(Reuters) - The recent financial crisis and sluggish recovery around the globe have rightly helped spur governments to take on structural reforms such as in the labor, retirement and tax sectors to the benefit of many nations, the OECD said on Friday.
Many nations have wrestled with whether now is the right time to take on wrenching reforms aimed at boosting the economy in the long-term when global growth is uncertain, according to the report ‘Going for Growth’ from the Organization for Economic Co-operation and Development.
But many economically developed nations, particularly those at the low end of that table, have successfully implemented reforms at a time when many might have been tempted to maintain the fiscal and political status quo, the report concludes.
“The crisis and ensuing sluggish recovery have acted as a catalyst for structural reforms especially in OECD countries where reforms were most needed,” according to the report from the Organization for Economic Development.
Specifically, the European debt crisis has accelerated reforms in many European countries, particularly since 2010.
“Greece, Ireland and Portugal all appear among the countries whose responsiveness to Going for Growth recommendations increased the most between 2008-09 and 2010-11, especially for labor utilization, and so does Spain,” the report notes.
In the United States, the report says, high unemployment since the financial crisis has chipped away at the lead in labor utilization for the world’s largest economy.
Going for Growth is the OECD’s metric to measure countries’ efforts to achieve structural reforms.
It might be wise to shield some costly government programs - such as employment aid - from cutbacks until the economic recovery is stronger so such programs “could be gradually phased out,” it said.
Nations that aim to increase job creation might consider extending some tax breaks or otherwise boost employment while stabilizing the fiscal sector, the report says.
“Growth-friendly tax reforms could help strengthen the jobs content of a recovery, while also helping fiscal consolidation insofar as they are implemented in a way that raises tax revenue,” the report states.
Reporting By Patrick Rucker; Editing by Chizu Nomiyama