2017 OECD ECONOMIC SURVEY OF SWITZERLAND

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1 217 OECD ECONOMIC SURVEY OF SWITZERLAND Boosting productivity and meeting skills needs Bern, 14 November

2 Living standards are high OECD Better Life Index, 217 Index scale, (lowest) to 1 (best) Subjective well-being Income and wealth 1 8 Jobs and earnings Switzerland OECD 6 Personal security 4 2 Housing Environmental quality Work and life balance Social connections Health status Education and skills Note: For each dimension indicators are normalised and averaged. Source: OECD, Better Life Index. 2

3 The economy is growing but only slowly % y-o-y 6 GDP growth Source: SECO. 3

4 Employment is high % Employment-to-population ratio Switzerland OECD Source: OECD, Labour Force Statistics database. 4

5 Productivity has stalled Trend labour productivity growth % Switzerland OECD Source: OECD, OECD Economic Outlook 12 database, preliminary version. 5

6 GRC FIN SVK NLD LVA CZE DNK HUN ITA EST ESP BEL DEU EU15 SVN IRL POL PRT AUT GBR FRA NOR CHE SWE ISL LUX % pts The demand for skilled workers has been strong Contributions to changes in total employment growth over 2-16 High skill Middle skill Low skill Note: Countries are ordered by the contribution of high-skill employment Source: Eurostat. 6

7 Entrenching the expansion 7

8 Fiscal policy is sound and public debt low 12 Gross general government debt, % of GDP Switzerland OECD Note: The shaded area denotes the 25 th to 75 th percentile range for OECD countries. OECD is an unweighted average of data for available countries. Source: OECD, OECD Economic Outlook 12 database, preliminary version. 8

9 Unconventional monetary policy has supported growth Interest rates % 4 SNB target range 3 3-month, CHF LIBOR SNB s foreign exchange reserves % of imports 225 CHF/EUR ceiling Source: Swiss National Bank; Thomson Reuters Datastream; OECD, OECD Economic Outlook 12 database, preliminary version. 9

10 Low interest rates increase risks House prices, 21 = Ratio to consumer prices Ratio to average household income Source: OECD, House Price database. 1

11 MEX TUR HUN CZE POL ISR ITA CHL IRL AUT DEU JPN FRA BEL LUX GRC ESP FIN PRT USA SWE GBR KOR NZL CAN NOR NLD DNK AUS CHE Household credit is high 14 Household credit, % of GDP, 217 Q Source: OECD, Vulnerability Indicators database. 11

12 Age-related public spending will become a fiscal burden Long-term projections for age-related spending, % of GDP 25 By type of spending Long-term care Health care 25 By level of government Communes Cantons 2 Pensions (AHV/IV) Education 2 Social security Confederation Source: Federal Department of Finance (216), Report on the Long-term Sustainability of Public Finances in Switzerland. 12

13 PRT CZE LVA AUT EST ESP ITA IRL ISR JPN SWE LUX NOR SVN HUN KOR ISL DNK DEU NLD CHE The current account surplus is large Current account balance in OECD countries with a surplus, 216 % of GDP Source: OECD, OECD Economic Outlook 12 database, preliminary version. 13

14 Net saving Net investment Net saving Net investment Net saving Net investment Net saving Net investment Net saving Net investment High household saving is contributing to the large current account surplus Net saving and investment balances in selected countries with a current account surplus % of GDP Households General government Corporations DNK DEU NLD SWE CHE Source: OECD, Annual National Accounts database; Federal Statistical Office; OECD calculations. 14

15 Key fiscal and financial recommendations To support growth: Avoid persistent budget underspending through better co-ordinating procedures at federal and sub-national levels. Reduce agricultural subsidies and pursue efficiency gains in public spending to free up funds for measures that enhance growth and inclusiveness. To reduce risks: Eliminate remaining explicit cantonal government guarantees to their public banks. Establish a formal framework for setting mortgage lending limits that takes affordability into account and is enforced on a comply-or-explain basis. 15

16 Key fiscal and financial recommendations (cont.) To address ageing-related challenges: Fix the retirement age at 65 for both sexes, and thereafter link it to life expectancy. Increase financial incentives to work longer before retirement. Promote programmes to lengthen healthy working lives, including preventative health programmes. Promote lifelong training, career planning and tailored job-search assistance to enhance workers resilience to change. 16

17 Boosting productivity for long-term growth 17

18 GRC ITA LUX FIN AUT CHE MEX DEU GBR JPN BEL NLD NZL DNK FRA ESP CAN ISR PRT ISL NOR SWE HUN AUS USA SVN CZE EST IRL KOR SVK TUR POL CHL Productivity is high, but sluggish % Average annual rate of trend labour productivity growth over Source: OECD, OECD Economic Outlook 12 database, preliminary version. 18

19 POL LVA TUR HUN GRC SVK ITA ESP EST PRT CZE SVN EU28 FRA ISR IRL NOR BEL LUX AUT ISL DEU GBR NLD FIN DNK SWE CHE Switzerland is a leader in R&D and innovation Innovation performance indicator EU average level in 21 = 1 Moderate innovators Strong innovators Innovation leaders Source: European Commission (217), European Innovation Scoreboard

20 The productivity of frontier firms has diverged from the rest Labour productivity, 22 = Most productive 1% of firms Other firms Note: Markers denote survey years. Labour productivity is calculated as value added per employee. Source: OECD calculations based on KOF, Swiss Innovation Survey. 2

21 The administrative burden is heavy 6 Share of firms that discontinued their business citing bureaucracy as the main cause, % KOR NLD AUS NOR DEU PRT ESP GBR ISR BEL FIN USA CAN SWE ITA CHE Source: Global Entrepreneurship Monitor 215/216, Report on Switzerland. 21

22 Restrictiveness Regulatory barriers to competition are high Product market regulation indicator Least restrictive countries¹ Euro area Switzerland Professional services Retail distribution Transport Network sectors overall² Communication Energy 1. Least restrictive countries is the average of the three countries with the lowest score in each sector. Scores range from to 6 and increase with restrictiveness. 2. Network sectors overall is the unweighted average of transport, communication and energy. Source: OECD, Product Market Regulation database. 22

23 Logistics storage and warehouse Sound recording Logistics freight forwarding Engineering Motion pictures Commercial banking Construction Computer Broadcasting Courier Restrictiveness Barriers to trade inhibit competition and productivity Services Trade Restrictiveness Index, for sectors with largest gaps.5.4 Switzerland OECD Source: OECD, Services Trade Restrictiveness Index database. 23

24 HUN SVK CZE POL LVA GRC PRT SVN EST TUR FIN ESP USA CAN CHL FRA SWE ISR ITA MEX ISL NZL IRL LUX DNK JPN NOR BEL GBR AUS DEU AUT CHE NLD Most women work part-time % Part-time employment as a share of total Men Women Source: OECD, Labour Force Statistics database. 24

25 Key recommendations to boost productivity To improve framework conditions: Increase private ownership and remove barriers to entry in energy, telecommunications and transport. Remove representatives of economic associations from the competition authority s board. Lower restrictions on trade in both goods and services, notably in agricultural products. Complete the negotiations for free-trade agreements that are underway. Finalise the virtual one-stop shop for administrative matters. Establish cantonal physical contact points to improve delivery of advisory services and public financing programmes. 25

26 Key recommendations to boost productivity (cont.) To better use skills of women and immigrants: Increase childcare affordability. Shift income taxation to individual rather than household incomes, or implement equivalent measures. Facilitate high-skilled immigration from non-eu countries to meet labour market needs. 26

27 Ensuring a dynamic skills training and life-long learning system 27

28 ISL NLD DNK LUX CHE NOR DEU SWE SVN AUS EST AUT LTU BEL NZL CAN GBR USA SVK OECD HUN LVA FIN ISR POL PRT IRL FRA CHL MEX ESP GRC ITA TUR The education and training system is successful 35 Youth not in employment, education or training % of year-olds Source: OECD (217), Education at a Glance

29 Immigration has helped to meet the rising demand for skilled workers Contribution to working-age population growth by education and nationality, % points Lower secondary Swiss citizens Upper secondary Tertiary Lower secondary Other nationalities Upper secondary Tertiary Source: Federal Statistical Office. 29

30 Total economy Accommodation & food services Manufacture of metal products Trade and repair of motor vehicles Real estate & scientific services Manufacturing of computers & watches Manufacture of other specialised machinery Finance & insurance IT & communications IT & other information services¹ High-skill vacancy rates are rising Sectors with above-average vacancy rates, % Average since 29 Year to 217Q2 1. IT and Other Information Services is a subsector of IT and Communications. Source: Federal Statistical Office. 3

31 LUX HUN AUT MEX ITA SWE PRT ESP DEU ISR FIN SVK CZE GBR TUR CHE NLD NZL EST CHL ISL NOR BEL DNK SVN IRL AUS Tertiary education should further expand Entry rates for bachelor s degree or equivalent¹ % First-time entry rates, excluding international students. First-time entry rates indicate the share of young adults expected to enter that type of tertiary education programme during their lifetime. Source: OECD (217), Education at a Glance

32 SVK POL GRC TUR HUN IRL LVA BEL ITA DEU CZE ESP PRT EU28 EA SVN GBR EST AUT LUX NLD FRA NOR ISL FIN DNK SWE CHE Participation in life-long learning is high year-olds participating in education and training in the preceding four weeks, 216 % Source: Eurostat, Labour Force Survey

33 GRC IRL POL BEL HUN LVA DEU TUR NOR ESP CZE EU28 GBR EA DNK PRT ITA NLD EST LUX SVN ISL SWE FIN AUT FRA CHE Participation in life-long learning is not broad-based Difference in participation rates of those with high and low levels of education, % pts year-olds participating in education and training in the preceding four weeks. Difference in participation rate of those with tertiary education and less than upper secondary school. Source: Eurostat, Labour Force Survey

34 Key recommendations for a dynamic skills training and life-long learning system Collect more detailed data on skills to facilitate adjustments to education in response to changing labour market needs. Enhance the effectiveness of pathways between vocational and general streams by increasing the academic component of the vocational curriculum and vice-versa. Encourage small firms to participate more in apprenticeships by promoting sharing of apprenticeship places between firms and training centres that undertake part of the training. Strengthen linkages between the vocational education and training system and employer associations in school-based vocational training. Use subsidies to encourage participation in continuing education and training for groups with low participation rates. 34

35 For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or 35