Down to business

Governments must continue to adopt appropriate labour policies and structural change that will support enterprise creation, entrepreneurship and innovation
Business and Industry Advisory Committee (BIAC) to the OECD

Thanks to prompt and significant government responses to the crisis, many economies are experiencing initial signs of recovery. However, there is still much uncertainty concerning what lies ahead and unemployment is still rising in many countries. The OECD unemployment rate reached a post-war high of 8.5% in July 2009, with an OECD estimated 15 million extra out of work since the start of the crisis. In contrast, unemployment across the OECD was at a 25-year low of 5.6% in 2007.

For the global recovery to take hold, governments need to undertake coordinated and coherent policy actions to restore confidence in financial markets and availability of capital. Governments must also ensure that labour market and social policy frameworks support business activity so that more jobs can be retained and new ones created.

In short, public policy must support enterprises. Governments must continue to adopt appropriate labour policies and structural change that will support enterprise creation, entrepreneurship and innovation-the only sustainable bases for the creation of wealth, jobs, new products and services. Importantly, government stimulus should be targeted, timely and temporary with a view towards long-term recovery.

Five key principles need to guide policies in support of job growth:

Actions must support job creation: Jobs may be created by short-term stimulus and emergency measures, including in the public sector, but policies must also continue to encourage entrepreneurial activity, innovation and enterprise creation, trade and investment. These activities are the most important source of jobs, and the only path to sustainable job creation.

Protectionism is not the answer: Despite ongoing challenges, there must be a continued commitment to keeping markets open to international trade and investment. Protectionism is a proven path to job losses in the long run.

Make doing business easier: Governments must vigorously promote regulatory environments conducive to sustainable enterprises, reduce excessive administrative costs and red tape, stimulate entrepreneurship and competitiveness, and provide access to lending facilities. In short, make it easier to do business.

Make the needs of small and mediumsized businesses a policy priority: The advantages that smaller firms gain from dynamism and greater flexibility are often countered by weaker fi nancial and management structures, making them particularly vulnerable in the current downturn. Providing SMEs with greater access to affordable credit, and reducing their compliance and cost burden are vital to recovery plans.

Protect "employment" rather than "jobs": Governments should ensure that labour market legislation and institutions can effectively facilitate a transition from recession to recovery. Protecting employment requires labour market institutions to provide flexibility that enables employers and employees to implement fair and creative measures to maintain employment levels.

The OECD is uniquely placed to support policy considerations and actions by governments on employment and social protection systems. The OECD also has an important role in global co-ordination on employment issues, including at the G8, G20 and with the ILO, the World Bank and the IMF. This global co-ordination has been critical in keeping the jobs crisis squarely on the agenda of governments as an issue that must be addressed in a co-ordinated manner across ministries, and this should continue.

Business is firmly committed to working with the OECD and its member governments to reinvigorate global economic growth and re-establish confidence in our financial systems based on sound and effective regulatory frameworks. This outcome is essential to addressing our employment and social policy challenges.


United States Council for International Business is amember of BIAC, the Business and Industry Advisory Committee to the OECD.


©OECD Observer No 274, October 2009

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