Editor’s note: Below are remarks as prepared for delivery at the G-20 Joint Finance and Labor Ministers Meeting in Moscow on July 19, 2013.
Good afternoon. Thank you to our Russian hosts for welcoming us and for their leadership in forging this first-ever opportunity for labor and finance ministers to discuss the major challenges facing the global economy and our national economies.
The fundamental premise of today’s discussion is that the goals of labor and finance ministries are and should be the same: to foster sustainable economic growth, to expand and strengthen the middle class in each of our countries and across the world, and to reduce unemployment and other economic disadvantages that threaten workers and their families.
These goals are mutually reinforcing and, when achieved, can create a virtuous cycle. Over time, appropriate levels of growth reduce unemployment. The resulting increased employment facilitates greater consumption and a broader tax base, which, in turn, engender more demand and more employment, as well as lower levels of government debt and sufficient funding for a strong social safety net. Activating greater numbers of the unemployed, workers with disabilities, and others experiencing labor market challenges in turn adds underutilized human capital to our nation’s production and reduces the demands placed on social safety net programs.
In sum, our goals are aligned. The important innovation in today’s meeting is the recognition that the means by which the labor ministries and finance ministries achieve these goals, while quite different, are inextricably intertwined and subject to common measures of success. We can determine whether finance ministries’ fiscal policies have succeeded in generating adequate growth by assessing whether unemployment is returning to pre-crisis levels, or even to a level that might be fairly called a natural rate of unemployment. If not, and if private-sector demand is insufficient to support faster growth, then we can adopt expansionary fiscal policies, again with lower unemployment serving as our measure of success.
In some quarters, including one house of the U.S. Congress and some capitals around the world, the response to economic challenges has been an undue pre-occupation with budget deficits and government debt and unyielding pressure for fiscal austerity. The predictable result has been delayed or disrupted economic growth, and high or even rising unemployment rates. As more jobs are lost and wages stagnate or decline, working families spend less and the economy falls into a downward economic spiral. The virtuous cycle turns vicious.
Similarly, we can ask whether labor ministries’ protection of workers’ rights and benefits, as well as our skills development infrastructures, have assured that workers’ jobs support middle-class lifestyles that are, as President Obama has said, the engine of economic growth. President Obama has concluded that fiscal policies must foster increasing growth when the private sector alone cannot. But he also recognizes that growth alone is not sufficient. Even creating more jobs is not a sufficient public policy response, although it is necessary. New jobs also must be good jobs providing decent wages, safe working conditions, the right to organize and bargain collectively, and economic security in retirement or after the onset of disability. Rising wages and other compensation, including automatic stabilizers like unemployment compensation, are not merely important measures of social justice – they are necessary tools for fighting economic recession. Those policies and programs should be measured based on their contribution to economic growth, at least in part.
That’s why the Obama administration has coupled expansionary fiscal policies with labor market policies designed to expand and strengthen a stable and productive middle class. For example, we are investing billions to help workers acquire the skills they need to succeed in newly created jobs and to climb career ladders to the highest rungs their talents and capabilities will allow. We are implementing labor market policies that protect workers’ rights on the job, including their right to earn a fair minimum wage and to retire with dignity.
Applied globally, well-devised labor market policies that reinforce pro-growth fiscal policies can help erase the existing jobs deficit and ensure that growth is sustainable and inclusive. Wage floors lift working families out of poverty, but they also bolster demand and reduce economic inequality. Robust systems of collective bargaining help to secure middle-class incomes, employer-provided benefits and safe working conditions.
Cynics complain that labor market policies are part of the problem. On the contrary, they are essential to redressing economic inequality that harms economic growth. A global race to the bottom fueled by low wages and weakened worker protections serves no one’s interests, particularly when the world economy already suffers from inadequate demand. Let us instead each strive to provide our workers with the most productive skills and the highest standard of living.
Five years after the onset of the global economic crisis, with roughly 200 million unemployed people around the world according to the International Labour Organization’s estimate, there must be no higher priority for our governments than expanded economic growth and the job creation that comes with it. Given that challenge, I can’t think of a better moment for the first joint meeting of labor and finance ministers under the G20’s auspices. What better time to bring together those of us who help shape the supply of labor with those who help shape the demand for labor?
Again, I congratulate the president of the G-20, our Russian colleagues, and all of today’s participants as we work together toward a sounder and fairer global economy. Thank you, and I look forward to our continued discussions.