Originally stemming from economists working in developing countries, the term inclusive growth emerged during the 2000s when organisations such as the World Bank realised their economic predictions were proving to be flawed. Growth in developing countries was not always resulting in the reductions in inequality and increases in living standards that had been expected. A more proactive approach was needed to ensuring growth was more inclusive and didn’t simply pass many people and places by.
It is hardly surprising that this notion of inclusive growth quickly gained traction in the developed world too.
Two questions sit at the heart of the debate on inclusive growth. Who is benefitting from economic growth and what outcomes do we want growth to deliver? These are captured by the OECD’s definition of inclusive growth:
Economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.
The dual emphasis on outcomes as well as opportunities is what defines an inclusive growth agenda from a narrower inclusion agenda. Connecting people up to the opportunities that exist in the labour market through better education, transport and employment support is vital. But intervention is also needed to influence the growth side of the equation. An inclusive growth strategy must seek to proactively influence and shape the nature of employment opportunities. This includes boosting employers’ demand for skills, shaping the occupational and sectoral make-up of the economy, and ultimately pushing up levels of pay and improving terms and conditions of employment contracts.
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