The urgent need for a renewed social contract

In these times of compounding changes and crises, we are moving towards the brink of what the world can handle. What we need is to redefine the arrangement between government and citizens, and between different groups of the population – and the G7 is well positioned to do just that

We live in times marked by compounding crises and upheavals – geopolitical, environmental, demographic, employment and technological. Each crisis reveals long-standing weaknesses in our prevailing systems and policies. Beneath these fault lines lie structural inequalities that with each disruption push millions of people even further behind. The uncertainty that each crisis provokes deters businesses from investing, prevents economies from creating sufficient jobs, and leaves many workers and their families unsure how to afford the most basic necessities.

The seriousness of the situation is shown by the fact that the number of working poor rose by some 9.4 million workers in 2023 to stand at nearly 20% of the world’s workforce. Income inequality has worsened and major disparities persist between high- and low-income countries. The unemployment rate persisted at 4.5% in 2023 in high-income countries and rose to 5.7% in low-income countries. In 2023, 27.5% of young people in low-income countries (compared to 10.1% in high-income countries) were not in education, employment or training – more than before the pandemic. And labour productivity growth has been on a continuous downward trend: annual productivity growth rates dropped from 2.2% between 2000 and 2014 to 1.5% between 2015 and 2022.

Uneven recovery

This uneven recovery from the Covid-19 pandemic and these persistent divides exacerbate vulnerabilities and obstruct paths to social justice. The expectations, norms and collective institutions that stitched together our societies appear to be unravelling. Torn between the imperatives of equity and cost containment, social protection policies cannot keep everyone afloat. Disaffection and loss of trust in national governance are rising. And increasing polarisation within societies is undermining solidarity.

We are moving towards the brink of what our world can handle. In the words of the 1944 Philadelphia Declaration of the International Labour Organization, “poverty anywhere remains a threat to prosperity everywhere”.

Yet today’s compounding crises and transitions also present important opportunities for improved cooperation and social dialogue on prevailing policies and institutional arrangements. These policies and arrangements include the conditions that create opportunities for employment and productive activity. And they concern arrangements for the provision and financing of public services – in education, health and care to name a few – and the respective responsibilities there.

We need ways to reinforce the policies and institutions that make societies inclusive, to direct investment to where the economic and social returns are greatest, and to deliver essential public goods and social protection. And we need ways to restore trust in public institutions through social dialogue, effective and inclusive governance and shared prosperity.

We must reinvigorate the social contract

In this context, what the world needs is a renewed social contract.

Although it varies across countries and over time, a social contract is essentially an implicit arrangement that defines the relationship between the government and citizens, and among different groups of the population. It reflects a common understanding about how society is organised, the norms and rules that govern how collective institutions operate and resources are distributed, the individual and collective responsibilities in that regard, and the policies that are formulated to achieve social justice.

A social contract for today must enable countries and the global community to find the strength of purpose to tackle the accumulation of grave threats to sustainable and peaceful development and social cohesion that I have described. Such new arrangements need to extend and enhance effective commitments for action. A shared understanding of what could constitute the foundations for a global and, therefore, new social contract will help the international community to construct a strong consensus built on universal values, common concerns and integrated policy approaches.

At their summit in Apulia, G7 leaders have the opportunity to significantly influence global economic and employment strategies, including in key and growing areas such as the care economy, skills strategies and the labour market impacts of artificial intelligence. Their commitment to equitable support can catalyse the efforts of countries working towards sustainable and inclusive growth. It can help build the way towards achieving a globally shared perception of the building blocks of a global social contract – including, among other things, the role of the newly forged Global Coalition for Social Justice.

Later this year in New York, governments will meet at the Summit of the Future with the intention to adopt a Pact for the Future. And next year, they will meet at the second World Summit for Social Development – which could become the forum where a renewed social contract can be thoroughly debated and ultimately adopted.

In addressing the post-pandemic challenges and promoting inclusive and sustainable structural transitions, we need a global social contract. A collective and urgent effort is essential. The collaboration of international organisations, national governments and global leaders, all working together through multilateral initiatives such as the G7, can pave the way for a sustainable, just and inclusive future.