“Reduced unemployment benefits and lower labour taxes are associated with higher participation for men of prime working age,” the IMF said in its World Economic Outlook.
“For women, an expansion in secondary education enrollment has a positive association with future participation rates. Similarly, labour market programs (such as retraining and reskilling) and childcare programs appear to be supportive.”
GDP growth is on course to slow to just 2.8pc per year at the end of the decade, around a quarter slower than the pre-pandemic average. In the UK, growth is not expected to be sustained at above 2pc for any meaningful period.
This threatens painful consequences for governments which are already struggling with mounting debts and pressure to spend more on pensions and healthcare.
Critical to boosting growth and prosperity is getting more people into work and ensuring they move into the most productive industries and companies.
As well as encouraging more people to take jobs, the IMF also said more migration can help boost the economy and offset the effects of the ageing population.
The IMF said: “Policies designed to facilitate the flow and integration of migrant workers, alongside measures to boost labour force participation among older workers in advanced economies – through retirement reforms and labour market programs – could mitigate the increasing demographic pressures on labour supply.”
Other economic reforms could help the private sector become more productive, making better use of the workforce and the available financial resources.
While the US has successfully increased productivity over time, other countries have struggled to match this performance and need new policies to grow more quickly, the IMF said.
Poor industrial strategies can prop up unproductive businesses at public expense, the analysts warned.
“The unproductive firm may be politically connected and receiving subsidies or tax breaks that allow it to operate on a larger scale than its profits merit,” the IMF said.
Slashing subsidies and cutting red tape could help, while boosting international trade can also force companies to become more competitive, the IMF said.
