Inclusive Growth and Social Cohesion in Cities:
An OECD Approach
Urban 20 White Paper
An OECD White Paper for the Urban 20 (U20)

Authored by:About Urban 20•

Urban 20 (U20) is a new city diplomacy initiative developed under the leadership of, Horacio
Rodríguez Larreta, Mayor of the City of Buenos Aires, Anne Hidalgo, Mayor of Paris and Chair of
C40 Cities Climate Leadership Group (C40). Launched on December 12, 2017 at the One Planet
Summit in Paris, the initiative is chaired by the cities of Buenos Aires and Paris, and convened by
C40, in collaboration with United Cities and Local Governments (UCLG).
U20 seeks to highlight the expertise of cities in a range of global development challenges andto raise the profile of urban issues within the G20. U20 offers solutions and clear
recommendations for consideration by national leaders ahead of the 2018 G20 Summit. It will
culminate in the inaugural U20 Mayors Summit in Buenos Aires on October 29-30. This will be a
stepping stone towards ensuring a dialogue between cities and the G20.
In 2018, 26 cities have participated in Urban 20: Barcelona, Beijing, Berlin, City of Buenos Aires,
Chicago, Durban, Hamburg, Houston, Jakarta, Johannesburg, London, Los Angeles, Madrid,
Mexico City, Milan, Montreal, Moscow, New York, Paris, Rio de Janeiro, Rome, São Paulo, Seoul,
Sydney, Tokyo, and Tshwane.
For more information, please consult: www.urban20.org

About the White Papers
Urban 20 is proud to present a series of White Papers from our Strategic and Advisory Partners
that highlight the most relevant topics on the cities development agenda and the forthcoming
urban trends. These papers define the challenges that local governments are currently facing
and offer open recommendations supported by relevant, up-to-date research and data. The
intention of this work is to broaden the understanding and perspective of decision makers andstakeholders as to enhance their ability to tackle these most pressing issues. The White Papers
also represent the hard work and dedication of these agencies and organizations to keep the
public well informed about the ongoing efforts to address the present and future challenges weshare as humankind.

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Inclusive Growth and Social Cohesion in Cities:
An OECD Approach is a White Paper preparedby the Organisation for Economic Cooperation
and Development (OECD) as a voluntary contribution
to enrich the discussions of the Urban 20 process.

About the Authors
The mission of the Organisation for Economic Co-operation
and Development (OECD) is to promote policies that will
improve the economic and social well-being of people aroundthe world. The OECD provides a forum in which governments
can work together to share experiences and seek solutions tocommon problems. This paper was prepared by theOrganisation for Economic Cooperation and Development(OECD) in its capacity as an Advisory Partner of the U20
process, building on longstanding OECD work on inclusive
growth and cities.

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Contents
Executive summary..................................................................................................................................... 5
Glossary......................................................................................................................................................... 6
Introduction.................................................................................................................................................. 7
Inequalities are a pressing global challenge............................................................................ 7
A comprehensive response to inequalities: An OECD policy framework for
Inclusive Growth............................................................................................................................. 8
Inclusive growth in cities............................................................................................................... 11
Inequalities in cities: Challenges and opportunities......................................................................... 12
Inclusive education systems....................................................................................................... 12
Jobs and labour markets............................................................................................................. 17
Housing and the urban environment........................................................................................ 21
Infrastructure and public services............................................................................................. 24
Recommendations................................................................................................................................... 27
Bibliography................................................................................................................................................ 31
Acknowledgments................................................................................................................................... 35
FiguresFigure 1. The OECD Framework for Policy Action on Inclusive Growth............................... 10
Figure 2. Change between 2006 and 2015 in the slope of the socio-economic gradient.. 15
Figure 3. Differences in labour participation rates in metropolitan areas by country, 2014.....17
Figure 4. The share of non-standard workers is high in some countries........................... 19
Figure 5. Neighbourhood segregation by income in metropolitan areas......................... 22
Boxes

Box 1. Defining Inclusive Growth: Proposals from international organisations..................... 8
Box 2. The OECD dashboard of core inclusive growth indicators....................................... 10
Box 3. The OECD Champion Mayors for Inclusive Growth initiative..................................... 12
Box 4. Introducing controlled school choice schemes in cities to overcome segregation...16
Box 5. Labour market challenges for specific social groups in Seoul, Korea................... 21
Box 6. Reforms in public bus transportation: Examples in Bogota (Colombia) and Seoul(Korea)........................................................................................................................................................... 24
Box 7. A comprehensive approach to urban rehabilitation in Santiago de Chile............ 26

This work is published under the responsibility of theSecretary-General of the OECD. The opinions expressed andarguments employed herein do not necessarily reflect theofficial views of OECD member countries.
This document, as well as any data and any map included
herein, are without prejudice to the status of or sovereignty overany territory, to the delimitation of international frontiers andboundaries and to the name of any territory, city or area.

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Executive summary
Inequality is a persistent policy challenge across many countries, with significant social andpolitical costs. Across the OECD, income inequality is at its highest point in 30 years, whereby
the average disposable income of the richest 10% of the population is around ten times that ofthe poorest 10%. Yet inequality goes beyond income, touching nearly every aspect of our lives,
from jobs to education and health outcomes, life expectancy, or even voter turnout. According
to OECD research, inequalities are even more acute in cities, and tend to be higher inlarger cities.
The multidimensional nature of inequalities calls for a policy response that cuts across policy
sectors and levels of government and stakeholder groups – what the OECD calls inclusive
growth. The OECD approach to inclusive growth provides governments at all levels with aconcrete roadmap towards realising better social and economic outcomes for people, places
and firms.
Cities and subnational governments have a key role to play in this cross-cutting policy response.
This is because local governments have a hand in many of the policy domains that matter forinclusive growth, including health, education, skills, housing and public services. Since its launchin March 2016, the OECD Champion Mayors for Inclusive Growth initiative helps lift up “whatworks” from around 50 mayors fighting for social integration and inclusive growth aroundthe world.
This paper examines the state of play surrounding multidimensional inequality and social
cohesion, drawing on the OECD Framework for Policy Action on Inclusive Growth through thelens of four key policy dimensions that matter for cities: inclusive education, inclusive jobs andlabour markets, inclusive housing and the urban environment, and inclusive infrastructure andpublic services, which are outlined in the New York Proposal for Inclusive Growth in Cities.
Building on this analysis, the paper proposes a set of policy recommendations to support
national and subnational governments in advancing inclusive growth and social cohesion incities. Proposed policy recommendations target different levels of government (national, local or
joint national-local efforts), addressing for instance the need to strengthen data collection andmethodological approaches to measure inclusive growth in cities, to align policy objectives
across sectors and levels of government, to engage a wide range of stakeholders, and tostrengthen capacities within local governments, among others.

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Glossary
ADB

between the proportion of the population fromeach income group in this neighbourhood tothat in the city.

Asian Development Bank•BRT

Bus rapid transit

TOD

ERP
Enterprise Resource Planning

UNDP

Transport-oriented development

United National Development Programme

ESCS

Index of economic, social and cultural status

VET

Vocational education and training

EU

European Union

GDP

Gross Domestic ProductGini coefficient

The Gini coefficient is a measure of inequalityof a distribution. It is defined as a ratio withvalues between 0 and 1, where 0 corresponds
to perfect equality and 1 corresponds toperfect inequality (i.e. all income to one
individual only).

Inclusive Growth

Economic growth that creates opportunity for
all segments of the population and distributes
the dividends of increased prosperity, both inmonetary and non-monetary terms, fairly
across society

PISA

Programme
Assessment

forInternational

Student

Pre-K

Pre-kindergarten

PPP

Purchasing power parity

SME

Small and medium-sized enterprise

Spatial Ordinal Entropy Index

The Spatial Ordinal Entropy Index can becomputed using grid cells data to create local
environments or neighbourhoods that are
defined at different scales. For example,
spatial entropy at a 1 000 m scale takes eachgrid cell and defines a 1000-meter areasurrounding it as the neighbourhood. The
outcome values of the Spatial Ordinal Entropy
Index are between 0 and 1, and reflect the ratio

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Introduction
Inequalities are a pressing global challenge
Inequality is a persistent challenge in cities and countries across the globe, threateningsocial cohesion. Across many OECD countries, income inequality is at its highest point in 30
years: today, the average disposable income of the richest 10% of the population is around tentimes that of the poorest 10% (OECD, 2018a). This is a challenge, because research suggests that
accumulated disadvantage for certain income, racial, gender, and ethnic groups can havedetrimental effects on social cohesion, prosperity and well-being.
But inequality goes well beyond income, touching nearly every aspect of people’s lives. The
OECD assesses inequality from a multidimensional perspective that includes medianhousehold income in addition to data on countries’ relative poverty rates and life expectancy, thefemale wage gap, childcare enrolment and voter turnout (see, for instance, the recently
launched OECD dashboard in Box 2, for a complete snapshot of Inclusive Growth indicators).
Accordingly, the policy approaches for tackling inequality, strengthening social cohesion andpromoting more inclusive growth must also cut across a range of policy areas.
OECD research shows that inequality can be even more acute in cities. In 10 out of 11 countries
for which data are available, income inequalities are higher in cities relative to their respective
national average (OECD, 2016a). By extension, income inequalities tend to be higher in larger
cities. This is partly explained because firms and workers in larger cities are generally moreproductive than in less dense areas, due to the concentration of positive agglomeration
spillovers and better matching between employers and employees (OECD, 2015). At the sametime, the geographical concentration of households with a similar income level, known asincome segregation, increasingly shapes how people live in cities. Recent research coveringboth Europe and the United States shows that the extent to which people live separated´
according to their level of income has increased during the last few decades (Marcinczak
et al.,
2016; Massey et al., 2009; Pendall and Hedman, 2015).

“Income inequalities are higher in cities relative totheir respective national average – and tend to behigher in larger cities (OECD, 2016a)”.

High and persistent levels of inequality come with important social and political costs. First,
high levels of inequality undermine the ability of the bottom 40% to invest in education, affecting
their opportunities and productivity, as well as those of their children. In the absence ofbroad-based insurance mechanisms that can help vulnerable segments of the labour market
cope with potential unemployment, unequal societies may be less resilient and may suffer
higher welfare costs from economic shocks (OECD, 2018a). Further, by undermining trust in
government and institutions, high levels of inequality can also reduce the political space forreform and may feed a backlash against globalisation and openness. This has been observedin some countries over recent years with the rise of populist movements (OECD, 2018a). Highlevels of inequality may increase the risk that narrow, non-representative interest groups
influence the policy-making process and “capture” its benefits, especially if notcounter-balanced by a well-designed regulation regime of lobbying and campaign finance.

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“High and persistent levels of inequality come with
important social and political costs”.

A comprehensive response to inequalities: An OECD policy framework for
Inclusive Growth
The OECD’s framework for responding to rising and persistent inequality is one of inclusive
growth. An inclusive growth policy approach can be defined as the “win-win” policies that deliver
stronger growth and greater inclusiveness in areas such as macroeconomic policies, labour
market policies, education and skills, competition and product market regulation, innovation andentrepreneurship, financial markets, infrastructure and public services, and development andurban policies (OECD, 2015a). A range of definitions have been put forward by different
international organisations, and are summarised in Box 1.

Box 1. Defining Inclusive Growth: Proposals
from international organisations
The OECD defines Inclusive Growth as “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.” It is athree-pronged approach based on: i) multidimensionality (which includes
economic welfare indicators such as GDP, in addition to other dimensions thatmatter for well-being, such as jobs, skills and education, health status, environment,
and civic participation and social connections); ii) an emphasis on distribution(meaning that all people are part of the growth process and benefit from theoutcomes of the process); and iii) policy relevance (a need to be policy-actionable)(OECD, 2015a).
The Asian Development Bank (ADB) framed its corporate strategy (Strategy 2020)
aiming to promote inclusive economic growth as one of its main objectives. In thisframework, Inclusive Growth is “growth that not only creates new economic
opportunities, but also one that ensures equal access to the opportunities created
for all segments of society, particularly for the poor” (Ali and Hwa Son, 2007).
The UNDP recently changed the name of its International Poverty Centre in Brasilia
to International Policy Centre on Inclusive Growth (IPC-IG), whose work is based on
the premise that more equal societies perform better in development. From the
UNDP perspective, Inclusive Growth is seen as both an outcome and a process. On
the one hand, it ensures that everyone can participate in the growth process, bothin terms of decision-making as well as in terms of participating in growth itself. On
the other hand, Inclusive Growth is one whose benefits are shared equitably.
The Europe 2020 Strategy has the notion of Inclusive Growth at its core. In thisStrategy, Inclusive Growth is understood as “empowering people through highlevels of employment, investing in skills, fighting poverty and modernising labour
markets, with training and social protection systems so as to help people anticipate
and manage change and build a cohesive society. It is also essential that the

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benefits of economic growth spread to all parts of the Union…strengthening
territorial cohesion”.
Source: OECD (2015a), All on Board: Making Inclusive Growth Happen, OECD Publishing, Paris,
https://doi.org/10.1787/9789264218512-en

The OECD Framework for Policy Action on Inclusive Growth has been developed to help
governments maintain and share the benefits from equitable economic growth. Supported bya dashboard of indicators to monitor trends, the Framework identifies possible policy responses
that can improve social equity and inclusion outcomes (Box 2). The framework is not prescriptive
and does not propose a “one-size-fits-all” approach. The value of specific policy solutions is
intended to be context-driven and may change with countries’ circumstances and priorities. The
framework is meant to help countries assess their policy choices against their ability to promoteequality of opportunities, social cohesion, and inclusion.

The Framework highlights three key dynamics for which policy solutions can spark
complementarities (Figure 1) (OECD, 2018):(1)
Invest in people and places that have been left behind through i) targeted quality
childcare, early education and life-long acquisition of skills; ii) effective access to quality
healthcare services, education, justice, housing and infrastructure; and iii) optimal natural
resource management for sustainable growth.
(2)
Support business dynamism and inclusive labour markets through i) broad-based
innovation, fast and deep technology diffusion; ii) strong competition and vibrantentrepreneurship; ii) access to good quality jobs, especially for women and under-represented
groups; and iv) resilience and adaptation to the future of work.
(3)
Build efficient and responsive governments through i) aligned policy packages acrossthe whole of government; ii) integration of equity aspects upfront in the design of policy; and iii)
inclusive policy-making, integrity, accountability and international coordination.
Many of these dimensions will be explored in this paper with respect to their relevance inurban areas.

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Figure 1. The OECD Framework for Policy Action on Inclusive GrowthWith the aim to achieve growth that benefits all, and that allows for people,
regions and business to fulfil their potential, the framework would look like:

Firms

CONTEXT
Globalisation
Digitalisation
Demographics
Climate change

PILLAR 1
PILLAR 2
Invest in people
Support businessand places
dynamism andleft behind,
Sustain andinclusive
labourproviding equal share equitably
markets
opportunities
the gainsof growth

PeoplePILLAR 3
Build efficientand responsive
governments

Places

Source: OECD (2018a), Opportunities for All: A Framework for Policy Action on
Inclusive Growth, OECD Publishing, Paris, https://doi.org/10.1787/9789264301665-en.

Box 2. The OECD dashboard of coreinclusive growth indicators
To support the Framework for Policy Action, the OECD has developed a dashboardof core inclusive growth indicators to measure key dynamics of inclusive growth(outcomes or drivers). The dashboard is intended to be evolutionary and could becomplemented by additional indicators. The indicators have been developed inlight of their policy relevance and availability at national level across a broad rangeof countries; some, but not all, are available at subnational scale, although there isconsiderable variation across countries.
The dashboard is organised into four categories, each with a set of core indicators:•
Growth and ensuring equitable sharing of benefits from growth: These
indicators help to track whether the economy is growing and living standards are
increasing for different groups of population, defined in terms of income, age andregion of residence. Indicators include:- GDP per capita growth (%)- Median income growth and level (%; USD PPP)

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- S80/20 share of income (ratio)- Bottom 40% wealth share and top 10% wealth share (% of household net wealth)- Life expectancy (number of years)- Mortality from outdoor air pollution (deaths per million inhabitants)- Relative poverty rate (%)•
Inclusive and well-functioning markets: This category looks at the structureand functioning of the economy and marketplaces as the main drivers of growthand inclusiveness. This category considers product and labour markets, both fromthe aspect of efficiency and equity. It provides an understanding of the maineconomic forces underpinning people’s living standards. These indicators gauge
the productivity-inclusiveness nexus at a more granular level, e.g. at gender,
sectoral and geographical levels. Indicators include:- Annual labour productivity growth and level (%; USD PPP)
- Employment-to-population ratio (%)- Earnings dispersion (inter-decile ratio)- Female wage gap (%)- Involuntary part-time employment (%)- Digital access (businesses using cloud computing services) (%)- Share of SME loans in total business loans (%)•
Equal opportunities and foundations of future prosperity: This category
looks at the distribution of selected non-economic well-being components, such as
health, education, socio-emotional skills, environmental quality of life and childcare.
These elements capture people’s opportunities to improve well-being and toparticipate in the economy and society. Indicators include:- Variation in science performance explained by students' socio-economic status (%)- Correlation of earnings outcomes across generations (coefficient)- Childcare enrolment rate (children aged 0-2) (%)- Young people neither in employment nor in education & training (18-24) (%)- Share of adults who score below Level 1 in both literacy and numeracy (%)- Regional life expectancy gap (% difference)- Resilient students (%)•
Governance: This category reflects a whole-of-the-government approach tomonitoring efficiency and responsiveness of the government. Indicators include:- Confidence in government (%)- Voter turnout (%)- Female political participation (%)
Source: OECD (2018a), Opportunities for All: A Framework for Policy Action on Inclusive Growth, OECD
Publishing, Paris, https://doi.org/10.1787/9789264301665-en

Inclusive growth in cities
This multidimensional framework is also extremely relevant in cities, which often have a handin many of the policy domains that matter for inclusive growth. Cities and urban areas are someof the most appropriate “units” or scales to measure and assess multi-dimensional inequality, as
well as propose effective policy responses (OECD, 2016a). While competencies may vary acrosscountries, cities tend to have some level of responsibility in areas as diverse as economic

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development, housing and land use, mobility, education and skills, health, and labour markets.
Leaders at the subnational level are well-placed to respond to growing inequality withmultidimensional, “win-win” policy solutions in these sectors and to manage potential trade-offs.
This approach was supported by local leaders from around the world at the launch of the OECD
Champion Mayors for Inclusive Growth initiative, through the signature of the New York Proposal
for Inclusive Growth in Cities in March 2016. This group of leading Mayors agreed to tackle
inequalities through actions along four policy pillars: i) an inclusive education system; ii) an inclusive
labour market; iii) an inclusive housing market and urban environment; and iv) inclusive
infrastructure and public services (Box 3) (OECD, 2016b).

Box 3. The OECD Champion Mayors for
Inclusive Growth initiative
The OECD, through its Champion Mayors for Inclusive Growth initiative, andinstitutional partners including the Ford Foundation, the Brookings Institution, Cities
Alliance, C40 Cities Climate Leadership Group, ICLEI, the Lincoln Institute of Land
Policy, the National League of Cities, UCLG, and United Way Worldwide, are working
together to highlight the efforts and commitment of Champion Mayors andinstitutional partners. This initiative:•
Facilitates the exchange of best practices among city governments, as wellas other stakeholders from the non-profit, private, civil society, and philanthropic
sectors to tackle inequalities across a range of dimensions. Exchanges occur
through regular meetings of Champion Mayors, thematic policy dialogues,
technical-level webinars, and a knowledge-sharing web platform.
•
Continues to develop the evidence base about social cohesion andinclusive growth, including mixed methods survey research about cities’ innovation
capacity and synergies between cities’ climate change financing strategies andinclusive growth outcomes. Evidence includes both data and indicators tomeasure the multidimensional nature of urban inequalities, as well as the mosteffective policy solutions in a number of policy domains to advance good social
cohesion and Inclusive Growth.
•
Provides targeted support to cities so that they can implement, monitor andevaluate their own Inclusive Growth policies, programmes and agendas.
Source:OECD(2016c),Paris
ActionPlanforInclusive
www.oecd-inclusive.com/champion-mayors-doc/paris-action-plan.pdf

Growthin

Cities,“Subnational governments have a critical roleto play in tackling inequality and advancing
social cohesion and inclusive growth”.

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Inequalities in cities: Challenges and opportunities
This paper takes a multidimensional approach to inclusive growth and social cohesion, both interms of assessing the challenges and identifying appropriate policy responses. It draws on
several critical dimensions of the OECD Policy Framework for Inclusive Growth that are especiallyrelevant in cities and outlined in the New York Proposal: i) inclusive education systems; ii) inclusive
labour markets; iii) inclusive housing markets and urban environments; and iv) inclusive
infrastructure and public services.

Inclusive education systems
At the national level, education systems are often characterised by inequality. OECD researchdemonstrates that students’ home life greatly shapes success in education; schooling can either
reinforce, or worsen, the large influences of home life on education success. On average acrossOECD countries, a significant share of the variation in students’ science performance could be
explained by students’ socioeconomic status. For science, 12.9% of the variation in student
performance within each country is associated with socio-economic status; this can reach morethan 20% in some countries, including France, Hungary, Luxemburg and Peru (OECD, 2016d).

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Over the last decade, students’ educational opportunities have increased, but not by much. By
2015, the degree to which students’ socio-economic status predicted performance in sciencedecreased to 13 score points in the OECD’s socio-economic gradient, while the difference inperformance between students who were one unit apart on the ESCS index decreased to 38
score points. The strength of socio-economic gradient measures the change in the percentage
deviation in science scores explained by the OECD’s PISA index in or across a given time period.
Over the 2006-15 time period, however, the strength of the gradient – which measures the links orcorrelation between education performance and socioeconomic status – decreased by morethan 3% points in the eight countries that also managed to maintain their average performance:
Brazil, Bulgaria, Chile, Denmark, Germany, Slovenia, Thailand and the United States (OECD, 2018a).
At the subnational level, education systems are inextricably linked to other social cohesion
factors. For instance, socio-economic segregation in schools is linked with residential segregationin cities (OECD, 2018b). Educational outcomes are strong predictors of future incomes, as well as
health and job outcomes, while equitable access to education is an essential way to improve
people’s life outcomes and also create more just and inclusive cities. On average, students
in urban schools are faring better than those in rural areas: in the OECD area, 15-year-old students
in urban schools outperform those in rural areas on the Programme for International Student
Assessment (PISA) test by 20+ points on average, the equivalent of about one year of education.
However, stark inequalities remain within cities in terms of access to quality education. Three
examples demonstrate the extent of these inequalities:•
In the Chicago Tri-state metropolitan area, school district high school graduation rates
range from 57% in the city of Chicago to over 95% in suburban areas (OECD, 2012a).
•
In Aix-Marseille, the working-age population without a diploma ranges from 39% in northern
Marseille neighbourhoods to 14% in Aix-en-Provence (OECD, 2013a).
•
In Puebla-Tlaxcala, Mexico’s fourth-largest metropolitan region, peripheral areas exhibit
lower education levels than the metropolitan core; in some peripheral census tracts, more than
65% of the population has not completed a secondary education. By contrast, incompletion rates
stand at less than 20% in the metropolitan core (OECD, 2013b).
Such inequalities in education both reflect and reinforce socio-economic inequalities in cities, withlong-lasting consequences on the life prospects of urban residents (OECD, 2016a).

“At the subnational level, education systems are
inextricably linked to other social cohesion factors.
While on average students in urban schools
outperform those in rural areas, stark inequalities
remain within cities in terms of access to quality
education”.

Some countries have been effective in improving performance and equity of the school systemat the same time. Educational opportunities have increased without offsetting improvements:
between PISA 2006 and PISA 2015, in Chile, Denmark, Mexico, Slovenia, Turkey, the United Kingdom
and the United States, the average impact of students’ socio-economic status on performance
weakened by more than 4 score points while mean science achievement did not decline (OECD,
2018a) (Figure 2). School choice programmes have also been implemented as a means toaddress segregation (Box 4).

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Figure 2. Change between 2006 and 2015 in the slope of the socio-economic gradientNote: Only countries and economies with available data are shown. Changes in both equity andperformance between 2006 and 2015 that are statistically significant are indicated in a darker
tone. The average three-year trend is the average rate of change, per three-year period,
between the earliest available measurement in PISA and PISA 2015. For countries andeconomies with more than one available measurement, the average three-year trend is
calculated with a linear regression model. This model takes into account that Costa Rica,
Georgia, Malta and Moldova conducted the PISA 2009 assessment in 2010 as part of PISA
2009+.
Source: OECD, PISA 2015 Database, Table I.6.17.

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Box 4. Introducing controlled school choice
schemes in cities to overcome segregation
Most OECD countries combine student allocation to schools by geographicalassignment and give some flexibility for parents to choose among different publicschools. Yet school choice schemes that do not consider equity risk exacerbating
segregation by ability, income and ethnic background (Musset, 2012). Better-off
parents tend to avoid schools with a significant number of disadvantaged students;
they are also more likely to enrol their children in high-quality schools because they
have more information and resources. In contrast, disadvantaged parents tend to
exercise choice less and to more often send their children to the local
neighbourhood school. Less-educated families may not access the information
required to make school-choice decisions, or may have different preferences whenit comes to school characteristics (Hastings, Kane and Staiger, 2005). Elements
such as these contribute to socio-economic segregation between schools.
Controlled choice programmes, or flexible-enrolment plans, introduce mechanismsthat ensure that children are allocated to schools more equitably (e.g. in terms ofparental socio-economic status or child’s ethnic origin).
In the event ofoversubscription to some schools, this type of scheme prevents disadvantaged
students from getting crowded out. For example, Rotterdam offers a system of
double waiting lists, which allow oversubscribed schools to give preference tochildren who would enrich their ethnic and socio-economic diversity.
Sources: Drawing from OECD (2012b), Equity and Quality in Education: Supporting Disadvantaged
Students and Schools, OECD Publishing, Paris, https://doi.org/10.1787/9789264130852-en ; Schleicher, A.
(2014), Equity, Excellence and Inclusiveness in Education: Policy Lessons from Around the World,International
SummitontheTeaching
Profession,
OECD
Publishing,Paris,
https://doi.org/10.1787/9789264214033-en; Musset, P. (2012), "School Choice and Equity: Current Policies
in OECD Countries and a Literature Review", OECD Education Working Papers, No. 66, OECD
Publishing, Paris, https://doi.org/10.1787/5k9fq23507vc-en; Hastings, J., T. Kane and D. Staiger (2005),“Parental preferences and school competition: Evidence from a public school choice program”,
http://dx.doi.org/10.3386/w11805.

Investment in early childhood education can pay off in cities. Educational spending perperson is typically highly concentrated at the secondary and tertiary levels, whereas spending
on both early childhood education and lifelong learning is much lower, even though this iswhere important inclusive growth-oriented outcomes can be achieved. In New York and several
other cities and states in the United States, for example, policies for free universal
pre-kindergarten (“Pre-K”) are providing opportunities for earlier access to education forunder-serviced communities (OECD, 2016a).
Supporting education for low-income youth can strongly benefit from community
partnerships. One such example in, Toronto, Ontario, is the Pathways to Education programme
created by community members in the city’s Regent Park neighbourhood. It is now present innumerous Canadian cities. It aims to tackle the roots of poverty and supports academic
achievement among the community’s youth by providing academic, financial and social
supports. Although Canada already has one of the highest post-secondary attendance rates
globally, the strong national average masks the fact that one in five teens between the ages of
15 and 19 is no longer pursuing an education. Society pays a high price for low educational
achievement: an estimated 85% of income assistance goes to the 34% of Canadians who havenot completed secondary school. In Regent Park, about 80% of residents were visible minorities.

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Moreover, 58% of Regent Park residents were born outside of the country and spoke little or no
English (OECD, 2016a).
Vocational education and training need to be tailored to local needs. Collaboration between
the private sector, training and education institutions, and varying levels of government fromlocal to national, is all fundamental to develop vocational education and training (VET)
programmes. The goal of VET programs is to provide the practical skills in rapidly changing
urban economies. Designing job-oriented VET programmes requires a strong grasp of local
economies and cutting-edge industries. In Australia, the VET system is well-developed andflexible, allowing for local and to adapt learning to local circumstances in new ways (Hoeckel etal., 2008). Another example is Vienna, where apprenticeship schemes offer practice-oriented
training in companies (“on-the-job” training, which takes up 80% of course time) and in vocational
schools (OECD, 2016a).

Jobs and labour markets
Improving participation in the urban labour market is crucial for inclusive growth. The
presence of highly skilled and low-skilled workers in cities drives inequality at the local level: skill
inequalities explained around 33% of inequality in US metro areas in 2000 (Glaeser, Resseger
and Tobio, 2009). In addition, metropolitan areas in the OECD have different levels of labour
participation rates, with differences within the same country ranging from 0.7 percentage points(Portugal) to almost 30 percentage points (Italy) in 2014 (Figure 3). Cities and neighbourhoods
with lower incomes also typically have worse-performing schools; local amenities often sufferfrom poorer access to services such as transport and health. At the metropolitan level, it is thus
important to promote investment in individuals’ skills and to complement measuring inequality
with measuring the key drivers of that inequality, such as the levels and the quality of educationof urban residents or the level of segregation of households, which are other components of the
Inclusive Growth agenda (OECD, 2016a).

Figure 3. Differences in labour participation rates in metropolitan areas by country, 2014

Note: All values refer to 2014 except for Austria, the Czech Republic and Switzerland (2013); and Slovenia(2011). The number of metropolitan areas in each country is shown in brackets.
Source: OECD (2016a), Making Cities Work for All, based on data from OECD Metropolitan Database.

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Jobs, productivity, and labour markets are being profoundly shaped by digitalisation andtrade, at rapid speed. Digitalisation can improve production processes; however, newtechnologies and know-how require time to be adopted and adapted for businesses, and thus
are only able to strengthen productivity growth after they are adopted and adapted. OECD
research on the productivity-inclusiveness nexus has shown that the gap between
high-productivity firms and those falling behind has increased, even within the same countries andcities, and within narrowly defined industries. This slowdown in productivity growth divergence andincreasing inequality are interrelated (Berlingieri et al., 2017). This relationship illustrates theimportance of policy responses that tackle the increasing productivity divergence and inequality
at once. They could also produce a “double dividend” in terms of both greater productivity growth
and reduced income inequality (OECD, 2018a).

“Jobs, productivity, and labour markets arebeing profoundly shaped by digitalisationand trade, at rapid speed”.

Digital technologies also present both opportunities and challenges for small firms inparticular. The intangible nature and low replication costs for digital technologies reduce the needfor large upfront investments. For example, cloud computing and other digital technologies havegiven SMEs better possibilities for online commerce and advertising without high transportation,communications and marketing costs. While the costs of adopting basic digital technologies havefallen dramatically, small firms with 10-49 employees are only half as likely as large firms to havebusiness websites, and only one third as likely as large firms to use Enterprise Resource Planning(ERP) platforms that integrate core business processes in real-time (OECD, 2018a).
Cities are major enablers of inclusive digital transformations. Cities spur the development ofvibrant local innovation and entrepreneurship ecosystems by bringing together local resources
and mobilising the participation of a broad range of stakeholders. On average, in 2015, 51% of new
firms were created in predominantly urban regions (OECD, 2018g). Urban regions also show thelargest levels of business dynamics, both in terms of business creation and destruction rates,
which is particularly pronounced for mostly urban regions at the frontier of national productivity(OECD, 2017e). Growing and nurturing entrepreneurial communities in cities is key to support newand established businesses to take full advantage of advanced technologies or innovative
business models. This includes taking a holistic view on the enabling factors of entrepreneurshipand innovation in cities and ensuring that entrepreneurs in different sectors and from different
backgrounds have equal opportunities to access knowledge networks, innovation supports¬¬¬ andskills training.
A more general concern expressed by workers is that globalisation and digital transformation
are contributing to poorer working conditions and lower quality jobs. New forms of employment
are emerging that have the potential to promote greater labour market inclusiveness, but only if
concerns about job quality are addressed. Both a more digitalised and globalised world havegiven rise to the “platform economy”, in which workers carry out “gigs” either in person (for example,
delivering food or providing rides) or online (such as transcription and product categorisation).
Workers that can carry out individual tasks required by consumers over online platforms often
perform these tasks as independent contractors. There is an increasing number of non-standard
workers who may only work occasionally and have multiple jobs and income sources, withfrequent transitions between dependent employment, self-employment and work-free periods(Figure 4), especially in large metropolitan areas. These new forms of employment can offer muchflexibility – both regarding where and when the work is carried out – and therefore provide
opportunities for people who have been excluded from the labour market due to caring
responsibilities or because they live in remote areas. Yet some of these jobs raise concerns about

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job quality, for example, or about employment protection and social security coverage (OECD,
2018a).

Figure 4. The share of non-standard workers is high in some countries

Note: Data on self-employment in France refer to 2011; data on temporary and part-time workers
is not available for the US.
Source: OECD (2018a), Opportunities for All, based on data from OECD Employment and LabourMarket Statistics Database and OECD (2017a).

By extension, there are significant concerns among workers and policy makers about the riskof jobs being lost to automation, given the rapid pace of technological change. Previous OECD
analysis has estimated that around 14% of jobs across the OECD area as a whole are at risk of
automation, while another 32% are likely to see significant changes. New work by the OECD
(OECD, 2018c) shows that the risk of job automation varies considerably across regions withincountries: the share of jobs at high risk of automation nears 40% in some regions (e.g. West
Slovakia) and is as low as 4% in others (e.g. the region around the Norwegian capital Oslo). In
addition, there are striking differences in access to quality employment across different regions inOECD countries. Regional disparities have increased in terms of the number and quality of newjobs created, unemployment and educational attainment. More than half of all regions saw theirworking age population decline from 2010 to 2016. Cities and towns continue to attract young
educated workers at the expense of rural areas. Encouragingly, 60% of regions in the 21 countries
studied have created more jobs at a low risk of automation since 2011 than the number of jobs
they have lost in high automation-risk sectors. Regions with a lower share of jobs at risk of
automation tend to be highly urbanised with higher educated workers and a strong tradeable
services sector (OECD, 2018c).
Moreover, digitalisation is also changing labour markets in metropolitan areas, particularly withrespect to non-standard forms of work that have gained ground in part through digitalisation.
Non-standard work – defined as temporary, part-time, and self-employment – has been on the

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rise across OECD countries over the past 10 years, accounting for net employment growth in the
U.S. between 2005 and 2015 (Kamal-Chaoui and Pearson, n.d.). The growth of non-standard work –some of which can be characterised as part of the “gig” economy – offers job opportunities formany individuals thanks to the greater flexibility: they can help better match workers to jobs,
integrate those who are most marginalised in the labour market or offer new opportunities forwork-life balance. However, these forms of employment often come with reduced access to social
protection and health benefits. Moreover, they don’t give an incentive to invest in skills upgradingin the same way as for a standard employee. And, evidence shows this type of employment may
simply be a last resort opportunity and not a worker’s choice (OECD, 2018c). New OECD work on
the labour market impacts of the “gig” economy in the United States suggest that the challenge is
especially present in metropolitan areas, although metropolitan areas display very different
patterns of non-standard work. Cities are essential for the functioning of the online platform
economy, which is able to tap into the benefits of agglomeration (Kamal-Chaoui andPearson, n.d.).

“The risk of job automation varies considerablyacross regions within countries: the share of jobs athigh risk of automation nears 40% in some regions
and is as low as 4% in others (OECD, 2018c)”.

Some social groups – such as women, youth and the low-skilled – face particular challenges
relating to job quality and security. For instance, women’s employment rates are still substantiallylower than those of men, and women suffer a large gap in earnings quality. By extension, youth
and low-skilled workers are more affected by economic shocks than prime-age workers as wellas high-skilled workers; and perform lower-quality jobs. Looking at job quality outcomes acrosssocio-economic groups reveals that over the past decade, the deep and prolonged economiccrisis led to a worsening of labour market security that particularly hit the youth and low-skilledworkers. These two groups tend to be disadvantaged – not only do they have the poorest
outcomes in terms of unemployment rates, but they have poor job-quality outcomes (lower
earnings quality, considerably higher labour market insecurity, higher job strain). By contrast,
high-skilled workers perform well on all three dimensions. The case of Seoul, Korea, is illustrative ofchallenges facing specific groups (Box 5).
Rapid population ageing will increase substantially the number of older people, who will needsupport to remain in work or find new work. Ageing can also imply job reallocation. Many
countries are undergoing significant demographic change, with the cross-OECD average shareof the population aged 65 estimated to rise from less than 1/6 of the population in 2015 to morethan ¼ of the population by 2050. China is also on the cusp of experiencing pronounced
population ageing. Fewer young people will be entering the workforce; shortages of qualified
labour could arise as larger cohorts of older workers retire. Longer working lives might mean more
numerous job changes. Population ageing is also likely to lead to labour reallocations acrosssectors and occupations as the overall consumption patterns change: demand will continue toshift from durable goods, like cars, towards services, like health care (OECD, 2018a).
The employment challenge is also pressing in developing countries with demographicpressures and scarce wage employment opportunities for youth. Between 2015 and 2020, 60
million jobs would have to be generated to provide jobs for the projected number of youth
entering the labour market in South Asia; 42 million in sub-Saharan Africa and 30 million in the
Middle East and North Africa to provide jobs for the projected number of youth entering the labour
market (World Bank, 2015; WIR, 2018; OECD, 2018a).

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“Many countries are undergoing significant
demographic change, with the cross-OECD average
share of the population aged 65 estimated to risefrom less than 1/6 of the population in 2015 to morethan ¼ of the population by 2050”.

Box 5. Labour market challenges for
specific social groups in Seoul, Korea
In Seoul, Korea, particular groups in the labour market face unique challenges,
notably elderly, women, migrants, youth. As labour market dualism in Korea andSeoul is highly stratified along the lines of education, skills, and gender, policies areneeded that mitigate against the rising divide between regular and non-regular
employment, and secure high-quality employment opportunities for disadvantaged
and under-represented parts of the population.
Expanding employment opportunities for women, youth, and seniors is key tocombatting demographic trends and strengthening inclusive entrepreneurshipand SME development in Seoul. The employment rate of women in Korea was theninth lowest in the OECD in 2017. It was also 19.3 percentage points below that ofmen (OECD, 2016e). A high share of women exit the workforce following marriage
and childbirth and return to the labour market at a later age, facing lower careerand earning opportunities. Self-employment and business creation can be analternative to the labour market if women have equal opportunity to start and run
businesses. This includes improving maternity and parental leave systems andavailability of high-quality childcare, and to facilitate re-entry into the workforce after
long absences.
Source: OECD (2018e), Inclusive Growth
https://doi.org/10.1787/9789264290198-en.

inSeoul,

Korea,

OECD

Publishing,Paris,

Housing and the urban environment
Inequality has a clear spatial dimension. Income segregation has been rising in the last
decades: across the developed world, rates of spatial segregation by both income andsocio-economic status in metropolitan areas have been increasing. In the United States, there isa well-developed literature documenting a rapid increase in spatial segregation since the 1970s(Massey, et al, 2009; Rothwell and Massey, 2010; Fry and Taylor, 2012; Pendall and Hedman, 2015).
The share of the population living in the poorest, and in the most affluent neighbourhoods,
respectively, has more than doubled since 1970. The number of people living in middle-income
areas of the city has dropped significantly (Reardon and Bischoff, 2011). The increase of income
segregation comes together with a general decrease in racial segregation in the United States(Glaeser and Vigdor, 2012; Logan and Stults, 2011; OECD, 2016a).
Spatial segregation looks different in different places, and even across cities within the same

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country (Figure 5). For instance, the most segregated cities in the Netherlands are at levels
comparable to the least segregated cities in the United States (OECD, 2016a; OECD, 2018b). The
level of segregation by income in Danish and Dutch cities is much lower than that in American andCanadian cities, which confirms findings from the literature (OECD, 2018b; Musterd and de Winter,1998). These five countries show significant differences in their average level of income
segregation. Furthermore, the variance in segregation across the European countries consideredis small compared to North American cities; standard deviations are less than half as large as inEurope (OECD, 2016a; OECD, 2018b).

“Inequality has a clear spatial dimension. Income
segregation has been rising in the last decades:
across the developed world, rates of spatial
segregation by both income and socio-economic
status in metropolitan areas have been increasing.
Yet spatial segregation looks different in different
places, and even across cities within the same
country. For instance, thecities radius)in
Spatialmost
ordinalsegregatedentropy index (1 kilometre
the Netherlands are at levels comparable to the least
segregated cities in the United States”.

Figure 5. Neighbourhood segregation by income in metropolitan areas

Note: Data refer to 2014 for the United States; 2013 for Denmark and New Zealand; 2011 for Brazil,
Canada, France, Ireland, United Kingdom and South Africa; 2010 for Australia; 2008 for the
Netherlands; 2000 for Mexico.
Source: OECD (2018b), Divided Cities: Understanding Intra-urban Inequalities, OECD Publishing,Paris, https://doi.org/10.1787/9789264300385-en.

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The concentration of specific groups in certain neighbourhoods is not “bad” per se, as it canbring benefits such as wider social networks and stronger community support. However,segregation is a problem if it implies that disadvantages are spatially concentrated, which canbe the case for neighbourhoods with low job accessibility or a poor social environment (OECD,
2018b). Such spatial concentration of disadvantages can induce life-long obstacles toopportunities (Chetty et al., 2015). Moreover, recent work shows that high spatial segregation
lowers the social cohesion of a city and as such lowers the overall well-being of residents(Novara et al., 2017; OECD, 2018b).
Contrary to widely held narratives, segregation is often driven by the most affluent
households in urban areas, but there is some variation across countries. Several studies
demonstrate that inequality tends to bring segregation, and in particular among the affluent,since households at the top of the income distribution tend to separate themselvesgeographically as they become more affluent (Reardon and Bischoff, 2011; Watson, 2009).
Income segregation is driven by the most affluent households in Canadian, French and US cities(OECD, 2018b). The rise in inequality during the last decade, including during the economic crisis
that started in 2008, might have affected current levels of segregation (OECD, 2016a).
In some places, the affluent may be concentrated “vertically” – this is the case, for instance,
in some large Brazilian cities. Recent OECD research shows that the affluent tend toconcentrate in vertical neighbourhoods, that is, neighbourhoods with a high density ofapartment towers. Vertical neighbourhoods are more common in larger Brazilian cities. For
instance in some waterfront areas of Rio de Janeiro, Brazil, residents are virtually surrounded byapartment buildings, as 97% of more of households live in apartments. Interestingly, these areas
concentrate host 16 times more high-income than low-income households. Neighbourhoods insmaller Brazilian cities, like Fortaleza and Vitória, are more mixed in terms of dwelling types, but
still those with a high proportion of apartment dwellers contain a larger percentage ofhigher-income heads of household (OECD, 2018b).
Spatial segregation can also be a critical challenge for migrant populations in cities. This has
been documented, for instance, in the case of many cities in the European Union. In EU Member
States, the ratio of migrants to the overall population varied between 1.66% in Poland and 45.19% in
Luxembourg, and between 0.54% in the Slovak Republic and 13.82% in Latvia when considering
only immigrants from non-EU countries. However, aggregated figures at the national level mask
the high diversity in the distribution of migrants across cities and regions within countries. Thereis a wide-ranging literature on migration studies noting that migrants tend to concentrate incities (Sanderson et al., 2015; International Organization for Migration, 2015; Wright, Ellis, and Reibel
2008; OECD 2016a). Almost two-thirds of migrants settle in metropolitan, densely populated
regions, while only 58% of “native-born” people live in such regions. Capital city regions record thehighest population shares of migrants in the majority of OECD countries (OECD, 2018b). A
concentration of migrants in certain neighbourhoods impedes integration (OECD, 2018b).
Housing is also a key policy area in which subnational governments – and especially cities– have an important role to play to address inequalities. On average in the OECD, subnational
governments account for a larger share of total public spending on housing than national
governments (72%). This value rises above 90% in Belgium, Estonia, Norway, Spain and
Switzerland. In Belgium, for example, social housing was completely decentralised to the regionsin 1980, and involves providers such as municipalities, public companies, foundations,
co-operatives and non-profits (OECD, 2016a).
Housing policy alignment across sectors is critical. National and local government policies too
often work at cross-purposes, eroding their respective impacts on housing outcomes. National
housing strategies often aim to stimulate the housing supply, via direct spending to support new
construction or facilitate access to homeownership, regulatory tools (e.g. to require municipalities
to build social housing, as in France) or tax incentives (e.g. the United States’ Mortgage Interest
Deduction). However, local government housing policies tend to impose demand-side

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constraints on housing supply, for example through restrictive land-use regulations,development controls, or zoning requirements. The combination of those two contradictory
approaches results in a sub-optimal use of public resources and rarely leads to positive
outcomes. Effective alignment of objectives and tools across levels of government is essential
to creating a more inclusive, affordable housing market (OECD, 2016a).
As OECD (2017b) outlines, a wide range of social outcomes are influenced by land use. Not
only is the availability of land one of the major determinants of housing costs; land and theproperty built on it constitute by far the largest part of all global wealth. As a consequence,land-use policies have enormous implications for the wealth distribution of a society (OECD,
2017b). Land use policies also play a major role in spatial segregation discussed. Land-use
planning can prevent segregation, for example by designing neighbourhoods with housing forhouseholds in all income categories. Furthermore, planning policies can alleviate conditions of
low income communities in areas that are poorly linked to services and jobs by improving
accessibility through better infrastructure.

Infrastructure and public services
Connecting social groups to opportunity and public services through effective transport
networks is a powerful policy tool for fostering inclusive growth. Disadvantaged communities
are often home to poorly maintained infrastructure – notably roads, lesser access to reliablepublic transport services, and private cars. For example, in the metropolitan area of Aix-Marseille,
France, transport networks have not met increasing travel demand between cities – about 77%of the population living in peri-urban areas (outside of Marseille) has no access to public
transport, 14% has limited access, and only 2% has high access (Poelman and Dijkstra, 2014). In
the context of Aix-Marseille, the institutional fragmentation of ten different regional transport
authorities in the metropolitan area has reinforced inequalities in access to employment (OECD,
2013a, OECD, 2016a).
Expanding and improving public transport accessibility can help connect all urban residents
to better opportunities. Overcoming financial and political constraints is key to building more
inclusive urban transportation. While national and local authorities have increasingly
incorporated equity goals in their mobility agendas, unintended consequences remain. For one,the availability of funding determines the feasibility of inclusive solutions for urban transport.
New York and Toronto, for instance, are working on policies to improve discount fares for
economically challenged households. Paris has established a single-price public transport fareby “de-zoning” the annual and monthly Navigo pass across the entire metropolitan area.
However, most of the instruments used –from direct discount fares to transportation cost-relief
tax credits – bear built-in collateral consequences. Transport cost-relief tax credits, for example,
can sometimes increase low-income households’ exposure to financial risks (OECD, 2016a). The
cases of Bogota (Colombia) and Seoul (Korea) are good examples of how cities have reformed
public bus transport to boost access and develop effective public-private partnerships (Box 6).

Box 6. Reforms in public bus transportation:
Examples in Bogota (Colombia) and Seoul (Korea)
Both Bogota (Colombia) and Seoul (Korea) conducted large-scale public transport
reforms in the early 2000s. In both cases, ridership was over capacity, lack ofregulation prompted a commercially complex environment of multiple service
providers, and the maintenance and safety of buses was not always guaranteed. As aconsequence, both capital cities took extensive reforms to deeply restructure their services.

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government built dedicated twin Bus Rapid Transit (BRT) lanes for buses on theside of roads for decongestion purposes. The buses are owned and run by privatecompanies under the jurisdiction of a concession contract.
•
In Korea, the Seoul metropolitan government introduced reforms starting in
2004, including BRT corridors, synchronised road and rail public transport, and thenatural gas-fuelled buses. Fare and ticketing were integrated throughout the whole
public-transport system. In this case, the Seoul metropolitan government alsocollaborated with private partners under a public-private partnership (Pucher et al.,2005; Allen, 2013).
Both Bogota and Seoul represent successful cases of infrastructure andoperational restructuring that contributed to increasing access to public transport,
presented as an alternative to private transport, and with the benefits of reduced
congestion and more competitive and reliable service. Moreover, both cases are aprime example of how collaboration between private actors and public
governments can result in significant achievements, and potentially faster andmore efficiently than a one-side approach from either sector.
Source: OECD (2016), Making Cities Work for all, based on World Bank (2004), “Transmilenio
busway-basedmasstransit:
Bogotá,Colombia”,
http://siteresources.worldbank.org/INTURBANTRANSPORT/Resources/Factsheet-TransMilenio.pdf; Clapp, C. et al. (2010), “Cities andcarbon market finance: Taking stock of cities’ experience with clean development mechanism (CDM)
and joint implementation (JI)”, http://dx.doi.org/10.1787/5km4hv5p1vr7-en; Pucher, J. et al. (2005), “Public
transport reforms in Seoul: Innovations motivated by funding crisis”, http://nctr.usf.edu/jpt/pdf/JPT%
208-5%20Pucher.pdf; Allen, H. (2013), “Bus reform in Seoul, Republic of Korea”, http://unhabitat.org/
wp-contentuploads/2013/06/GRHS.2013.Case.Study.Seoul.Korea.pdf.

Improved public service delivery can also help to enhance trust and improve citizens’
perceptions of institutional and representative performance. High-quality public services are
essential to people’s lives, and as a result closely related to trust. On average, more than
two-thirds of country citizens across the OECD are “generally satisfied” with service provision in
their local area, for services ranging from healthcare to public transportation and the police.
Interestingly, however, people that have used a specific service over the past year report higher
levels of satisfaction. However, differences in service satisfaction between countries are large.
And satisfaction with certain types of civic institutions can be markedly lower overall (e.g. only
49% across OECD countries trust the judicial system). Improving service quality and simplifying
access could hence be a channel to improve trust (OECD, 2018a).
While housing and transport policies are closely interrelated, careful co-ordination of investment
across these two policy domains needs to take place at the metropolitan scale. For example,
poorer populations too often find themselves excluded by newer, sustainable, transit-oriented
developments (TODs) or development proposals in walkable neighbourhoods, particularly incentrally located areas. Development actors ought to prioritize the metropolitan scale when
delivering housing and transport investment to ensure a co-ordinated response to the need for
efficiency, affordability and access to opportunity. While regulatory barriers may drive up the costof affordable housing development in the core, low access to transport in the periphery could
drive up the total “true cost” of housing + transport for poorer households, who get priced out of
the core. Strategic and practical civic groups offer a remedy to these challenges: an example
is the metropolitan-scale New York and Connecticut Sustainable Communities Consortium,
which offers a coordinating platform for housing and transport policy (OECD, 2016a). Santiago de

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Chile is another case in successful regeneration through a comprehensive approach (Box 7).

Box 7. A comprehensive approach to urban
rehabilitation in Santiago de Chile
Central Santiago de Chile’s successful regeneration can be attributed to a
combination of factors:•
Santiago de Chile pursued a comprehensive urban regeneration agenda
combining investment in housing, mobility, basic services, public spaces, public
safety and green areas. The metropolitan region made a strong effort to coordinate
housing and mobility investments, prioritising proximity to public transport to guideurban and housing investments. Investment in transport in the central area
included the extension of several metro lines and the development of new metro
stations. These, from the perspective of developers, were a strong selling point todraw young and middle-class households to the area.
•
The central city of Santiago de Chile relied on a special subsidy for theconstruction of affordable housing. Chile’s Ministry of Housing and Urban
Development (Ministerio de Vivienda y Urbanismo) also provided a grant for
first-time homeowners, which was applied to specific urban areas defined as“renewal areas” (Rojas, 2004).
•
There was strong leadership of a multi-stakeholder public-private entity,
which even included representatives from different levels of government. The
municipality undertook several important urban projects to improve the centralarea, and also negotiated with private firms to build supermarkets and local public
and private services.
Source: Adapted from OECD (2016a), Making Cities Work for All, and OECD (2015b), OECD Territorial
Reviews: Valle de México, Mexico, http://dx.doi.org/10.1787/9789264245174-en; Contreras, Y. (2011), “Larecuperación urbana y residencial del centro de Santiago: Nuevos habitantes, cambios
socioespaciales significativos”, www.scielo.cl/pdf/eure/v37n112/art05.pdf; Paquette, C. (2005). “Lareconquête du centre de Santiago du Chili: Un nouveau modèle pour la récupération des centres
historiques d’Amérique latine?”; Cámara Chilena de la Construcción (2014), Renovación Urbana en
Chile. Éxitos, Desafíos y Oportunidades. Segundo Encuentro Inmobiliario Chile, Santiago, 5 July
available at: www.cchc.cl/comunicaciones/noticias/56642-presentaciones-iiencuentro-inmobiliariochile-peru; Rojas, E. (2004), “Volver al centro. La recuperación de áreas urbanas centrales”,
Inter-American Development Bank, Washington, DC.

Policies for inclusive growth in cities, and especially policies to construct and maintain public
services and public infrastructure, benefit from effective strategic partnerships across levelsof government and society. Kick-starting collaborative initiatives around tangible projects on
key public services can help rally forces at the initial stage and progressively lead to setting a“bigger picture”, as success breeds further success and trust. Flagship projects and events
can also serve as catalysts for social change and greater civic or neighbourhood engagement.
For example, the Marseille, France’s “Capital of Culture experience” brought residents andleaders from different government agencies and sectors together in an unprecedented way. In
a context of extremely high institutional fragmentation, this project laid a major foundation for theconstruction of a new metropolitan authority, which became operational in January 2016.

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RECOMMENDATIONSBuilding on the analysis in the previous section, this section proposes a set of policy
recommendations to support national and subnational governments in advancing
inclusive growth and social cohesion in cities. This guidance should be seen as acomplement to sector-specific policy recommendations relating, for instance, toeducation, jobs, housing or transport. Proposed policy recommendations target
different levels of government (national, local and joint national-local efforts).

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Working together, national and local governments can:Strengthen data collection and methodological approaches to measure and monitor
inequalities and inclusive growth at subnational level, with special attention to themultidimensional aspect of the challenge. The OECD dashboard (Box 2) can provide a usefulframework for thinking about important dimensions to be included.
Align policy objectives for inclusive growth across levels of government for a sharedvision of what needs to be done in cities. This is important, given that national and city
governments often work on the same core policy levers for inclusive growth, but not necessarily
together. Cities, regions, territories and national governments often overlap on policy fieldmandates and would do well to align their objectives and identify synergies across programmes
and policies (OECD, 2016a).
Engage a wide range of stakeholders, including citizens and the business sector, as
inclusive growth cannot be achieved by governments alone. Businesses must play a central
role, for instance by ensuring more diversity and inclusiveness in their board and workforce; byadjusting their corporate governance models throughout the supply chain; and bystrengthening their efforts around responsible business conduct (such as by raisingcompliance with laws on respect for human rights, environmental protection, labour relations
and financial accountability). The OECD is launching the Business for Inclusive Growth Initiative
to make the business case for inclusive growth and support governments and firms inadvancing public policies and business actions that promote inclusive growth in tandem(OECD, 2018a).

National governments can:Apply an urban lens to policy challenges and responses for inclusive growth, as part ofa broader national urban policy. Although a wide range of national policies can have a profoundeffect on urban development and inclusive growth, national governments do not always review
this impact systematically. This is changing, however, and a growing number of governments
have expanded their vision of urban policy to improve the co-ordination of different strands ofpolicy that have significant urban impacts (OECD, 2014). OECD work on national urban policies
has defined such strategies as a coherent set of decisions from a government led process ofco-ordinating various actors for a common vision that will promote more productive, inclusive
and resilient urban development (OECD, 2017d). Such efforts at national level can have profound
impacts on inclusive growth outcomes in cities.
Strengthen fiscal, strategic and institutional capacities within local governments toaddress inclusive growth priorities, as part of a long-term agenda. This is important in the current
context, where many subnational governments do not have the sufficient fiscal capacity to carry

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out their responsibilities (known as under- or unfunded mandates). Many subnational
government budgets are already constrained by the day to day public needs and urban
management expenditures, leading them to focus on their core tasks and short term
obligations, at the expense of broader policy objectives like inclusive growth. Beyond the fiscal
dimension, subnational governments can also face important capacity gaps in terms of humanresources and strategic policy making.
Provide local governments with the leeway to adopt policies that respond to local needs
and circumstances. In the realm of housing, for instance, local governments can integrate
housing policy objectives within urban planning responsibilities to support more inclusive,
sustainable urban development. Backed by the strategic direction and incentives of higher
levels of government, local authorities can formulate local housing strategies incorporating ananalysis of local housing supply, expected demand, expected social and demographic trends,
market conditions, and recommendations for planning processes, land use plans anddevelopment regulations (OECD, 2018a).
Foster effective horizontal cooperation, in particular in metropolitan areas and between
urban and rural areas. Carrying out many policy responsibilities relevant for inclusive growthrequires cities to collaborate at the metropolitan scale. Moreover, urban and rural areas enjoy
different, often complementary assets, and better integration between these areas is importantfor socio-economic performance, including linkages relating to demographic, labour, public
services, and environmental dimensions. Effective rural-urban partnerships can help attaineconomic development objectives for both zones. Governments can encourage the integrationof urban and rural policies by working towards a common national agenda (OECD, 2018f).
Engage and elevate the voices of Mayors and local government leaders in the global
Inclusive Growth agenda. Mayors, particularly in challenging contexts, are leading by making
bold policy choices around social cohesion and inclusive growth. Stakeholders across sectors
from around the world can support and engage these mayors and follow their lead, including
initiatives like the OECD Champion Mayors for Inclusive Growth initiative (Box 3).

Finally, there are several recommendations for local
governments:
Assess the potential synergies and trade-offs for inclusive growth among different policy
objectives, outcomes and priorities. For instance, as explored in OECD (2018d), cities’ climate
policies to reduce greenhouse gas emissions can have h a range of economic consequences,intended and unintended, and these interventions can result in trade-offs between policy
objectives. Some communities will be particularly hard hit by the transition to a low-carbon
economy, and measures will need to be taken to address these losses and help thesecommunities transition towards more sustainable activities. Cities would do well to diagnose the

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policy misalignments across sectors and levels of government that may exist to addresscompeting objectives, for example both climate change and inclusive growth objectives(OECD, 2017c).
Coordinate policy objectives and priorities across sectors and with neighbouring
jurisdictions. The policy challenges relating to inequalities and inclusive growth cross numerous
policy sectors and often stretch beyond administrative boundaries. This calls for effective
coordination across local jurisdictions within a broader metropolitan area, as well as greater
policy alignment across different sectors, such as transport, housing, water and energy, andacross different policy areas such as land-use planning, innovation, labour market and skills,
entrepreneurship, social inclusion, taxes, infrastructure and investment. Such co-ordination canhelp promote the contributions from and benefits to all people, places and firms (OECD, 2017c).

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Acknowledgments
The paper contributes to the OECD Inclusive Growth initiative,
led by Gabriela Ramos, OECD Chief of Staff and Sherpa to theG20, and coordinated by Romina Boarini in the Office of theSecretary-General. It was coordinated by Marissa Plouin,
Coordinator of the OECD Champion Mayors for Inclusive Growth
Initiative, with support from Stefan Norgaard, within the OECD
Centre for Entrepreneurship, SMEs, Regions and Cities directedby Lamia Kamal-Chaoui. The paper draws on the policy
framework developed as part of the OECD Inclusive Growth
Initiative, as well as OECD research on urban inequalities andspatial segregation. Special thanks to Lamia Kamal-Chaoui,
Sandra Hannig, Soo-Jin Kim, Karen Maguire, Ana Moreno
Monroy, Abel Schumann, Paolo Veneri, and Ziga Zarnic in theOECD Secretariat for their inputs and comments. For more
information, please contact Aziza Akhmouch, Acting Head of the
Cities, Urban Policies and Sustainable Development Division.

Conctacts for this report
Aziza AkhmouchAziza.Akhmouch@oecd.org

The

views,

opinions,

positionsandrecommendations

expressed in this White Paper are solely those of the individuals
and their organisations. They do not necessarily reflect those of
Urban 20 or any of its chairs, conveners, partners andparticipating cities.
This work is published under the responsibility of theSecretary-General of the OECD. The opinions expressed andarguments employed herein do not necessarily reflect theofficial views of OECD member countries.
This document, as well as any data and any map included
herein, are without prejudice to the status of or sovereignty overany territory, to the delimitation of international frontiers andboundaries and to the name of any territory, city or area.

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www.urban20.org