows that fiscal and structural reform, combined with coherent climate policy and clean infrastructure investment, can increase long-run GDP by up to 2.8% on average across G20 countries in 2050 relative to a continuation of current policies. If the positive impacts of avoiding climate damage are also taken into account, the net effect on GDP in 2050 rises to nearly 5% across developed and emerging economies of the G20 (OECD, 2017[42]).

An integrated climate and growth agenda can also create new opportunities for workers, if the associated challenges are managed well. While the overall employment impacts are likely to be minimal, jobs will be created in green sectors and destroyed in ‘brown’ sectors with high environmental footprints. Some regions, including the South-West region of the UK have seized the opportunities for green growth by shifting from traditional agriculture, fishing and shipping to eco-tourism, renewable energy and sustainable aquaculture, balancing economic, social and environmental priorities (OECD, 2017[43]).

In general, there are four main channels through which market-based green policies can impact on (interact with) economic sectors and labour markets (c.f. OECD (2017, p. 6[44])):

  • Changes in production modes: When adapting to green growth regulation, firms will use fewer polluting inputs and pollution-intensive processes. Therefore, each sector will change its labour demand, creating or destroying jobs.

  • Changes in demand patterns: Green policies lower the prices of clean goods relative to polluting products. This change in their relative prices impacts the demand for polluting and non-polluting goods. Therefore, individuals purchase increasingly cleaner goods, as they become cheaper than the polluting goods. This changes overall demand patterns and induces shifts in production across sectors. The extent to which workers are able to shift between sectors influences the overall effect on employment.

  • Changes in aggregate income and macroeconomic conditions: The implementation of green policies can influence the overall economic activity, in particular aggregate supply, demand, and employment. Such policies may also trigger changes in the government budget e.g. through changes in tax revenues. Importantly, well implemented green policies can achieve multiple dividends. Through the reduction of harmful labour market taxation, they can result in improved environmental quality, better health and wellbeing of citizens, and a more efficient economy.

  • Changes in trade and competitiveness: Producing pollution-intensive goods in a jurisdiction facing green policies can make the good relatively more expensive compared to similar goods produced in jurisdictions without such regulation. Such concerns are relevant for internationally traded goods.

However, while the overall employment effects of green policies are still unclear, one of the key determinants of the ease of transition for the labour force will be the transferability of skills (SDG 4.4) across sectors (OECD, 2017[44]).

Weak institutions and policy capture hinder inclusiveness and economic growth

In many countries, weak institutions and policy capture, together with fragmented systems of governance, hinder inclusiveness and lead to unnecessary policy trade-offs and coordination failures. Policy capture is the process of consistently or repeatedly directing public policy decisions away from the public interest towards the interests of a specific interest group or person. Particularly in today’s environment of growing inequality and political discontent, capture erodes the fundamental democratic process of fair decision making based on openness, dialogue, consensus, and the public interest. It can hinder sustainable economic growth, affect the quality and effectiveness of public services and policies, and undermine trust in government, further exacerbating inequalities and trapping societies in a vicious circle (Figure ‎1.7). Specifically (c.f. OECD (2017, p. 9[45])):

  • Capture leads to misallocation of public and private resources, resulting in rent-seeking activities and diminished allocative and productive efficiency. Capture endangers sustainable growth (SDG 8).

  • Capture perpetuates or exacerbates social and economic inequalities. Benefits obtained through capture enable the interest group to reinvest in further influence-seeking and maintain and expand its wealth and power. Thus, capture nurtures a vicious circle of inequality (SDG 10).

  • Capture can lead to blocked reforms or inadequately enforced policies to protect entrenched interests. It can also redirect ongoing reforms away from the public interest.

  • Capture is likely to decrease trust in government, fostering the perception that politics are unfair and unduly influenced. It can erode government credibility and legitimacy, and hamper effective policy implementation (SDG 16). Even the appearance of undue influence can have these detrimental effects.

  • Capture can also cause negative health, environmental and security threats, for example by providing lower-quality services or neglecting safety. Capture of the justice system by organised crime facilitates its operations. Capture of health (SDG 3), educational policies (SDG 4) and environment-related policies (SDGs 6, 7, 13, 14 and 15) may further contribute to a vicious circle of inequality.

Figure ‎1.7. A vicious cycle between inequality and policy capture
Figure ‎1.7. A vicious cycle between inequality and policy capture

Source: OECD (2018[8]), Opportunities for All: A Framework for Policy Action on Inclusive Growth, https://dx.doi.org/10.1787/9789264301665-en.

The values underpinning sound public governance, such as public-sector integrity, openness, transparency and the rule of law, along with enablers of sound public governance, including evidence-informed decision-making, commitment, vision and leadership, whole-of government coordination and a commitment to innovation and change management, can all be brought to bear to minimise policy capture by specific interests and optimise good governance in the general, public interest.

Corruption and bribery undermine productivity growth through resource misuse

Corruption, including bribery, is the biggest impediment to trust in governments and also leads to cronyism and inequality of opportunity among citizens. Corruption undermines economic and productivity growth through biased decisions over the use of resources, whereby government efforts are placed into unproductive activities instead of productive activities. Without making any inference with respect to causality, Figure ‎1.8 shows that higher levels of corruption are indeed observed with lower levels of productivity. Reducing corruption and bribery, as called for by SDG target 16.5, should thus be part of countries’ broader policy agenda to promote inclusive and sustainable growth. Companies can also support this objective by engaging in responsible business conduct and undertaking due diligence in all activities and transactions.

Figure ‎1.8. Corruption and productivity in OECD countries, 2014
Figure ‎1.8. Corruption and productivity in OECD countries, 2014

Note: This figure plots the inversed Corruption Perception Index 2015 (CPI) from Transparency International against productivity, as measured by GDP per hour worked, for the 34 OECD countries.

Sources: Data from Transparency International 2014 (inversed); OECD (2018[22]), Investing in Integrity for Productivity, http://www.oecd.org/gov/ethics/investing-in-integrity-for-productivity.pdf (accessed on 18 October 2018) p. 9.

Recent work by the OECD argues that corruption affects three key determinants of productivity growth:

  • Corruption undermines innovation and diffusion of new technologies. A corrupt environment is not conducive to technological change and undermines companies’ incentives to invest in innovation and research and development. Corrupt countries also tend to invest less in education, with consequences on the quality of human resources available in both the public and the private sectors. There is also a link between trust, innovation and productivity. Where respect for the rules is low, distrust and uncertainty are likely to spread, and individuals will invest more into safeguarding themselves and their businesses than into developing innovations or assets that could be robbed, extorted or expropriated (c.f. OECD (2018, p. 14[22])).

  • Corruption prevents the creation of an enabling market environment where most productive firms can thrive. The emergence of new companies, the process of creative destruction and the pressure of competition are known to drive productivity. At the same time, evidence seems to show that more competition is related with less corruption, suggesting that enhancing competition could both reduce scope for corruption opportunities and promote productivity growth. A sound and enabling market environment, characterised by more innovation-friendly regulation, lower barriers to trade, easier and cheaper access to inputs, and greater market discipline, would help ensure better competition as well as a better flow of technology and knowledge. On a related note, informal markets and corruption seem to reinforce each other and are likely to have a joint impact on productivity (c.f. OECD (2018, p. 15[22])).

  • Corruption leads to resource misallocation in the private and public sector. There are various reasons why resources can be misallocated, among them barriers to exit and skills mismatch. The cost of resource misallocation is high since trapping scarce resources in unproductive firms slows down the growth opportunities of the more productive and innovative firms. For example, there is a negative relationship between skills mismatch and labour productivity through allocative efficiency. Since skilled labour is scarce, trapping resources in low productivity firms makes it more difficult for the more productive firms to hire skilled labour. Corruption also leads directly to misallocation of government resources, working against, for example, efficient public procurement with integrity (c.f. OECD (2018, p. 19[22])).

Limited access to justice reinforces inequalities across society

At its core, effective access to justice promotes good public governance, policy design and regulatory performance. Strong, well-functioning justice systems reduce the scope for policy capture, corruption and mismanagement in the public sector, and increase trust in government. When provided in a coordinated and coherent manner, effective access to legal and justice services can also contribute to policy objectives beyond the justice sector, e.g. in areas such as health, education, gender equality, employment, housing and environment. Conversely, unequal access to justice may perpetuate existing inequalities in these same areas, with disproportionate impact on low-income and other disadvantaged and vulnerable groups because of their lack of economic resources.

Against this background, SDG 16.3 calls on all countries to promote the rule of law at the national and international levels and ensure equal access to justice for all. Lack of legal empowerment and unequal access to justice generate significant socio-economic costs for individuals and societies: they limit economic opportunities, reinforce the poverty trap and undermine human potential (Figure ‎1.9). Poor, marginalised and vulnerable populations, including women, youth, disabled people, indigenous and migrant groups, and small and medium-sized enterprises, are disproportionately affected, leading to further disadvantage and inequality (OECD, 2019[37]).

Some countries have taken steps to improve access to justice for all. Spain, for instance, provides legal information about the judicial bodies in the civil, commercial, criminal, family and labour legal systems through its Administration of Justice Portal. Similar initiatives exist in Estonia and Finland (OECD, 2019[37]).

Figure ‎1.9. Understanding the costs of unmet legal needs
Figure ‎1.9. Understanding the costs of unmet legal needs

Source: OECD (2019[37]), Equal Access to Justice for Inclusive Growth: Putting People at the Centre, https://dx.doi.org/10.1787/597f5b7f-en.

These sections have highlighted some of the interactions, and the transmission mechanisms through which they operate, between SDG 4 on quality education, SDG 8 on decent work and economic growth, SDG10 on reduced inequalities, SDG 13 on climate action, and SDG 16 on peace, justice and strong institutions. What follows next is an overview of the policy and governance responses that countries can use to ensure that these interactions contribute to – or at least do not undermine – the empowerment, inclusiveness and equality of all people.

Policy and governance responses: Supporting people, business and governments

The interlinkages between the subset of SDGs to be reviewed by the 2019 HLPF analysed in the previous section, highlight the importance of more integrated approaches to policy making, sound and inclusive governance frameworks, as well as enhanced policy coherence. Policy coherence can provide a solution to formulate policy options that optimise co-benefits across the SDGs. The OECD has a long experience in these areas, thanks to its cross-cutting analysis, multiple policy networks, and peer learning between countries. The 2011 Green Growth Strategy, the New Approaches to Economic Challenges, OECD’s Going for Growth and the work on the Productivity-Inclusiveness Nexus are some examples.

More recent work has focused on developing a “people-centred growth model” in which wellbeing is the yardstick of success, not GDP per capita. The OECD Framework for Policy Action on Inclusive Growth puts people at its centre, focuses on wellbeing outcomes, and emphasises the distribution of outcomes across the population. The Framework also recognises that inequalities unfold in different ways across different countries, and that specific context and social preferences need to be taken into account (OECD, 2018[8]). Its key policy recommendations are structured around three broad principles – investing in people and places left behind; supporting business dynamism and making labour markets more inclusive; and making governments more efficient and responsive. The OECD Framework (extended to embrace the planet dimension, see Box ‎1.2) pinpoints the main determinants of SDGs 8 and 10, as the rest of this section elaborates in more detail.

Investing in people and places left behind, providing equal opportunities

This section explores the extent to which individuals and communities have equal opportunities to succeed, irrespective of their socio-economic origins and backgrounds. Inclusive and equitable quality education with life-long learning possibilities (SDG 4) requires investments in people and places to ensure equal opportunities for all (SDG 10) and sustainable growth (SDG 8). The course of policy action spans across non-economic aspects of well-being, such as health (SDG 3), education (SDG 4), gender (SDG 5) to improve the (environmental) quality of life (SDGs 3.9, 6.3 and 14.1), infrastructure (SDG 9) and sustainable cities (SDG 11). Creating foundations for new jobs aligned with green growth objectives hereby requires investments in both human and produced capital, for example, through vocational training and life-long-learning (including by improving girls’ and women’s participation in STEM) and effective investment policy frameworks (including by improving the ability of the financial system to support the investment needed for the low-carbon transition).

Box ‎1.2. Mapping the OECD Framework for Policy Action on Inclusive Growth into the Sustainable Development Goals

The OECD Framework for Policy Action on Inclusive Growth aims to provide countries with broad guidance on how to design and implement integrated policy packages that can improve their performance by:

  • Showing clear links between the different dimensions of inclusive growth and capturing how policy influences these dimensions through key channels.

  • Adopting a sufficiently flexible structure that can be adapted to country-specific challenges and circumstances.

  • Advocating a whole-of-government approach to the implementation, monitoring and evaluation of inclusive growth.

It helps countries assess their policy settings against their ability to promote equality of opportunities, and to support the consideration of ex ante equity issues in policy design. In particular, the Framework highlights three main key dynamics (pillars) that policies can help to catalyse: (i) investing in people and places that have been left behind; (ii) supporting business dynamism and inclusive labour markets; and (iii) building efficient and responsive governments. The Framework builds on several years of OECD research on the policy determinants of multidimensional well-being outcomes, and in particular on inclusive growth outcomes captured through the 24 indicators of the OECD Inclusive Growth Dashboard. The Dashboard builds on a wide range of OECD datasets on economic, social and environmental outcomes.

A statistical exercise (Figure ‎1.10) has been carried out to map SDGs into the IG Framework pillars augmented by the planet dimension, in order to look at the relationship between Inclusive Growth outcomes (as broadly captured by SDGs 8 and 10) and drivers (as captured by the other SDGs, organised along the Framework Pillars of “Investing in People and Places left behind”, “Support Business Dynamism and Inclusive Labour Markets”, and “Build efficient and responsive Governments”). The relationship, shown in Figure ‎1.11, suggests that countries that perform best on these three pillars perform very well on IG Goals as well.

Figure ‎1.10. The Framework for Policy Action on Inclusive Growth mapped with the SDGs
Figure ‎1.10. The Framework for Policy Action on Inclusive Growth mapped with the SDGs
Figure ‎1.11. Countries’ performance on Inclusive Growth Goals (8 and 10) and the remaining SDGs clustered around the OECD Framework for Action on Inclusive Growth
Figure ‎1.11. Countries’ performance on Inclusive Growth Goals (8 and 10) and the remaining SDGs clustered around the OECD Framework for Action on Inclusive Growth

Note: Performance on the Goals measured on the Axes is expressed on an inverse scale (the higher the score, the lower is the performance as the score measures the distance between countries’ current position and the 2030 targets. The charts show a strong relationship between how close the countries stand to reach the different pillars targets, and their distance to achieve “Sustainable and Inclusive growth for all” (SDG 8 and 10). The correlation between the Pillars and SDGs 8 and 10, is consistently higher than 73% for all Pillars. This means that countries that have and promote the three dynamics above tend to be closer to achieve SGDs 8 and 10 targets. For instance, countries that perform well in terms of “Responsive and Efficient Governments” (SDGs 16 and 17) tend to be closer to achieve a growth that is inclusive and sustainable, whereas having weak “Governance” foundations increases the distance to achieve SDGs 8 and 10 targets.

Sources: OECD calculations based on OECD (2019[46]) Measuring Distance to the SDG Targets 2019:

An Assessment of Where OECD Countries Standhttps://doi.org/10.1787/a8caf3fa-en and OECD (2018[8]), Opportunities for All: A Framework for Policy Action on Inclusive Growthhttps://dx.doi.org/10.1787/9789264301665-en.

The key actions to consider are:

  • Promoting life-long learning and acquisition of skills for all (SDG 4). High-quality initial education and training systems could be implemented from early childhood (SDG 4.2) through to schooling age (4.1) and beyond (SDG 4.3). Priority can be given to enhancing access to good-quality early education and childcare (SDG 4.2, captured by the IG indicator 3.3 “Childcare Enrolment rate”). This specific policy response can help to reduce the share of young people in NEET (aligned with SDG 8.6, and captured by IG indicator 3.4 “Young people in NEET”). This may require combining schooling and practical training with counselling (SDG 4), psychological support (SDG 3.4) and housing assistance (SDG 11.1) to build cognitive, vocational and social skills. Life-long learning policies may need to focus on continuous reskilling and adaptation to the technological change (SDG 4.4). This can be complemented with well-designed social welfare programmes that encourage work and improve the skills of those left behind (under SDG 4.6, captured by the IG indicator 3.5 “Share of low performing adults”), while protecting individuals and families from unanticipated risks (SDG 1.3).

  • Weakening the link between socio-economic background and health, education and employment outcomes (SDGs 2 and 3). This may require focusing on ex-ante interventions such as prevention campaigns (SDG 3.4 and 3.5) and ex-post interventions such as ensuring that vulnerable individuals can access healthcare and receive health insurance that meets their needs (SDG 3.8), or have access to unemployment insurance (SDG 1.3). This may imply expanding health spending allocated to prevention targeted at key risk factors (e.g. health, pollution, accidents, and crime) and population groups, especially children. For instance, the design of health policies may specifically target the low-income groups: such as communication, policies that promote healthy diets (SDG 2.2) by improving health literacy and empowering consumers (e.g. mass media campaigns to increase awareness of healthier food consumption).

  • Promoting regional catch-up by investing in left-behind places (SDG 9 and 11). In the context of growing regional disparities (SDG 10), policies could focus on productivity-enhancing reforms (SDG 8.2) so that lagging regions can attract and maintain investment. An integrated and predictable approach to investment policy making may be needed to leverage and effectively manage physical capital, knowledge-based capital and natural capital through efficient allocation between regions. Investment in physical infrastructure and sustainable transport systems (SDG 9.1 and 11.2), housing and land-use policies to improve access to affordable housing (SDG 11.1), clean energy networks (SDG 7) and modern ICT networks infrastructure (SDG 9.c) would be key to support a regional catch-up.

  • Empowering and investing in left-behind communities, by providing equal access to opportunities and resources (SDG 1.4 and 16). High-quality local administration (SDG 16.6) is needed to encourage action by local communities and create common purpose within and between communities, unlock their economic potential and reduce poverty by providing access to resources and opportunities (SDG 1.4). This may include, for instance, fostering better connections between people and increasing their sense of civic engagement through efficient and responsive local governments. This needs to go hand in hand with ensuring equal access to key public services, amenities such as health (SDG 3), education (SDG4), nutrition (SDG 2), utility services (e.g. water, energy and transport; SDG 6, 7 and 11.2) and access to nature and green spaces (SDG 11.7).

  • Reducing residential segregation and providing access to good-quality affordable housing (SDG 11), requires consideration of policies for poverty reduction (SDG 1), health improvement (SDG 3), better child development (SDG 4), equality of opportunity and social inclusion (SDG 10). In many OECD countries, housing is one of the key drivers of increased disparities. Lower income groups risk being priced out of capital city regions. With residential segregation, poor areas emerge where neighbourhood crime, social unrest and pollution are particularly problematic. Yet, social housing accounts for only about 5% of the total housing stock in OECD countries. Housing policies can complement structural reforms to help workers move to regions with the best jobs available: for example, by improving access to social housing, reducing constraints on the development of private rental markets, reducing transaction costs associated with relocation for renters and home-owners or considering targeted subsidies to cover the costs of relocating could help workers acquire jobs. Housing policies can be designed to avoid adverse distributional impacts (SDG 10) – not to merely handle them when they occur. It is also key to ensure access to quality and sustainable infrastructure to different segments of society, and in particular to take into account the needs of women, children, minorities, indigenous communities and other vulnerable groups (OECD, 2019[47]).

  • Supporting the implementation of strong and well-designed social protection in developing countries (SDG 1). The expansion of social protection expenditure and coverage can contribute to poverty reduction (SDG 1.1 and 1.2), resilience (SDG 1.5) and economic development. For instance, policies such as targeted cash transfers to encourage human capital development contribute to SDGs 1 and 4 at the same time, and create the foundation for future growth, equity and prosperity (SDG 8 and 10). Delivering on these SDGs may require the adjustment of social protection systems: from expanding the fiscal space (SDG 17.1) and tackling informality (SDG 8.3) – mostly in developing countries – to addressing governance issues (SDG 16) to improve implementation mechanisms and administrative capacity to ensure policy coherence. In the context of SDG 17, some of these challenges could be addressed by increasing international support to developing countries, by providing better technical support and more resources (SDG 17.1 and 17.3), and fostering capacity-building (SDG 17.9).

  • Optimising natural resource management for sustainable growth (SDGs 13, 14, 15 and 6). The effects of environmental degradation (SDG 14 and 15) and climate change (SDG 13) are unevenly distributed among and within countries (SDG 10), with those least prepared and able to cope often suffering the greatest socio-economic consequences. Poorer communities are generally the least well prepared to meet the challenges of climate change. Governments may need to increase financial and technical support to the communities less able to invest in ex-ante preventative measures or ex-post mitigation of climate change and environmental degradation (SDG 1.5). Likewise, inadequate access to water supply or sanitation (SDG 6) and exposure to air pollution (SDG 3.9, captured by the IG dashboard indicator “exposure to outdoor air pollution”) may require targeted infrastructure and environmental measures for the lower parts of the income distribution.

  • Investments dedicated to gender equality and sustainable development need to increase (SDGs 5 and 10). The OECD and the DAC Network on Gender Equality (GenderNet) analyses the Official Development Assistance (ODA) flows of the OECD Development Assistance Committee (DAC) members. Analyses show that USD 44.8 billion of ODA targeted gender equality, on average 2016-17, which means that 38% of the members bilateral allocable aid was targeting gender equality and women’s equality as either a significant (secondary) or principal (primary) objective. This is higher than ever before. At the same time, support to programmes specifically dedicated to gender equality and women’s empowerment as their principal objective remains consistently low. In 2016-17, funding for dedicated programmes with the principal (main) objective remains low at 4% and 62% did not target gender equality, according to the gender policy marker criteria (OECD, 2019[48]).

Supporting business dynamism and inclusive labor markets

This section considers product and labour markets issues (SDGs 8 and 12), framed through the lens of equity (SDG 10) on top of a well-established objective of efficiency. The OECD work on the Productivity-Inclusiveness Nexus has shown that the slowdown in productivity growth (SDG 8.2) and rising productivity divergence within sectors are interrelated with increasing inequality (SDG 10) (Berlingieri, Blanchenay and Criscuolo, 2017[35]). This implies that addressing the productivity divergence could potentially generate a ‘double dividend’ in terms of higher productivity growth and lower income inequality (SDGs 8 and 10); for example, by ensuring financial access to SMEs (IG indicator 2.7, consistent with SDG 9.3) and technology diffusion and access (SDG 9.5, 9.b and 9.c). However, keeping up real wages with rising productivity may also require corporate governance models to be reassessed in light of new business models and vibrant social dialogue; as well as the integration of a long-term perspective in the design of incentives and compensation for shareholders and executives.

The key actions to consider are:

  • Governments need to promote gender equality (SDG 5), diversity and non-discrimination in labour markets (SDG 5.1, 10.3 and 16.b), which are keystones of prosperous modern economies that provide sustainable inclusive growth (SDG 8 and 10). For instance, governments and businesses could implement stricter anti-discrimination legislation together with diversity training (i.e. education on LGTBI issues; see Valfort (2017[49])), as well as the OECD Gender Recommendations: offering equal and shareable parental leave, expand access to affordable childcare, and various policies aimed at gender pay equality, such as pay transparency legislation. Women's economic empowerment (SDG 5) is a prerequisite for achieving sustainable and inclusive growth (SDG 8 and 10). Reducing gender-based discrimination in social institutions could yield substantial economic benefits, leading to an annual increase in the world GDP growth rate of 0.3 to 0.6 percentage points by 2030, depending on the policy scenario (Ferrant and Kolev, 2016[50]).

  • Boosting productivity growth and business dynamism, while ensuring adaptation and diffusion of technologies across the board (SDGs 8 and 9). This can be achieved through policies that improve the business environment and foster entrepreneurship, facilitate the reallocation of workers and capital, strengthen competition and limit wasteful granting of subsidies to firms, promote organisational change and the diffusion of technologies, strengthen trade and investment on a multilateral and non-discriminatory basis, and incentivise businesses and governments to invest in new business and governance models. Policies that spur business dynamism, innovation and the adoption of new technology need to be sensitive to firms’ size and capacities, and avoid unduly strengthening the position of incumbents. International co-operation of tax policy and implementation of the OECD/G20 BEPS package is needed to level the playing field, while also promoting responsible business conduct.

  • Addressing the decoupling of real wage growth from productivity growth (SDG 10). For instance, pro-competitive product market reforms can raise wages relative to productivity by reducing product market rents appropriated by capital. In the same line, labour market policies such as minimum wages or collective bargaining institutions can increase real wages at the bottom of the income distribution (SDG 10.1 and 10.4).

  • Achieving inclusive labour markets and reducing structural unemployment (SDG 8.5). This may require that appropriate labour market policies (SDG 8.3), social welfare (SDGs 1.3 and 10.4) and employment protection be put in place to stimulate labour mobility and opportunities for placement and retention of quality jobs for all. Employment protection legislation would need to be properly designed to yield predictable contract termination costs and avoid creating different levels of job security across labour contracts, while protecting workers against possible abuses (SDG 8.8). Tax policies can be adapted to ensure more inclusive growth and deliver sustainable revenues, for example, by reducing marginal tax rates for those with low skills and low propensity to work by expanding in-work benefits such as earned-income tax credits (EITCs). In addition, fiscal policies can improve conditions for new businesses and SMEs, in order to avoid inefficient jobs destruction, labour informality and poor-quality jobs (SDG 8.3).

  • Promoting responsible business conduct (SDG 8, 10 and 16). Businesses can play a major role in contributing to economic, environmental and social progress, especially when they minimise the adverse impacts of their operations, supply chains and other business relationships. The OECD Guidelines for Multinational Enterprises support companies in their efforts to conduct due diligence in order to identify, prevent or mitigate and account for how actual and potential adverse impacts are addressed. By adhering to the Guidelines, and other sector-specific due diligence guidance, businesses contribute to the achievement of numerous SDG targets, including SDG 2.4 on sustainable food production systems, SDG 5.1 on ending discrimination against women, SDG 8.8 on protecting labour rights and promoting safe and secure working environments, SDG 16.2 on ending abuse, exploitation and trafficking, and 16.5 on reducing bribery and corruption, to name just a few. As such, RBC not only contributes to the enterprise’s own prosperity, but is a key element in achieving more inclusive and more sustainable economic, social and human development.

  • Raising the attractiveness of employment in specific sectors (SDGs 2 and 8). For example, agriculture is a major employer in many developing countries and has the potential to create more jobs in high value organic agriculture and processed food from sustainable agriculture (SDGs 2.4 and 2.5). Governments can support environmentally-friendly agricultural value chains and help smallholder farmers to capture value added at each stage of the production, marketing and consumption process (SDG 2.3). For instance, making regional and domestic agriculture more central in national development strategies, and closely linking the food systems to food security (SDG 2.1) and the requirements of a circular economy (SDG 2.4 and 8.4) can be win-win policies to achieve SDGs and IG.

  • Optimising natural resource management for sustainable growth, (SDGs 9 and 12 linked to SDGs 13, 14 and 15). New markets are being created for clean technologies (e.g. as the cost of some renewable technologies is fast declining) and new business models are being developed (e.g. with extended producer responsibility schemes to promote a circular economy). Policies can support investment in low-emission technologies, smart and clean infrastructure (SDG 9.4), and the conservation and sustainable use of biodiversity and water resources (SDG 14 and 15). Resources can be freed up by phasing out environmentally harmful subsidies to consumers and producers (SDG 12, notably 12.c), broadening the carbon pricing base, and engaging in structural reforms to support the reallocation of resources. OECD work has found that policies that provide incentives across a broad spectrum of firms and consumers, such as emission or energy taxes tend to be more cost-efficient than those that target a specific product, fuel or technology, such as subsidies for electric cars. Such measures include prioritising fiscal incentives and targeted financial support to R&D, related to promote clean energy (SDG 7.2), sustainable production patterns (SDG 12) and to combat climate change and its impacts (SDG 13). These efforts could also include policies that encourage greener product designs and measures to change consumer behaviour (SDG 12).

Rebuilding trust with efficient and responsive governments and businesses

A lack of trust compromises the willingness of citizens and business to respond to public policies and contribute to sustainable economic growth (SDG 8), for instance, by undermining the confidence of investors and consumers. Trust is also important for the success of government programmes and regulations that depend on co-operation and compliance of citizens (OECD, 2017[45]). To restore trust and improve policy effectiveness, governments and businesses may need to be more responsive to citizens (SDG 16.7), reliable in supplying services (SDG 16.6), fair in the application of laws and contract rules (SDG 16.3), and maintain a high standard of integrity (SDG 16.5). The forthcoming OECD Policy Framework on Sound Public Governance (Box ‎1.3) can support country efforts to “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable, and inclusive institutions at all levels”, as called for by SDG 16.

Box ‎1.3. The OECD Policy Framework on Sound Public Governance

The Policy Framework on Sound Public Governance aims to provide governments at all levels with an integrated diagnostic, guidance and benchmarking tool to help:

  • Design and implement public governance reforms that can lead to improvements in, and the sustainability of, prosperity for their country and wellbeing for its citizens.

  • Design and implement reforms in any policy area by taking public governance approaches for effective policy making into account so that reforms can respond more effectively to complex, multidimensional challenges, ultimately leading to improved outcomes for citizens and businesses. This takes on added importance as countries move to adapt the 2030 Agenda and implement the SDGs in a way that reflects national conditions.

  • Design and pursue a public-governance reform agenda that can enable governments to move closer to OECD standards and practice in this area.

Specifically, the Framework argues that sound public governance is the combination of three interconnected elements:

  • Values: key behavioural traits that guide public governance across all of its dimensions in a way that advances and protects the public interest.

  • Enablers: an integrated nexus of practice that enables the correct identification of issues and challenges and the design, implementation and evaluation of reforms in response that sustain improvements to outcomes.

  • Instruments and tools: a set of policy instruments and management tools for effective policymaking.

Source: OECD (forthcoming, 2019).

To ensure sustainable and inclusive growth and address rising inequalities (SDG 8 and 10), governments may need to engage citizens to play a stronger role in economic systems by restoring their trust in institutions and faith in the future. For instance, the lack of gender parity in politics and institutions compromises effective political representation, given that average female participation in the politics is below one third in OECD countries.

Enhancing trust in governments and in businesses in an interconnected world requires concerted action across countries to foster competition, growth and inclusiveness (SDG 8 and 10). It can increase the economic benefits generated by well-designed fiscal plans (SDG 17.1) that are aimed at growth-enhancing investment in physical and human capital (SDG 9 and 4) – for example, with smart and clean cross-border infrastructure networks. Also, policies aimed at reducing environmental inequalities need to take a holistic perspective to address the social drivers of environmental footprints and be consistent across the board. Building trust hinges on transparency of benefits and costs of “inclusive green growth” policies across different groups of population and the extent to which they feel that their voices are heard and preferences reflected in policy making.

The key actions to consider are:

  • Ensure that public policy making is protected from undue influence, where a public decision is captured by a narrow interest group to reflect its own interest (SDG 16.5). Improving government integrity (SDG 16.5) has been found to be one of the most important determinants of trust in government (Murtin et al., 2018[51]; OECD, 2017[45]).

  • Co-ordinate and align action to strengthen institutional frameworks for diversity and gender mainstreaming and budgeting (SDG 16.7 and 16.b). Involving under-served or excluded populations in decision-making allows building trust between citizens, businesses and governments. In addition, an inclusive decision-making process is less likely to be monopolised by elites (SDG 16.5), because it becomes more difficult for one interest group to influence the decisions without triggering resistance by the other groups.

  • Improve budget transparency, government accountability and reliability, as well as responsiveness and openness to citizen input (SDG 16.6 and 16.7). OECD governments are increasingly implementing open government initiatives2 that promote inclusiveness – such as digital government, access to information, budget transparency, openness and accessibility as well as citizen participation in service delivery including youth and disadvantaged groups in policy making (SDG 16.7), inclusive and participatory budgeting or initiatives on gender equality. These initiatives not only allow for governments to have a clear understanding of a wide range of citizens’ needs and demands, allowing better targeted and defined public policies and, thus reducing inequalities in society (SDG 10), but also, they provide citizens with the tools to hold governments accountable (SDG 16.6).

  • Empower citizens through open and citizen driven-data (SDG 16.10). The government can provide citizens with the necessary data, resources and information to allow them to make informed decisions about their own lives, professional development and public participation. For instance, governments can consider a citizen-driven approach to make data more open and useful for collaboration with and among citizens in light of their rights and obligations.

  • Effective and people-centred public services (SDG 16.6). Governments can start mapping, understanding and integrating the citizens’ behaviours, demands and needs in the design and delivery of public service strategies in light of digitalization and open government principles. As well as improving public procurement systems, including e-procurement.

  • Public-private and multi-stakeholder partnerships to foster inclusive growth (SDG 17). To address structural and global challenges (such as climate change, gender equality, corporate governance, business dynamism and productivity, digitalization and the future of work) international cooperation between and within countries is crucial. The OECD launched in 2018 the Business for Inclusive Growth Platform, which aims to help remedying the lack of inclusive growth and align government policies and business actions to advance the inclusive growth and the 2030 agenda together (aligned with SDG 17.16 and 17.17). The B4IG platform focuses on developing measures to assess business impact on IG (SDG 17.19), thus informing the RBC agenda, and on developing the means of implementation for inclusive and sustainable policies. Ultimately, the pursuit of inclusive growth outcomes requires a whole-of-government approach that aligns vision, incentives and delivery mechanisms across the policy making cycle (Table ‎1.1).

Table ‎1.1. Governance implications of inclusive growth policies

Inclusive growth policies

Governance implications

Focus on multi-dimensional policy impacts: Material and non-material living standards

  • Shaping a vision for inclusive growth (IG): Guiding the definition of IG goals with reliable, timely, multidimensional data.

  • Enhanced policy coherence: Assess and address trade-offs and complementarities between multidimensional policy objectives.

Focus on integrated policies: Growth and redistribution

  • Sustained implementation efforts: Anticipating broader socio-economic changes that may inform IG targets, and aligning short, medium and longer-term resource and priority considerations.

  • Assessing multidimensional impact: Using ex ante evaluation to assess distributional impact along with economic impact.

  • Assessing impact and strengthening feedback: Reinforcing accountability and evaluation mechanisms to capture IG targets.

Focus on outcomes that reflect the needs of societies (health, education, jobs)

  • Whole-of-government approach: Targeting joined-up outcomes beyond administrative silos, encouraging policies to reinforce each other, and a strong co-ordinating role for the centre of government.

  • Quality decision making: Promoting balanced participation through stakeholder engagement and mechanisms to prevent capture in decision making, and encouraging inclusive problem identification.

  • Multi-level governance: Aligning outcomes at higher and lower levels of government to improve coherence of public policy.

Focus on inequalities (income and wellbeing) and on different social groups and scales beyond the average

  • Inclusive service delivery: Implementation that seeks to maximise access, use and responsiveness across social groups and locations.

  • Inclusive engagement: Feedback and engagement mechanisms to promote an inclusive policy implementation process.

  • Access to redress: Providing the possibility of enforcing a right or redressing a wrong to enable opportunity.

  • Multi-level analysis: Including place-based considerations that may drive inequalities.

Source: OECD (2016[52]), The Governance of Inclusive Growth, https://dx.doi.org/10.1787/9789264257993-en.

Ongoing OECD work can be expected to inform the debate on inclusive governance further. The new report “Governance as an SDG Accelerator: Country experiences and tools” (OECD, 2019[53]), provides an overview of the different governance tools that countries can use to enhance coherent and inclusive implementation of the 2030 Agenda. It aims to support the knowledge gathering and peer learning initiatives underpinning future partnerships between the OECD, UNDP, APRM and others to strengthen public governance practices for the implementation of the SDGs.

Taking into account environmental concerns when setting growth objectives

Finally, the gains in growth and well-being should be environmentally sustainable. This is why, for the first time, the 2019 edition of Going for Growth (OECD, 2019[54]) includes environmental sustainability considerations in its analysis.

In addition, the report looks at how pro-growth reforms and pro-environment reforms may interact with the inclusiveness dimension. Potential trade-offs and unintended consequences include (c.f. OECD (2019[54]):

  • The removal of fossil fuel subsidies is likely to reduce domestic emissions, in particular in some emerging-market economies, where the subsidies tend to be highest. However, many consumer subsidies are in principle aiming to target energy poverty and accessibility of remote locations (to markets, schools) and as such, their removal may particularly impact vulnerable parts of the society. A wealth of evidence has shown that fossil fuel subsidies are rather inefficient at addressing poverty, primarily due to poor targeting (IEA et al., 2011[55]). Nevertheless, in countries with poorly developed institutions and social safety nets, their removal poses challenges that need to be addressed with well enforced compensatory, targeted measures.

  • Higher reliance on environmental taxation can have adverse distributional consequences if poorer households rely more on goods that will be taxed more (Flues and Thomas, 2015[56]).

  • Road pricing can improve the emission performance of transport, by reducing congestion. However, the high prices of access to urban areas may be particularly harmful for poorer commuters, especially if the public transport quality and accessibility is deficient.

  • Easing zoning and land regulation can in principle increase the availability of housing, but may encourage urban sprawl and through increasing commuting distances contribute to higher emissions from transport or their displacement.

Such potential trade-offs are a concern for policy makers and tools are available to deal with many of them. For example, a tax reform that increases environmental taxation or reduces environmentally harmful subsidies may provide revenues that can mitigate the undesirable effects on consumption and income inequality. Similarly, road pricing may provide revenues to invest in infrastructure, in particular public transport.

This chapter has identified a number of interlinkages between the SDGs to be reviewed by the High Level Political Forum in 2019: Goal 4 on quality education, 8 on decent work and economic growth, 10 on reduced inequalities, 13 on climate action, and 16 on peace, justice and strong institutions. Applying a PCSD lens can help to identify critical interlinkages among goal areas, manage potential trade-offs, promote synergies, and address negative impacts. Once interlinkages have been identified, frameworks such as the Inclusive Growth Framework and the Framework for Sound Public Governance can help to guide policymakers respond to those interlinkages. The following chapters focus on the institutional mechanisms needed to deliver coherent responses and examples from multi-stakeholder partnerships that help put policy coherence into practice.

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Annex 1.A. The goals, targets and the interactions between them

Goal 4: Quality education

Annex Box ‎1.A.1. SDG 4: Ensure inclusive and equitable quality education and promote life-long learning opportunities for all

4.1 By 2030, Ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and effective learning outcomes.

4.2 By 2030, ensure that all girls and boys have access to quality early childhood development, care and pre-primary education so that they are ready for primary education.

4.3 By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.

4.4 By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship.

4.5 By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations.

4.6 By 2030, ensure that all youth and a substantial proportion of adults, both men and women, achieve literacy and numeracy.

4.7 By 2030, ensure that all learners acquire the knowledge and skills needed to promote sustainable development, including, among others, through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity and of culture’s contribution to sustainable development.

Targets on means of implementation

4.a Build and upgrade education facilities that are child, disability and gender sensitive and provide safe, non-violent, inclusive and effective learning environments for all.

4.b By 2020, substantially expand globally the number of scholarships available to developing countries, in particular least developed countries, small island developing States and African countries, for enrolment in higher education, including vocational training and information and communications technology, technical, engineering and scientific programmes, in developed countries and other developing countries.

4.c By 2030, substantially increase the supply of qualified teachers, including through international co-operation for teacher training in developing countries, especially least developed countries and small island developing States.

Source: UNGA (2015[57]), “A/70/L.1: Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E.

Annex Table ‎1.A.1. Interactions between SDG 4 and other Sustainable Development Goals

Goal

Links with SDG 4

SDG1. No poverty

Education that targets marginalised and poor populations can bring change to many of the systemic factors that have contributed to the delay in poor communities’ development, preventing the transmission of poverty between generations and increasing the rate of return to the economy (human capital investment). Life-long learning can help older people adapt to a rapidly changing global context and prevent or contain old-age poverty.

SDG 2. Zero hunger

By increasing people’s chances to secure an adequate income, education facilitates their access to a sufficiently rich and balanced diet. Education helps find innovative approaches of agricultural production and can foster sustainable use of land and other natural resources.

SDG 3. Good health and well-being

Education creates opportunities for better health. People with access to quality education are more likely to have jobs with higher earnings and access to health services and nutritious food; and acquire knowledge and skills to support healthier behaviours, including knowledge on healthy food. Health education is an important tool to manage, prevent and detect diseases (e.g. HIV, malaria) and to avoid stigmatisation of people due to their illness.

SDG 5. Gender equality

In developing countries, education that provides women with literacy and numeracy skills helps them acquire critical knowledge for everyday life. It also helps them understand and access their social and legal rights, and enables them to participate in economic and political life. In developed countries, education in STEM topics can increase women’s participation in male-dominated occupations.

SDG 6. Clean water and sanitation

Education can strengthen efforts to manage, conserve and use water more efficiently. At the same time, in many developing countries, it is often factors related to water, sanitation and hygiene that limit children’s’ right and access to education in the first place.

SDG 7. Affordable and clean energy

Education and skills support the development and dissemination of cleaner and more efficient energy technologies and solutions. It can also help reduce the use of e.g. coal for cooking and raise awareness of diseases caused by air pollution.

SDG 8. Decent work and economic growth

Education increases an individual’s chances to decent and well-paid employment. Education is also key for equitable economic growth and resilience to change. Higher skills are linked to the creation of new technologies, and higher-quality research and development, making economies grow.

SDG 9. Industry, innovation and infrastructure

Education and skills drive research and innovation, including infrastructure development.

SDG 10. Reduced inequalities

Primary, secondary and tertiary education is critical for improving the welfare of disadvantaged populations and reducing inequality, in particular as more and more of the world enters into the global knowledge society.

SDG 11. Sustainable cities and communities

Education can shift behaviours and day-to-day decisions that impact on urban sustainability. Education in fields such as science and engineering can contribute to building cleaner and more sustainable cities.

SDG 12. Responsible consumption and production

Education is critical for raising awareness about the impacts and “footprints” of our consumption and production, both domestically and abroad, and for informing people about more sustainable lifestyles. This includes better waste management of food and chemicals and increased recycling and reuse.

SDG 13. Climate action

Education is an essential element of the global response to climate change. It helps young people understand and address the impact of global warming, encourages changes in their attitudes and behaviour and helps them adapt to climate change-related trends.

SDG 14. Life below water

Over 70 percent of the Earth’s surface is covered by oceans. Education is essential for managing them sustainably, as well as for exploring the opportunities offered by marine resources. Education informs people about the need to reduce nutrient pollution, plastic waste, and to avoid overexploitation of ecosystems (e.g. through overfishing).

SDG 15. Life on land

Education and awareness-raising underpin efforts to protect ecosystems and biodiversity, including the need to detect and prevent poaching and to act against invasive species.

SDG 16. Peace, justice and institutions

Education helps people understand and access their legal rights. It increases their understanding of different cultures and values, enabling conversation before conflict.

SDG 17. Partnerships

Means of implementation.

Note: Compiled by the OECD PCSD Unit.

Goal 8: Decent work and economic growth

Annex Box ‎1.A.2. SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

8.1 Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries.

8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors.

8.3 Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.

8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on sustainable consumption and production, with developed countries taking the lead.

8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.

8.6 By 2020, substantially reduce the proportion of youth not in employment, education or training.

8.7 Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms.

8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.

8.9 By 2030, devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products.

8.10 Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.

Targets on means of implementation

8.a Increase Aid for Trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries.

8.b By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labour Organization.

Source: UNGA (2015[57]), “A/70/L.1: Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E.

Annex Table ‎1.A.2. Interactions between SDG 8 and other Sustainable Development Goals

Goal

Links with SDG 8

SDG1. No poverty

Whether they are subsistence farmers, salaried workers, or self-employed entrepreneurs, people derive most of their income from work. This means that the level of employment, the quality of jobs, and the access which the poor have to decent earning opportunities are crucial determinants of poverty reduction.

SDG 2. Zero hunger

Growth that raises the incomes of the poor tends to be most effective in improving food security. Empirical evidence suggests that agricultural growth in low-income countries is three times as effective in reducing extreme poverty as growth in other sectors.

SDG 3. Good health and well-being

There exists a strong positive association between average income (or wealth) and indicators of population health status, which is evident both across countries and within countries. Job security reduces stress and contributes to psychological well-being.

SDG 4. Quality education

Economic growth can contribute to improved educational infrastructure and facilities.

SDG 5. Gender equality

Eliminating barriers to equality and creating better economic opportunities will allow women and girls to be powerful agents of change, improve their lives and those of their families, and contribute to the social and economic development of their communities.

SDG 6. Clean water and sanitation

More than 1.3 billion jobs worldwide (42% of the world’s total active workforce) are heavily water-dependent, including work in agriculture, mining and industries ranging from paper to pharmaceuticals. At the same time, investments in safe drinking water and sanitation have been shown to foster economic growth, with high rates of return.

SDG 7. Affordable and clean energy

Economic growth and energy demand are linked, but the strength of that link varies among regions and their stages of economic development. The state of economic development and the standard of living of individuals in a given region strongly influence the link between economic growth and energy demand.

SDG 9. Industry, innovation and infrastructure

Sustained investment in infrastructure and innovation are crucial drivers of economic growth and development. Technological progress is key to finding lasting solutions to both economic and environmental challenges, such as providing new jobs and promoting energy efficiency. Physical and digital connectivity facilitates social interactions and labour mobility, allowing people draw higher dividends from their skills, efforts and experiences.

SDG 10. Reduced inequalities

Inclusive economic growth is key to reducing inequalities between and within countries.

SDG 11. Sustainable cities and communities

Cities of all sizes are critical to economic progress. The economies of scale make urban centres engines of growth and innovation, and cities overall are characterised by higher levels of productivity and income. Cities are also hubs and gateways in global networks, such as trade or transport.

SDG 12. Responsible consumption and production

Economic growth can have a negative impact on responsible consumption and production if not managed properly. Responsible consumption is important to ensure long-term sustainable growth

SDG 13. Climate action

Economic growth and investment depend on a stable environment and ecosystem. The economic costs of climate change are high. Conversely, acting on climate change can be good for growth: Spurring investment in clean and resilient infrastructure, if combined with stronger fiscal and structural policies in a synergistic way, can boost growth in the short term and foster robust long-term growth, in both advanced and emerging economies.

SDG 14. Life below water

The ocean is generating employment opportunities and contributing to economic growth. At the same time, too rapid economic growth can generate environmental externalities that impact negatively on the ocean and all marine life.

SDG 15. Life on land

Economic growth can drive destructive economic activities that generate negative environmental externalities, e.g. mining and cattle farming in biodiversity hotspots. On the other hand, wealthy societies can afford to place a higher value on preservation and to improve enforcement.

SDG 16. Peace, justice and institutions

Economic stability, and rising prosperity that is broadly shared - both within and among countries - can foster peace. Peace is a necessary precondition for trade, sustained economic growth, and prosperity.

SDG 17. Partnerships

Means of implementation.

Note: Compiled by the OECD PCSD Unit.

Goal 10: Reduced inequalities

Annex Box ‎1.A.3. SDG 10: Reduce inequality within and among countries

10.1 By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average.

10.2 By 2030, empower and promote the social economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.

10.3 Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard.

10.4 Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.

10.5 Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations.

10.6 Ensure enhanced representation and voice for developing countries in decision-making in global economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions.

10.7 Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies.

Targets on means of implementation

10.a Implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with World Trade Organization agreements.

10.b Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries, African countries, small island developing States and landlocked developing countries, in accordance with their national plans and programmes.

10.c By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.

Source: UNGA (2015[57]), “A/70/L.1: Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E.

Annex Table ‎1.A.3. Interactions between SDG 10 and other Sustainable Development Goals

Goal

Links with SDG 10

SDG1. No poverty

Inequality and poverty affect each other directly and indirectly through their link with economic growth. The poorest members of society suffer immediately from inequality, but in the longer term, the whole economy is damaged.

SDG 2. Zero hunger

Poverty is the main obstacle to food security. Income inequality is closely linked to people’s access to food and nutrition.

SDG 3. Good health and well-being

Many health outcomes – everything from life expectancy to infant mortality and obesity – can be linked to the level of economic and social inequality within a given population. Greater economic inequality and discrimination tend lead to worse health outcomes.

SDG 4. Quality education

Social, economic and political exclusion has a strong impact on the educational attainment of vulnerable groups. Fighting inequalities and discrimination due to e.g. age, sex, disability, race, ethnicity, origin, or religion can improve access to education for all.

SDG 5. Gender equality

Gender and economic inequality are closely connected. Indeed, the majority of the world’s poor are women. Globally, more men than women own land and other productive and capital assets; men are paid more for doing the same roles as women; and men are concentrated in higher paid, higher status jobs.

SDG 6. Clean water and sanitation

Many countries around the world show significant inequalities in water supply, sanitation and hygiene (WASH) services between rural and urban areas, poor and non-poor households, and different regions within countries.

SDG 7. Affordable and clean energy

The poorest often end up paying disproportionate shares of income for energy, in part because of the higher upfront costs for energy-efficient equipment. The cost impacts of public clean energy incentive schemes may also disproportionately burden poorer taxpayers, and public money tends to favour national grid infrastructure over smaller-scale off-grid development.

SDG 8. Decent work and economic growth

Growing inequality is harmful for long-term economic growth. A main transmission mechanism between inequality and growth is human-capital investment: lower income people are prevented from realising their human capital potential, which is bad for the economy as a whole. The gap between rich and poor keeps widening as growth benefits higher income groups more. Conversely, economic growth that is distributed fairly across society has been shown to be more sustainable in the long-term.

SDG 9. Industry, innovation and infrastructure

High degrees of inequality can hamper a country’s rate of innovation through various different means, while innovation can both lower and increase inequality, depending on the circumstances surrounding it.

SDG 11. Sustainable cities and communities

Well-organised and inclusive cities allow people to access opportunities, regardless of their location within the city. However, cities are often divided. In an unequal city, a low-income household will likely live in a deprived neighbourhood. Deprivation in turn can impact school and work outcomes of children and adults, further deepening inequalities, even across generations. Inequality between urban and rural areas can lead to rapid and unsustainable urbanisation and risk leaving the rural population behind.

SDG 12. Responsible consumption and production

Sustainable management of resources and more equal distribution (of e.g. food) can contribute to reduced inequality (as well as reduced food waste).

SDG 13. Climate action

Climate change could accelerate inequality. Poor and low-income people tend to live and work in areas more susceptible to temperature extremes, in buildings less able to withstand them, and with little social protection. 

SDG 14. Life below water

Poor people and small-scale fishers are disproportionately affected by declining fish stocks and other marine resources.

SDG 15. Life on land

The poor often depend on natural resources and ecosystem services for their well-being, making them more vulnerable to the degradation of biodiversity. Richer groups of people are allegedly less affected because of their ability to purchase substitutes or to offset local losses of ecosystem services by shifting production and harvest to other regions.

SDG 16. Peace, justice and institutions

Conflict and inequality are intimately interlinked. Economic and political exclusion are key drivers of conflict in many conflict-affected countries. At the same time, an exclusive focus on poverty might obscure the need to address the root causes of conflict, in turn undermining the sustainability of aid interventions in fragile and conflict-affected contexts.

SDG 17. Partnerships

Means of implementation.

Note: Compiled by the OECD PCSD Unit.

Goal 13: Climate action

Annex Box ‎1.A.4. SDG 13: Take urgent action to combat climate change and its impacts*

13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.

13.2 Integrate climate change measures into national policies, strategies and planning.

13.3 Improve education awareness-raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning.

Targets on means of implementation

13.a Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible.

13.b Promote mechanisms for raising capacity for effective climate change-related planning and management in least developed countries and small island developing States, including focusing on women, youth and local and marginalized communities.

*Acknowledging that the United Nations Framework Convention on Climate Change is the primary international, intergovernmental forum for negotiating the global response to climate change.

Source: UNGA (2015[57]), “A/70/L.1: Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E.

Annex Table ‎1.A.4. Interactions between SDG 13 and other Sustainable Development Goals

Goal

Links with SDG 13

SDG1. No poverty

The impact of climate change is felt most strongly in low-income regions The majority of the world’s poor rely on agriculture and natural resources for their livelihood. The effects of climate change, including limited water and food sources and increased competition for them, further hampers their prospects to escape from poverty.

SDG 2. Zero hunger

Climate change exacerbates the risks of hunger and undernutrition through extreme weather events that lower agricultural production (e.g. droughts, floods), as well as through long-term and gradual climate risks (e.g. rising sea levels, glacial melt) that affect communities in coastal areas and river deltas.

SDG 3. Good health and well-being

The environmental consequences of climate change affect directly and indirectly the physical, social, and psychological health of humans. Climate change can be a driver of disease migration, as well as exacerbate health effects resulting from toxic air pollution. Biodiversity loss can potentially hamper the development of new medicines.

SDG 4. Quality education

Climate change threatens the livelihood of millions of families. The loss of resources is likely to impact family spending on education. Climate change can also divert government resources from education.

SDG 5. Gender equality

Extreme weather events have a greater impact on the poor and most vulnerable – 70% of the world’s poor are women. Moreover, women are often responsible for gathering and producing food, collecting water, and sourcing fuel for heating and cooking. These are all tasks that become more difficult with climate change.

SDG 6. Clean water and sanitation

Water is the primary medium through which we will feel the effects of climate change. Water availability is becoming less predictable in many places, and increased incidences of flooding threaten to destroy water points and sanitation facilities and contaminate water sources. Additional problems relate to droughts, salination, and loss of ecosystems.

SDG 7. Affordable and clean energy

Changes in temperature, precipitation, sea level, and the frequency and severity of extreme weather events affect how much and in what way energy is produced, delivered, and consumed in all countries. Renewable energy will be critical for tackling climate change.

SDG 8. Decent work and economic growth

Global warming will primarily influence economic growth through damage to property and infrastructure, lost productivity, mass migration and security threats. The negative impacts of climate change will be greatest in poorer countries. Workers and their families are also challenged by the transition brought about by climate change.

SDG 9. Industry, innovation and infrastructure

Climate change is adding extra pressures and creating the need for more resilient infrastructure and new technologies to cope with changing weather patterns. Through its effects on natural resource exploration and extraction, climate change can also impact on the production of industrial commodities.

SDG 10. Reduced inequalities

Climate change could accelerate inequality within and between countries. Poor and low-income people tend to live and work in areas more susceptible to temperature extremes, in buildings less able to withstand them, and with little social protection. 

SDG 11. Sustainable cities and communities

Climate change poses serious threats to urban infrastructure, quality of life, and entire urban systems. Cities also concentrate large numbers of the poor who are especially vulnerable to climate change. Cities are also main CO2 emitters and heat collectors.

SDG 12. Responsible consumption and production

Sustainable transport and tourism as well as reduced fossil fuel use can help combat climate change. Food waste is a significant source of CO2 emissions and should be limited.

SDG 14. Life below water

The ocean absorbs about a quarter of human-caused carbon dioxide emissions to the atmosphere, leading to ocean acidification and altered marine ecosystems. Rising sea surface temperatures have been linked with increasing levels and ranges of diseases in marine life, including corals, abalones, oysters, fishes, and marine mammals.

SDG 15. Life on land

Climate change affects the capacity of ecosystems, such as forests, glaciers, barrier beaches, and wetlands, to reduce the impacts of extreme events on e.g. infrastructure, human communities, and other valued resources. Climate change also contributes to biodiversity loss, desertification and land degradation, and can potentially facilitate the spread of invasive species.

SDG 16. Peace, justice and institutions

The effects of global warming on the world’s physical landscape often lead to geopolitical changes that threaten to destabilise already vulnerable regions. The stresses on natural resources undermine the capacity of nations to govern themselves, and can increase the chances of conflicts.

SDG 17. Partnerships

Means of implementation.

Note: Compiled by the OECD PCSD Unit.

Goal 16: Peace, justice and strong institutions

Annex Box ‎1.A.5. SDG 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

16.1 Significantly reduce all forms of violence and related death rates everywhere.

16.2 End abuse, exploitation, trafficking and all forms of violence against and torture of children.

16.3 Promote the rule of law at the national and international levels and ensure equal access to justice for all.

16.4 By 2030, significantly reduce illicit financial and arms flows, strengthen recovery and return of stolen assets and combat all forms of organized crime.

16.5 Substantially reduce corruption and bribery in all their forms.

16.6 Develop effective, accountable and transparent institutions at all levels.

16.7 Ensure responsive, inclusive, participatory and representative decision-making at all levels.

16.8 Broaden and strengthen the participation of developing countries in the institutions of global governance.

16.9 By 2030, provide legal identity for all, including birth registration.

16.10 Ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements.

16.a Strengthen relevant national institutions, including through international co-operation, for building capacity at all levels, in particular in developing countries, to prevent violence and combat terrorism and crime,

16.b Promote and enforce non-discriminatory laws and policies for sustainable development.

Source: UNGA (2015[57]), “A/70/L.1: Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E.

Annex Table ‎1.A.5. Interactions between SDG 16 and other Sustainable Development Goals

Goal

Links with SDG 16

SDG1. No poverty

Poverty heightens the risk for insecurity and fragility. Conversely, the destabilising effects of conflict make it harder for leaders, institutions, and other stakeholders to reduce poverty and promote human development.

SDG 2. Zero hunger

Combining efforts to restore and support resilient livelihoods with peacebuilding and conflict resolution efforts is critical for food security and nutrition. Equally, investing in food security may strengthen efforts to prevent conflict and achieve sustained peace. Equal access to land can reduce both conflict and food insecurity.

SDG 3. Good health and well-being

Conflict-related and structural physical, psychological and sexual violence has serious lasting impacts on both health and well-being. Reducing all forms of violence and ensuring peaceful and inclusive societies are prerequisites for universal well-being.

SDG 4. Quality education

Conflict and violence deprive millions of children from a safe learning environment and education.

SDG 5. Gender equality

Gender equality, including equal access to justice, is an essential factor in a country’s security and stability. Excluding women from actively participating in society can increase the risk of instability. Gender equality is not only about social justice; it is also an important element in economic development and can inform and improve work on conflict prevention.

SDG 6. Clean water and sanitation

Legal, economic, financial and institutional mechanisms to incentivise multi-sectoral and transboundary water co-operation are essential for coping and preventing water-related problems, which are becoming ever more central in armed conflicts.

SDG 7. Affordable and clean energy

High numbers of forcibly displaced persons are stretching (natural) resources and leaving international institutions struggling to account for the interconnected dynamics of climate change, conflict and energy poverty.

SDG 8. Decent work and economic growth

Conflict and disaster have severe implications for the world of work, while poverty, unemployment and decent work deficits can themselves become triggers of vulnerability and fragility, reducing the prospects for inclusive and sustainable economic growth. Investment relies on the stability and rule of law of countries.

SDG 9. Industry, innovation and infrastructure

Reduced corruption will lead to better and more effective infrastructure that benefits all citizens (as opposed to prestige projects driven by corruption).

SDG 10. Reduced inequalities

Strong institutions and justice systems are critical for reducing inequalities within and among countries.

SDG 11. Sustainable cities and communities

Urban governance is integral to the management and resolution of conflict and the mitigation of violence in densely populated areas.

SDG 12. Responsible consumption and production

Responsible production and consumption, including fair trade, require legislation and justice systems that condemn internationally outlawed practices such as child and forced labour.

SDG 13. Climate action

Climate change mitigation and adaptation are not only technical issues; they are also a matter of governance. Meeting environmental and climate commitments requires well-crafted policies and laws that are implemented transparently and enforced by strong institutions.

SDG 14. Life below water

Adequate governance structures and institutional coherence are crucial to respond effectively to growing pressures on the world’s ocean, such as stock depletion, IUU fishing and marine pollution. Nature is the first to suffer from an absence of state protection as “nature’s concerns” are easily overheard or ignored.

SDG 15. Life on land

Strong institutions and governance mechanisms are critical for tackling problems related to natural resources and ecosystems, such as corruption and illicit trade in environmental goods and wildlife products.

SDG 17. Partnerships

Means of implementation.

Note: Compiled by the OECD PCSD Unit.

Notes

← 1. Data on the distribution of earnings among groups with different levels of education show the degree to which earnings centre around the country median. “Median earnings” refer to earnings of all workers, without adjusting for differences in hours worked.

← 2. The OECD Recommendation on Open Government defines open government as “a culture of governance that promotes the principles of transparency, integrity, accountability and stakeholder participation in support of democracy and inclusive growth” fostering inclusive institutions that enable effective citizen participation, pluralism and a system of checks and balances contributing to inclusive growth (https://www.oecd.org/gov/Recommendation-Open-Government-Approved-Council-141217.pdf).

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