Wirtschaftspolitik für höheres Wachstum und weniger Ungleichheit BMWi, Berlin, 16 th March 2017 Christian Kastrop Director, Economics Department
Key messages Most people in many OECD countries have seen little or no income growth Weak growth in productivity & wages, rising wage dispersion & income inequality These trends are undermining political support for evidence-based policies The pace of structural reform has slowed back to pre-crisis levels Reforms to work incentives and to encourage female participation are paying off Lack of reform of public spending and taxes, too little public investment Packages of reforms are needed to get maximum effect and ensure benefits are broadly shared, but most countries are not doing this Going for Growth identifies a package of 5 country-specific priorities for each country to achieve inclusive growth 2
Most people in many OECD countries have seen little or no income growth for a decade Growth in household disposable income (average annual rate, mid-2000s to latest year) OECD countries, households at median and bottom 20% income levels EST NZL LVA KOR POL Median household income has fallen CAN OECD FIN BEL TUR CHL SVK DEU HUN ISR LUX NLD AUT ISL Median household income growth at less than 2 % NOR AUS PRT JPN SWE USA ESP CHE MEX Bottom 20% FRA CZE ITA IRL Median DNK SVN Stronger income growth for median household GRC -7-6 -5-4 -3-2 -1 0 GBR -1 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 3 Source: OECD Income Distribution Database.
Productivity gaps have widened, increasing wage inequality Labour productivity Index, 2001 = 100 Real compensation per worker Index, 2001 = 100 Note: Frontier firms are the 5% of firms with the highest labour productivity by year and sector. Industries included are manufacturing and business services, excluding the financial sector, for firms with at least 20 employees. Source: Andrews, D., Criscuolo C., and Gal P. (2016), The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy, OECD Productivity Working Papers, No. 05; Orbis data of Bureau van Dijk; and OECD calculations. 4
Employment rates are above pre-crisis levels in many countries, but productivity growth is weaker Difference in pre-crisis vs post-crisis productivity growth and employment rates, pp Countries where both employment and productivity growth have fallen Countries where productivity growth has fallen but employment improved Source: Economic Outlook database Database. 5
Progress on the implementation of structural reforms has declined to pre-crisis levels Indicator of number of actions taken in response to OECD Going for Growth recommendations Driven by a decline in productivity-related areas Source: Going for Growth 2017 6
One encouraging development is the increase in actions taken to lift employment Indicator of number of actions taken in response to Going for Growth recommendations over 2-year periods, percentage of recommendations Stronger effort to promote inclusiveness via greater job market integration of youth, low-skilled workers and women Source: Going for Growth 2017 7
These efforts to promote inclusiveness are beginning to pay off Employment as a percentage of population in the group, 2007 = 100 Index 2007=100 106 104 15-24 year-olds 25-64 year-olds 102 Low skilled (below upper secondary education)¹ High skilled (tertiary education)¹ 100 98 96 94 92 90 88 86 84 2007 2008 2009 2010 2011 2012 2013 2014 2015 106 104 102 100 98 96 94 92 90 88 86 84 Employment of youth and low-skilled has risen quickly despite subdued growth 8 Source: Going for Growth 2017
The gender gap in employment has fallen over time Differences in the employment rates of men and women, percentage points Source: Going for Growth 2017 9
New priorities: The extended framework Quantitative assessment Employment Productivity Inclusiveness Outcomes (e.g. aggregate employment) Policies (e.g. labour tax wedge) Outcomes (e.g. total factor productivity) Policies (e.g. administrative burdens) Outcomes (e.g. gender gaps) Policies (e.g. childcare) Qualitative assessment (country desks) 5 priorities No weighting of objectives: combination of country expertise + national preferences Reform packages: to get the best of synergies between growth and inclusiveness => specific equity-friendly pro-growth policy reforms
Inclusiveness comprises a number of income and non-income aspects Income dimensions Non-income dimensions Labour market: job quantity & quality Inequality in household disposable income Gini coefficient Income share bottom 20% Poverty Relative poverty rates Total population Working-age population Children Youth Elderly Poverty mean gap Emerging economies Absolute poverty rate Absolute poverty gap Top income and wealth shares Top 1% income share Top 1% wealth share Earnings inequality and quality D5/D1 earnings ratio D9/D5 earnings ratio Earnings quality Gender wage gap Labour market insecurity and informality Unemployment risk Unemployment insurance Emerging economies Vulnerable employment Incidence of informality Risk of extreme low pay Labour market inclusiveness Female employment gap Elderly employment gap Youth unemployment gap Foreign-born unemployment gap Long-term unemployment rate Health outcomes and inequalities Female life expectancy Male life expectancy Self reported good health Low-high income health gap Emerging economies Child mortality Access to sanitation Skills and equality of educational opportunities Upper-secondary education share PISA scores: mean and overall variation PIAAC scores: mean and gender gap Low-performing students and adults Impact of socio-economic background on PISA scores NEET share
Reform recommendations concern many policy areas Source: Going for Growth 2017 12
In a nutshell, Going for Growth 2017 recommends concrete reforms for Skills: Preparing young people for labour market of the future while improving gender balance Firms: Promoting business dynamism and diffusion of technology and knowledge Jobs: Helping workers to cope with the rapid turnover of firms and jobs
Per cent of 2017 priorities Pro-growth reforms do not always go hand-in-hand with inclusiveness
Packaging of reforms is key to achieving inclusive growth Share of countries with joint priorities in areas with potentially strong synergies 60 OECD Non OECD-G20 countries 60 50 50 40 40 30 30 20 20 10 10 0 0 Product market, labour market & social protection Product market, labour market, social protection & skills formation Source: Going for Growth 2017 15
Examples of policy packages: re-employment of laid-off workers Effect of a 0.1% of GDP increase in ALMP spending on the re-employment probability conditional on the regulatory barriers to entry Stronger job-search assistance will help workers to cope with firm exit more effectively when firm entry barriers are low Source: Andrews, D. and A. Saia (2017), Coping with creative destruction: Reducing the cost of firm exit, OECD Economics Department Working Paper No. 1353. 16
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