INEQUALITIES, AGEING SOCIETIES AND SECULAR STAGNATION: AN OECD VIEW

Transcription

1 Secular Stagnatin in Eurpe and Japan Bruegel-Kbe University 5 Octber 2015 INEQUALITIES, AGEING SOCIETIES AND SECULAR STAGNATION: AN OECD VIEW Paul Swaim Senir Ecnmist Directrate fr Emplyment, Labur and Scial Affairs OECD

2 Outline f my talk 1. What des secular stagnatin have t d with inequalities and ageing ppulatins? Demand versus supply-side aspects f secular stagnatin (Mstly) n the supply-side 2. Hw did the glbal financial crisis affect ptential grwth? OECD estimates f the hit n ptential utput Pssible channels underlying lasting impacts frm recessins/banking crisis 3. Hw rising inequality and ppulatin ageing fit int the picture Inequality trends and their impacts n ptential grwth rates Ppulatin ageing/stagnatin reduces the size f the labur frce and thus ptential grwth, while als reinfrcing the rise in inequality 4. What shuld gvernments d? Raise participatin rates and the earnings f lw-paid wrkers Use the tax-benefit system t redistribute incme Much else

3 Part 1 What des secular stagnatin have t d with inequalities and ageing ppulatins? Demand versus supply-side aspects f secular stagnatin Inequalities and ageing affect bth demand and supply, but I will fcus largely n supply-side channels

4 Demand versus supply-side theries f secular stagnatin Chrnically deficient aggregate demand is classic fcus, at least in Nrth America Alvin Hansen s 1938 Presidential address t the AEA frecast chrnic lw demand (very wrng, as did nt predict Wrld War II) Slw recveries frm the bursting f Japan s bubble ecnmy in the early 1990s and, mre recently, the GFC in the US much f Eurpe is reviving interest in secular stagnatin thery Chrnic slw/n grwth can als reflect lw ptential grwth rates due t supply-side factrs: Slw input grwth (quantity r quality) Slw prductivity grwth

5 Ppulatin ageing and rising inequality prbably have their strngest impacts n the supply side Stagnant/ageing ppulatin reduces the grwth f labur input Clearly true with respect t the quantity f labur, unless participatin rates rise Impact n the quality f labur is less clear Rising inequality mst strngly effects wh benefits frm grwth, but may als cntribute t slwing grwth by impeding human capital develpment Bth factrs can als have demand-side effects Hansen cited slwer ppulatin grwth as a factr leading t lw investment spending Rising inequality may lwer cnsumer spending r lead t unsustainable debt levels

6 Part 2 Hw did the GFC affect ptential grwth? Recent OECD estimates f the hit n ptential utput Pssible channels frm a recessin/banking crisis t lwer ptential grwth rates

7 OECD GDP per capita cmpared with varius pre-crisis trends In 2010 PPP US dllars 44,000 42,000 40,000 Actual GDP per capita Pre-crisis trend GDP per capita, Ptential GDP per capita Pre-crisis trend ptential GDP per capita, ,000 36,000 34,000 32,000 30,000 28,000 26,000 24, Nte: OECD GDP per capita ver the perid is based n Nvember 2014 OECD Ecnmic Outlk prjectins. Surce: OECD calculatins based n OECD Ecnmic Outlk, Nvember 2014 lng-term database.

8 Estimated effects f the crisis n the ptential utput f OECD cuntries Percentage reductin in ptential utput relative t a pre-crisis cunter-factual scenari % OECD aggregate Median -10 Upper/Lwer quartile Nte: Estimated effects f the crisis are measured relative t a cunter-factual scenari in which trend prductivity cntinues at its pre-crisis (2000-7) trend grwth rate, structural unemplyment rates remain at their pre-crisis (2007) levels and trend participatin rates are prjected t allw fr evlving demgraphics by hlding labur frce entry and exit rates cnstant at pre-crisis levels. Surce: OECD calculatins based n OECD Ecnmic Outlk, Nvember 2014 lng-term database.

9 Cntributins t the effect f the crisis n the ptential utput fr individual OECD cuntries Percentage-pint differences in 2014, relative t a pre-crisis cunter-factual scenari 5 % Nairu Participatin rate TFP Capital per wrker Ttal -25 DEU* JPN USA* OECD GBR* FIN IRL* GRC* Nte: An asterisk (*) dentes that cuntry is judged t have experienced a banking crisis between 2007 and 2011 based n Laeven and Valencia (2012). Estimated effects f the crisis are measured relative t a cunter-factual scenari in which trend prductivity cntinues at its pre-crisis (2000-7) trend grwth rate, structural unemplyment rates remain at their pre-crisis (2007) levels and trend participatin rates are prjected t allw fr evlving demgraphics by hlding labur frce entry and exit rates cnstant at pre-crisis levels. Surce: OECD calculatins based n OECD Ecnmic Outlk, Nvember 2014 lng-term database.

10 Part 3 Hw d inequalities and ppulatin ageing fit int the picture? Inequality trends and their impacts n ptential grwth rates Ppulatin ageing/stagnatin reduces the size f the labur frce and thus ptential grwth, while als reinfrcing the rise in inequality

11 Incme inequality increased in gd times, and it cntinued increasing in bad times Lng-term trends in inequality f dispsable incme (Gini cefficient) Surce: OECD Incme Distributin Database, Nte: Incme refers t dispsable incme adjusted fr husehld size.

12 Numeracy Scre Inequality drags dwn ecnmic grwth and harms pprtunities Average numeracy scre cnditinal n parental educatinal backgrund (PEB) and inequality 300 Lw PEB Medium PEB High PEB Inequality (Gini cefficient) Nte: The graph plts the average predicted numeracy scre fr individuals frm lw, medium and high family (educatinal) backgrunds, as a functin f the degree f inequality (Gini pints) in the cuntry at the time they were arund 14 years ld. Marginal effects btained using estimates are shwn in Table 2.A1.2, clumn 7 (i.e. cnditining the degree f frmal educatin). The dtted blue line replicates the results reprted in Figure 2.4 in the case f lw PEB individuals. Lw PEB: neither parent has attained upper secndary educatin; medium PEB: at least ne parent has attained secndary and pst-secndary, nn-tertiary educatin; high PEB: at least ne parent has attained tertiary educatin. Dtted lines represent baseline prbabilities fr each grup. The bars indicate 95% cnfidence intervals. The vertical dashed lines indicate the 25th, the median and the 75th percentiles f the underlying distributin f inequality. Surce: OECD Secretariat calculatins based n PIAAC data.

13 Ageing and slwing grwth mean that generatinal imprvements in living standards are slwing in many cuntries, especially fr the less educated (further raising inequality)

14 Part 4 What shuld gvernments d? A cmprehensive strategy that wrks n multiple frnts is needed, including measures t: Raise participatin rates (especially f wmen and lder wrkers) Raise the earnings f lw-paid wrkers Redistribute incme via the tax-benefit system And much else (e.g. better macrecnmic plicy, immigratin, innvatin plicy,.)

15 Activatin measures, targeted t under-represented grups culd play a key rle Evlutin f ALMP expenditures per unemplyed: Annualised average percentage change, a % Nte: OECD is the weighted average f the 31 OECD cuntries reprted in this figure (excluding Greece, Iceland and Turkey). a) fr Chile; fr Israel and the United Kingdm; fr France, Krea, New Zealand, Pland and Spain. Fiscal years fr Australia (starting n 1 July), Canada (starting n 1 April), Japan (starting n 1 April), New Zealand (starting n 1 July), the United Kingdm (starting n 1 April), and the United States (starting n 1 Octber). b) Shrt-time wrk schemes (Emplyment Adjustment Subsidies and Emplyment Cntinuatin Benefit f the Emplyment Insurance) are included in the active labur market spendings fr Japan. c) Data n unemplyment fr Israel have been adjusted t be cnsistent with the data published since 2012 using the chaining cefficient prvided by the Natinal Authrities. Surce: OECD estimates based n the OECD Labur Market Prgrammes, Eurstat Labur Market Plicy and OECD Shrt-Term Labur Market Statistics Database.

16 Building relevant skills is key, but als using them in the labur market Average numeracy scres and average skill use levels 295 Numeracy prficiency scres (left axis) Numeracy use (right axis) a) The Survey f Adult Skills nly cvered Flanders (Belgium) and England/Nrthern Ireland (United Kingdm). Surce: OECD Emplyment Outlk 2015, Chapter 2.

17 Prmting access t skills in high demand is essential, but als rewarding them equally: the case f gender pay gaps Male-female wage rati befre and after cntrlling fr skills distributin and price effects a Raw Skills distributin Skills prices a) OECD calculated as the simple, unweighted cuntry average. Wage gaps are expressed as the lg f the D9/D1 rati. b) The Survey f Adult Skills nly cvered Flanders (Belgium) and England/Nrthern Ireland (United Kingdm). Surce: OECD Emplyment Outlk 2015, Chapter 2.

18 The minimum wage can be a useful tl t cmbat in-wrk pverty Minimum wages as a percent f median and average wages f full-time emplyees, 2007 and 2013 % Nte: Germany: the minimum-wage level in 2015 is expressed as prprtin f the prjected 2015 median wage. Prjectins are based n earnings data frm the OECD Ecnmic Outlk Database. Surce: OECD Emplyment Outlk 2015, Chapter 1.

19 60 Redistributin thrugh taxes and benefits plays an imprtant rle fr decreasing inequality Inequality f (grss) market and dispsable (net) incme, wrking-age ppulatin, Market incme inequality ( ) Dispsable incme inequality Nte: Data fr 2007 refer t 2006 fr Chile and Japan; and 2008 fr Australia, France, Germany, Israel, Mexic, Nrway, New Zealand, Sweden, and the United States. Data fr 2011 refer t 2009 fr Japan; 2010 fr Austria and Belgium; and 2012 fr Australia, Finland, Hungary, Krea, Mexic, the Netherlands and the United States. Fr Hungary, Mexic and Turkey data n market incme inequality are nt available. There is a break in the series in 2011 fr the United Kingdm, and results are nt strictly cmparable data fr Ireland and the United Kingdm are prvisinal. OECD-30 average excludes Hungary, Mexic, Switzerland and Turkey.

20 Thank yu Cntact: OECD Directrate fr Emplyment, Labur and Scial Affairs, via Fllw us n Twitter, OECD Emplyment Outlk, via OECD Emplyment database, via 20