News brief - May 2011

Child poverty warning; Economy; Soundbites; Slower development aid?; Japan rebuilds; Tax burden on the rise; Estonia joins the OECD; Shinier steel outlook; Cities under-served by carbon markets; Brazil and India sign OECD chemical accord; Corruption: governments warned; Plus ça change...

Child poverty warning
Slower development aid?
Japan rebuilds
Tax burden on the rise
Estonia joins the OECD
Shinier steel outlook
Cities under-served by carbon markets
Brazil and India sign OECD chemical accord
Corruption: governments warned
Plus ça change...

Child poverty warning

Poverty in households with children is rising in nearly all OECD countries, a recent report reveals. The share of children living in poor households has risen over the past decade, to reach 12.7% across the OECD. One in five children in Israel, Mexico, Turkey, the US and Poland live in poverty. Doing Better for Families, the OECD’s first-ever report on family well-being, says that families with children are more likely to be poor today than in previous decades. Governments should ensure that family support policies protect the most vulnerable, the authors argue.



The OECD’s latest leading indicators point to mixed trends ahead for major economies. The indicators, which include order books, building permits and long-term interest rates, edged up by 0.2 points for the OECD area, though with a possible easing in expansion ahead in the EU.

Meanwhile, GDP in the OECD area grew by 0.4% in the fourth quarter of 2010, down from the 0.6% growth recorded in the previous quarter. It contracted by 0.3% in Japan and by 0.5% in the UK, and had slowed in Germany to 0.4% from 0.7% . In the US growth accelerated to 0.8% from 0.6%.

Consumer price inflation in the OECD area reached 2.7% in the year to March 2011, up from 2.4% in February. It was driven by an acceleration in energy prices to 12.4% in March, up from 10.2% in February. Food prices rose by 3.2% in March. Excluding food and energy, consumer prices rose by 1.4 % in March 2011, the highest rate in a year.

The unemployment rate of 8.2% in March 2011 in the OECD area was unchanged from February, following three consecutive monthly decreases. Indeed, for the first time since 2007, unemployment is showing a steady or declining pattern in most OECD countries.

Unit labour costs in the euro area rose by 0.2% in the third quarter of 2010 (quarter-onquarter, seasonally adjusted), slightly up from the 0.1% rate seen in the second quarter.

Merchandise trade growth quickened in the final quarter of 2010 in most major economies, with record trade figures in China. Total exports of G7 and BRICS countries grew by 8% in the fourth quarter compared to 1% in the previous quarter, and total imports grew by 7% compared to 1%.



Commodity price speculation
“Some of it (the food and energy price rise) of course is supply and demand related but I think there’s another element to it […]. The world’s financial monetary authorities, particularly in the US, but also in the UK, have added enormous amounts of liquidity in the past couple of years through quantitative easing [...]. So I think you can quite clearly say that the Federal Reserve and to a lesser extent the Bank of England have actually partly fuelled this commodity price boom.”

Richard Jeffrey, Chief Investment Officer of Casanove Capital Management, BBC Today radio programme, 6.22 am, 11 May 2011

Old Europe?
“Le retour des frontières en Europe divise l’Union. (The return of borders in Europe is dividing the Union.)”

Front page headline of Le Monde, 6 May 2011

Economic choice
"In economics, the academic realm ought to be the home of pluralist discourse but the growth of peer review and journal publication has undermined this. University economists, of the sort gathered at Bretton Woods, are now under relentless pressure to conform to a narrow, established paradigm."

John Kay, Financial Times, 15 April 2011

Slower development aid?
Development aid from OECD donor countries totalled $129 billion in 2010, the highest level ever, and an increase of 6.5% over 2009. But with some donors not meeting agreed commitments, aid could rise at a slower pace.

See Databank for more, and

Japan rebuilds

The 11 March earthquake and tsunami were Japan’s strongest ever recorded and its worst disaster in half a century. Addressing reconstruction and humanitarian needs is a priority, the latest OECD Economic Survey issued in April says. This inevitably creates the need for short-term increases in public spending, though as the report notes, the fiscal situation has reached a critical point. While it is still too early to assess the full extent of the damage, the report says the immediate impact will be to reduce output, although this will later be reversed by reconstruction efforts. Meanwhile, the OECD will be working closely with the Japanese authorities to assist where possible.


Tax burden on the rise

Income tax hikes and social security increases since the start of the crisis are putting pressure on take-home pay in some OECD countries, though some governments are cutting taxes, according to the OECD’s latest Taxing Wages report. The annual report shows that tax burdens rose in 22 of the 34 OECD countries in 2010. The Netherlands, Spain and Iceland were among the countries with increases, while Denmark, Greece, Germany and Hungary were among those showing the biggest drops.

Comparing the total cost to an employer of hiring someone to that person’s net take-home pay, including child and other family benefits, the report says that this tax wedge was highest in France (42.1% of labour costs), Belgium (39.6%) and Italy (37.2%) for one-earner married couples with two children earning the average wage, and smallest in New Zealand (-1.1%, meaning that net take-home pay is higher than costs to the employer), Chile (6.2%) and Switzerland (8.3%). The average OECD tax wedge was 24.8%.

Estonia joins the OECD

Estonia became the OECD’s 34th member country on 9 December 2010.


Shinier steel outlook

The outlook for the global steel industry is promising, with global demand forecast to increase by an annual 6% in both 2011 and 2012, the OECD’s Steel Committee said on 13 May 2011, but warned of rises in raw material prices, high oil prices and sluggish growth in the OECD area.


Cities under-served by carbon markets

Cities should be better served by the current carbon markets in the fight against climate change, a new report says. Cities use two-thirds of world energy and produce two-thirds of energy-related greenhouse gas emissions.

Search Cities and Carbon Market Finance at “What’s New”, 19 April at

Brazil and India sign OECD chemical accord

Brazil and India have joined an OECD chemical testing agreement that allows countries to share and accept each other’s results, saving money for governments and industry, and reducing the risk of trade disputes. The OECD system for the Mutual Acceptance of Data (MAD) in the Assessment of Chemicals ensures that the results of non-clinical safety tests done on chemicals and chemical products, such as industrial chemicals and pesticides, are accepted in all participating countries. OECD research has shown that this multilateral agreement saves governments and chemical producers around €150 million annually. Brazil joined MAD on 9 May, with India signing up on 6 April.


Corruption: governments warned

Most governments are not meeting their international commitments to clamp down on bribery and corruption in international business, with only five signatories to the OECD Anti-Bribery Convention having sanctioned individuals or companies in the past year, according to an OECD report released in April. Five of the 38 nations that are signatories to the convention imposed penalties on individuals or firms in 2010, and the organisation wants to see more enforcement and compliance with the landmark treaty.


Plus ça change...

“When it is a question of the development of society, it is not enough for a few experts to be familiar with all the aspects of certain problems and ‘know-how’.[…] In publishing the OECD Observer, a step is being taken towards a wider dissemination of this knowledge.”

Extract from the first editorial introducing the OECD Observer by Thorkil Kristensen, Secretary-General of the OECD, issue No 1, November 1962.

©OECD Observer No 284, Q1 2011

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