ISTANBUL (Reuters) - The world’s 20 biggest economies must focus on higher labor productivity and become more competitive and innovative if they want to deliver on a pledge to boost economic growth, the OECD said on Monday ahead of a G20 meeting.
Leaders of the world’s top 20 economies (G20) agreed last year to launch new measures to raise their collective gross domestic product growth by an additional 2 percentage points over the next five years above the level projected in 2013.
The pledge, called the Brisbane Action Plan, entails about 1,000 commitments. G20 finance ministers and central bank governors meeting in Istanbul on Monday and Tuesday will discuss ways to prioritize and implement them.
“Labor productivity remains the main driver of long-term growth,” the Organisation for Economic Cooperation and Development (OECD) said in a report prepared for the meeting.
The OECD, together with the International Monetary Fund, is likely to be tasked with negotiating with individual countries on which reforms to choose first.
“Priority should be given to reforms aimed at developing skills and knowledge-based capital. Raising the quality and inclusiveness of education systems will underpin this,” it said.
“Governments need to improve policy settings in competition and innovation to facilitate the entry of new firms and the smooth reallocation of capital and labor towards the most productive firms and sectors,” the report said.
Structural reforms have slowed in most advanced economies in the last two years after a flurry of activity at the height of the financial crisis while big emerging economies were speeding up changes, it said.
Overall, structural reforms implemented since the early 2000s have contributed to raising the level of potential gross domestic product per capita by around 5 percent on average across countries, with most of the gains coming from higher productivity, the OECD said.
“Further reform towards current best practice could raise the long-term level of GDP per capita by up to 10 percent on average across OECD countries,” the report said. “This is equivalent to an average gain of around $3,000 per person.”
The OECD said governments should ensure that women, young people as well as low-skilled and older workers also get jobs and earn decent salaries.
Editing by Nick Tattersall and Susan Fenton