1、February 2020 The social contract in the 21st century Outcomes so far for workers, consumers, and savers in advanced economies Since its founding in 1990, the McKinsey Global Institute (MGI) has sought to develop a deeper understanding of the evolving global economy. As the business and economics re

2、search arm of McKinsey it is not commissioned by any business, government, or other institution. For further information about MGI and to download reports, please visit McKinsey Global Institute The social contract in the 21st century Outcomes so far for workers, consumers, and savers in advanced ec

3、onomies Authors James Manyika, San Francisco Anu Madgavkar, Mumbai Tilman Tacke, Munich Jonathan Woetzel, Shanghai Sven Smit, Amsterdam Abdulla Abdulaal, Dubai February 2020 Preface What the social contract isand how and why it changeshas preoccupied philosophers, economists, and social scientists f

4、or at least four millennia, encompassing the Code of Hammurabi, Platos Republic, and the European Enlightenment when, among others, JeanJacques Rousseau used the term in his 1762 book, On the Social Contract. At its core, the social contract is the implicit relationship between individuals and insti

5、tutions. Historysuggests that the discussion about the social contract is most active in times of broadeconomic, social, and political upheaval. It is thus perhaps not surprising that the subject has once again become topical, given the shifts fueled by technology and globalization in market and pol

6、itical economies since the start of the 21st centurynot to mention the 2008 financial crisis. Public sentiment, as expressed in opinion polls over the past few years, suggests that we are living in a new era of rising discontent, mistrust of institutions, and an economy that does not work well for e

7、veryone. Thisremains true despite significant progress in some economic indicators, including employment rates and GDP growth, along with technological advancements and improvements in education and longevity. Discussion of the social contract often encompasses the political economy and societys ins

8、titutions, including governments, as well as issues of values and social justice in communities small and large, local and global. In this research, our focus is on its economic aspects. This report is the latest MGI publication focusing on shifting economic outcomes for different groups of individu

9、als. Previous publications include 2016 reports on income stagnation, consumer trends, and investment returns, and 2019 papers on inequality and onlabor share of national income.1 The research was led by James Manyika, chairman of the McKinsey Global Institute, AnuMadgavkar, and Tilman Tacke, MGI pa

10、rtners based in Mumbai and Munich, respectively. MGI directors Sven Smit and Jonathan Woetzel provided input, guidance, and support, asdid Jan Mischke, an MGI partner in Zurich. The research team was led at different stages by Abdulla Abdulaal, Maggie Desmond, and Manuel Schnfeld. Team members were

11、YunnanJiang, Joh Hann Lee, Kimberley Moran, Katie Parry, and TJ Radigan. We are grateful to external academic advisers who guided and reviewed our work: Martin Baily, senior fellow at the Brookings Institution; Richard Cooper, professor of international economics at Harvard University; Harold James,

12、 professor of history and international affairs at Princeton University; HansHelmut Kotz, program director at the SAFE Policy Center at Goethe University and resident fellow at the Center for European Studies at Harvard University; Dani Rodrik, professor of international political economy at the Joh

13、n F. Kennedy School of Government at Harvard University; Michael Spence, Nobel laureate and professor of economics at New York Universitys Stern School of Business and senior fellow at the Hoover Institution; and Laura Tyson, Distinguished Professor of the Graduate School at the University of Califo

14、rnia, Berkeley. This research has benefited from a growing body of work on various aspects of the implicit social contract. We are particularly grateful to the following authors, whose work was a core 1 Previous McKinsey Global Institute reports include Urban world: The global consumers to watch, Ma

15、rch 2016; Diminishing returns: Why investors may need to lower their expectations, May 2016; Poorer than their parents? Flat or falling incomes in advanced economies, July 2016; A new look at the declining share of labor income in the United States, May 2019; and Inequality: A persisting challenge a

16、nd its implications, July 2019. iiMcKinsey Global Institute source of data and research for us throughout this report: Jacob S. Hacker, The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream, 2019; PeterHall and David Soskice, Varieties of Capitalism: The Institution

17、al Foundations of Comparative Advantage, 2001; and Joseph Stiglitz, Amartya K. Sen, and JeanPaul Fitoussi, Measurement of economic performance and social progress, 2009. We also gained insight from OECD publications, primarily Under pressure: The squeezed middle class, and Hows life? Measuring well-

18、being. Many colleagues at MGI and McKinsey in 2017, more than half of individuals did not save for old age. While mean individual wealth has returned to precrisis levels in 11 countries in our sample, median wealth is still 23 percent lower on average. Changes in individual outcomes across the three

19、 arenas have been propelled by the changing role of institutions, which are cushioning individuals to a lesser degree from the effects of the forces at work in the economy. Forexample, employment protections are now lower, ahigher share of healthcare and education costs is private, and guaranteed pe

20、nsion levels have dropped. While spending on publicsector wages and various government transfers to individuals rose from an average of 38 percent of GDP in 2000 to 41 percent in 2018, it was largely because of higher agingrelated costs. This pattern of greater “individualization” of the social cont

21、ract prevailed in most of the 22 economies, despite differing market systems and levels of government spending. As a more individualized social contract evolves, different groups of individuals are affected differently. Outcomes have been favorable for about 115 million workers equipped for highskil

22、l jobs, individuals for whom discretionary consumption is relatively high compared with their spending on basics, and savers able to accumulate capital. However, more than 120 million middleskill workers in Europe and the United States experienced declining employment and stagnating wages at a time

23、when the cost of basics rose faster than general inflation. Lowincome individuals experienced challenging outcomes in their roles as consumers and savers. Young people have less secure employment, spend more on meeting basic needs, and have just onethird of the average adult wealth compared with two

24、thirds a generation ago. Women in general, and minorities in some countries, have fared less well than others in incomes and savings. While individuals have achieved many gains that will need to be sustained and expanded, the bottom three quintiles of the populationabout 500 million peoplehave exper

25、ienced challenges. We identify ten key questions to address if outcomes are to improve and be inclusive as the century progresses. These include: how to reduce job fragility and wage stagnation at a time of changing work arrangements; how to address rapidly rising costs of housing and, in some count

26、ries, healthcare and education; how to mitigate the risk of saving shortfalls for some; and how to address the challenges faced by particularly vulnerable groups, including the young and lower income households. Policy makers, business leaders, and individuals will need to focus on two fronts. The f

27、irst is sustaining and expanding the gains achieved through continued economic and productivity growth; business dynamism; investment in economies, technology and innovation; and continued focus on job growth and opportunity creation. The second is tackling the challenges individuals face, especiall

28、y those most affected. Leaders are beginning to respond to these opportunities and challenges to varying degrees. However, more is needed given the scale of the opportunities and challenges, if the outcomes for the next 20 or more years of the 21st century are to be better than the first 20 and incr

29、ease broad prosperity. viMcKinsey Global Institute Institutions have shifted more responsibility onto individuals Change in category consumer prices, indexed to overall infation, percentage points Share of consumer spending, % Of 45M new jobs, 31M for women Mean individual wealth recovered but media

30、n is still below pre-crisis level $ thousand Insufcient guaranteed pensions, 2018 Not enough personal saving % of 15+ population Growing indebtedness More polarized labor market Europe and US employment share change by skill/wage level 200018, percentage points Unprecedented job growth Employment ra

31、te, % of 1564 population Part-time work drove job growth Change in employment rate 200018, percentage points 66 20002018 71 Outcomes for workers Outcomes for consumers Outcomes for savers Two priorities for the next decades of the 21st century Net pension wealth covers 10 years Not saving for retire

32、ment Not saving at all High Part time Full time MiddleLow -8 -4 0 4 3 7 4 8 15 11 20 6 24 2 53 26 Young people Less stable employ- ment, less wealth, and a harder climb onto the housing ladder than elders. 180 million Women and minorities Still lag in employ- ment, savings, and wages; female pay is

33、85 per $1 for men. 295 million Communications 43 Furnishings 33 Clothing 31 Recreation 30 Transport 0 Food +2 Other +17 Healthcare +19 Housing +21 Education +52 20 20 40 40 60 0 2002 20102018 Less expensive . while prices of discretionary goods and services such as communications and clothing fell s

34、ignifcantly More expensive Large increases in the cost of basics including housing, healthcare, and education absorbed income gains for many . 1. Sustain and expand the gains2. Find solutions for the most adversely afected groups Tech progress Outcomes have changed for people in their roles as worke

35、rs, consumers, and savers in 22 OECD countries 21st-century social contract: Economic outcomes for individuals so far +4.1 +2.7 -1.4 Low-skill, low-wage Stagnant wages, more costly housing, and negative savings (14% of disposable income). 335 million Trailing regions Uneven locus of economic activit

36、y, job growth, and innovation. 215 million of US households in 2017 had zero or negative net worth, vs 16% in 2001 23% A v e r a g e r e t i r e m e n t i s 2 0 y e a r s Higher employment and opportunity creation Produc- tivity and economic growth 100 15 300 0 200020181005 250 Median wealth Mean we

37、alth Getty images Life has changed substantially for individuals in advanced economies in the first two decades of the 21st century as a result of trends including disruptions in technology, globalization, the economic crisis of 2008 and its recovery, and shifting market and institutional dynamics.

38、Overall, the 21st century has brought opportunities and economic growth and the prospect of more to come as the century progresses, through developments in science, technology and innovation, and productivity growth. In many ways, outcomes so far for individuals have been for the better. Yet the rel

39、atively positive perspective on the state of the economy, based on nationallevel GDP and job growth indicators, needs to be complemented with a fuller assessment of the economic outcomes for individuals as workers, consumers, and savers. In doing so, this research finds that opportunities for work h

40、ave expanded, employment rates have risen to record levels in many countries, and many benefits have improved, although not everywhere. At the same time, work polarization and income stagnation, while varying in magnitude across countries, have grown. While the availability and cost of many discreti

41、onary goods and services have fallen sharply, the cost of basic necessities such as housing, healthcare, and education has grown and is absorbing an everlarger proportion of incomes. Coupled with wage stagnation effects, this is eroding the welfare of the bottom three quintiles of the population by

42、income level (roughly 500 million people in 22 countries). Public pensions are being scaled back, and roughly the same three quintiles of the population do not or cannot save enough to make up the difference. Moreover, in the postcrisis macro and monetary policy environment especially, the investmen

43、t opportunities for a majority of households have been unattractive. While the average wealth for individuals has recovered to precrisis levels, the wealth of the median individual is still almost onefourth below precrisis levels. Thiscontributes to rising economic insecurity and wealth inequality.

44、In addition to changes in the outcomes for individuals, we also find quantifiable evidence that individuals have had to assume greater responsibility for their economic outcomes in the past two decades. While this research focuses on actual shifts this century, many of these outcomes and shifts and

45、underlying trends began decades earlier. These changes in outcomes for individuals and the roles of institutions point to an evolution in the “social contract”: the arrangements and expectations, often implicit, that govern exchanges between individuals and institutions. While many have benefited fr

46、om the evolution in the social contract, for a significant number of individuals the changes are spurring uncertainty, pessimism, and a general loss of trust in institutions.1 Some policy makers and business leaders are responding with a public reevaluation of their role and purpose in society.2 In

47、this research, we aim to go beyond sentiment, to examine, in a factbased way, how particular aspects of the implicit and various social contracts have changed and, where possible, to measure those changes. We focus on advanced economies, covering 22 Organisation for Economic Cooperation and Developm

48、ent (OECD) countries that together constitute 57 percent of global GDP, although the questions are germane for emerging economies as well.3 1 Trust in government fell in more than half of the Organisation for Economic Cooperation and Development (OECD) economies between 2006 and 2016, and almost hal

49、f the people polled in 16 OECD economies believe the average person in their country is worse off today than 20 years ago. What worries the world, Ipsos Public Affairs, September 2018. 2 For example, see “Business Roundtable redefines the purpose of a corporation to promote an economy that serves all Americans,” Business Roundtable, August 19, 2019. 3 Our research covers Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, South Korea, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,