G7 Finance Ministers and Central Bank Governors’ Meeting: Session 5: Adapting to the Modern Economy
Remarks by Angel Gurría
Whistler, Canada - 1 June 2018
(As prepared for delivery)
Rapid innovation, including digitalisation, offer enormous potential to boost productivity, incomes and well-being. But it is also a source of new challenges.
The diffusion of digital technologies remains incomplete and uneven across firms, likely contributing to the widening productivity gap between global frontier firms and the rest. Furthermore, innovation will likely disrupt labour markets and affect the distribution of jobs wages and income. The share of jobs at high risk of automation ranges from 10% to 18% in G7 countries, with middle and low-skilled workers being more exposed.
Realising the benefits of innovation and ensuring that they are broadly shared, depends on a widespread adoption of new technologies by firms, an effective reallocation of workers and capital towards growing opportunities, policies that give people the skills to navigate changing labour markets, as well as on an adaptation of labour market institutions and social protection policies.
Each country would need to develop its own whole-of-government adaptation strategy based on its specific circumstances and broader policy choices. Finance Ministers can and should be key actors in this effort.
First, fiscal policy is one of the most powerful instruments to promote innovation and technological diffusion, in particular by encouraging investment in knowledge-based capital. R&D tax incentive schemes, for instance, can help but they require careful design and evaluation to ensure value for money.
Tax and spending decisions can also help equipping workers for the transition and promoting progressivity, for instance by introducing or expanding in-work benefits or earned income tax credits focusing on low wages or by promoting skills development through student loans and other targeted public spending programmes.
Second, Finance Ministers should contribute to promote trust in new technologies through effective digital security, privacy and data protection policies at the domestic level. But this agenda also requires attention to greater multilateral co-operation in these areas. Enhanced coherence and interoperability at the international level among varying approaches and frameworks is essential.
Finally, new technologies and globalisation can only bring their full benefits in an inclusive manner if competitive conditions prevail. Competition and regulatory frameworks will need to respond to the unique features of the digital economy. The OECD competition assessment checklist is currently being reviewed to identify unduly restrictive regulation that may stifle the development of the digital economy and to identify unequal regulatory costs affecting traditional and digital economy firms. It will be important to remain vigilant and ensure a level playing field is maintained.
Ministers and Governors, it is time for action. G7 countries can make a difference by working together on finding common approaches to make this transition a success and a source of opportunities for everyone. Thank you.