Decent Work and Inclusive Growth: The GCMY Perspective
Malaysia has progressed significantly from independence. Our economy experienced rapid growth a Tiger Cub Economy, with technology and business developing at a rapid pace. So did the wellbeing of its people, as we grew to become one of the best healthcare providers in the ASEAN region.
Amid impressive progress, however, today’s economy is not working for everyone—from the very poor to the middle class, many are struggling to participate in and benefit from global economic activity. In its “Outlook on the Global Agenda 2015,” the World Economic Forum calls out rising income inequality and persistent jobless growth as the two most important economic trends facing the global economy, contributing to rising inequality and restricting consumer spending and growth. Concerns exist that in the coming decades, current rates of economic progress will slow or reverse, and that many will continue to be excluded from economic opportunity, which not only has direct economic impacts but also could jeopardize social progress and stability.
GCMY refers to United Nations Global Compact’s publication “Business Leadership for an Inclusive Economy: A Framework for Collaboration and Impact” on the business role in creating inclusive prosperity, namely on three key investments – (1) Providence of good jobs, (2) Increasing access to essential goods and services and (3) Investing for prosperous local communities:
1. Providence of Good Jobs
While employment is necessary for inclusive growth, it is not sufficient to achieve that goal. Jobs that enable prosperous livelihoods in the 21st century have different features than in the past. It is clear that we are living in a period of substantial disruption, with economic, technological, and cultural/demographic conditions changing very rapidly. In the mature economies, the promise of lifelong jobs with defined benefit pensions are rapidly disappearing. In fast growing economies, new technologies and changing natural resource conditions threaten to reduce employment opportunities in global supply chains, which— however imperfect—have provided a valuable entry point for tens of millions of people into the formal economy over the past 30 years. For example, researchers predict that 47 percent of the U.S. workforce is at high risk of automation and, after several years of decline in middle-income jobs, it is now low-income and low-skill jobs that are most likely to be automated. At the same time, global “robot-driven” job creation could reach 1.5 million through 2016.
In light of these changes, employment that leads to more inclusive participation depends not only on working conditions in one’s current job, but also skill development over the long term. Moreover, this approach is greatly strengthened by the existence of an enabling environment that promotes human capital development and ensures a viable social safety net. In the service economy as well as in supply chain manufacturing, this means a focus not only on working conditions and compensation in one’s current job, but also an effort to enable workers to develop skills that they can apply elsewhere. This could mean financial literacy skills that allow people to manage their resources, or training and education that can be applied in one’s next job, regardless of whether that is with their current employer.
2. Increasing access to essential goods and services
Maximizing access to essential goods and services not only has direct social benefit, it also can add tremendous value for companies. The business benefits include opportunities to reach new markets, enhance reputation, increase innovation, strengthen workforce engagement and productivity (e.g., through distribution of health products), and engage customers. For example, financial inclusion initiatives ranging from product innovation to financial education have resulted in 700 million previously unbanked people using financial products for the first time through banks and mobile providers between 2011 and 2014.
Moreover, greater access to essential goods and services contributes to a better overall economic climate, particularly in developing markets. For example, a 2014 report from Deloitte (commissioned by Facebook) posits that reaching 75 percent of the population in developing markets with internet access “could generate US$2.2 trillion in additional GDP, a 72 percent increase in the GDP growth rate, and more than 140 million new jobs”.
3. Investing for Prosperous Local Communities
Companies that make investment decisions that generate local economic benefit can reap benefits of their own, including securing social license to operate and increased social stability, catalyzing local economic “ecosystems” that improve economic conditions, and enhancing risk mitigation on issues such as poor public governance and corruption. For example, a 2011 survey of 40 extractives industry leaders, insurers, law firms, and research institutes suggested that a major mining project could lose US$20 million per week if conflict delays production.
Inclusive community engagement and investment can also deliver returns at a macro-economic level. For example, if people are better able to access health services because of improved roads, transport services, health facilities, or service providers, productive capacity of the whole community is increased.