2017 OECD ECONOMIC SURVEY OF LUXEMBOURG Better skills for more inclusive growth Paris, July, 21th http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm
@OECDeconomy @OECD
Main messages • Luxembourg’s economic performance is strong. • The short-term fiscal stance is adequate. However, Luxembourg faces high age-related costs. • The modernisation strategy will require improvements in education outcomes, especially for immigrants, and better upskilling of workers over their lifetime. • Inclusive growth would also benefit from reducing work disincentives faced by low-skilled youth, women and older workers.
2
Well-being is high Life is good in Luxembourg Income and wealth 10
Subjective well-being
8
Jobs and earnings
6
Personal security
Housing
4 2 0
Environmental quality
Work and life balance
Civic engagement and governance
Health status
Social connections Luxembourg
Education and skills OECD
Note: Indicators are normalised to range between 10 (best) and 0. Source: OECD (2016), OECD Better Life Initiative 2016, www.oecd.org/statistics/better-life-initiative.htm
3
Unemployment is low and declining Unemployment rates, per cent of labour force 20 Luxembourg
Euro area 15
10
5
2007
2009
2011
2013
2015
2017
0
Source: OECD Economic Outlook 101 database.
4
There is ample fiscal space General government fiscal balance, per cent of GDP % of GDP
% of GDP
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-2
Source: OECD (2017), OECD Economic Outlook: Statistics and Projections (database).
5
But ageing costs are projected to rise Gross public pension expenditure, per cent of GDP 20
2013
2060
20
18
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
NLD IRL EST LVA GBR SVK SWE CZE LUX NOR DEU DNK POL EU HUN BEL SVN ESP FIN PRT AUT FRA ITA GRC
0
Source: European Commission (2015), The 2015 Ageing Report: Economic and budgetary projections for the 28 EU Member States (2013-2060).
6
House prices are growing strongly‌ Real house prices, index 2007=100 Seasonally adjusted
Seasonally adjusted 150
150
140
Luxembourg
Australia
Belgium
France
Germany
Sweden
Canada 140
130
130
120
120
110
110
100
100
90
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
90
Source: OECD, Analytical house prices indicators database.
7
‌and household indebtedness is rising also Household debt, per cent of GDP or GNI 100
100
90
90
80
80
70
70
60
60
50
50
40
40
30 20
% of GDP (Gross Domestic Product)
10 0
30
% of GNI (Gross National Income)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
20 10 0
Note: The instruments that are taken into account to compile household debt are debt securities and loans. Data are presented in consolidated terms. Source: OECD National Accounts Statistics.
8
Economic growth is strong, but relies heavily on the financial sector Real GDP growth, year-on-year percentage changes 12 10 8 6 4 2 0 -2 -4 -6
Luxembourg
Euro area
-8 -10
2007
2009
2011
2013
2015
2017
Source: OECD Economic Outlook 101 database.
9
Green growth requires further investment Congestion times are among the highest in Europe Hours spent in road congestion by the average driver every year, 2015 45
45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
FIN EST SWE LVA SVK DNK CZE POL ESP SVN AUT HUN PRT FRA EU DEU NLD IRL LUX ITA BEL GRC GBR
0
Note: This indicator assumes two 30km trips per day (morning peak and evening peak) and 220 working days. It takes into account all major roads in the 27 Member States for which data is available (about 2 500 000 kilometers). Source: European Commission, EU transport scoreboard 2016. 10
The demand for skills is changing Average annual change in total employment requiring different tasks (thousands)
18
Non-routine manual
Routine manual
Abstract
18
15
15
12
12
9
9
6
6
3
3
0
0
-3
-3
-6
1996-2008
2009-10
2012-15
-6
Note: Refers to population aged between 15 and 64. Abstract tasks refer to problem-solving, intuition, persuasion and creativity. Source: Eurostat (2017), Employment and unemployment (Labour Force Survey) (database), March.
11
Luxembourg has long attracted immigrants to fill vacancies Net migration flows, % of total population 2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0.0
Source: STATEC.
12
Recommendations for more resilient and greener growth 1. The linkages between banks and investment funds need to be closely monitored. 2. Additional macro-prudential measures should be introduced to rein in high household indebtedness and increasing housing prices. 3. Housing supply should be supported by streamlined land planning, introduction of time-limited building permits and increased taxation of non-used constructible land. 4. Age-related costs should be reduced further by linking the legal age of pension with life expectancy and the level of pensions to the level of contributions.
5. Green growth requires higher taxes on transport fuel, a system of congestion charges and further investment in transport infrastructure.
13
BETTER SKILLS FOR MORE INCLUSIVE GROWTH
14
Computer skills are high Share of people with computer skills, 2014
ROU
TUR
BGR
POL
HRV
HUN
BEL
SVK
0
MLT
0
ITA
5 IRL
5 NLD
10
CZE
10
EU28
15
LVA
15
GRC
20
DEU
20
SVN
25
GBR
25
FRA
30
ESP
30
PRT
35
AUT
35
LTU
40
EST
40
ISL
45
SWE
45
DNK
50
NOR
50
LUX
%
FIN
%
Note: Share of individuals aged 16 to 74 reporting to have carried out five or six specific tasks related to computer use. Source: Eurostat (2015), Individuals’ level of computer skills; European Commission (2012. 15
Skill mismatches are high Self-reported skills mismatch As percentage of all employment, 2015 60
60
Overskilled
Underskilled
AUT
EST
SVN
HUN
DEU
LUX
CHE
SWE
IRL
DNK
ESP
GRC
FRA
EU-28
0
GBR
0
POL
10
NLD
10
CZE
20
SVK
20
LVA
30
BEL
30
NOR
40
ITA
40
FIN
50
PRT
50
Note: Workers are classified as underskilled (overskilled) if they report that they need further training to cope well with their duties (if they report that they have the skills to cope with more demanding duties). Source: Sixth European Working Conditions Survey, 2015. 16
Education scores show a persistent gap Average PISA scores, 2009-2015 Mean score
Mean score 505
505 OECD average
Luxembourg
500
500
495
495
490
490
485
485
480
480
475
475
470
470
465
465
460
Science
Reading
Mathematics
460
Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education.
17
Grade repetition is high Share of 15-years old who repeated a year at least once, per cent 35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
ISL SVN GBR FIN DNK EST SWE KOR CZE NZL GRC LVA POL CAN SVK AUS IRL ISR HUN TUR USA OECD ITA AUT MEX DEU CHE NLD FRA CHL LUX PRT ESP BEL
35
Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education.
18
The share of training in active labour market policy spending is low Per cent of GDP, average 2010-15 (or last available year) 1.6
1.6
Training
Total LMP measures
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0.0
GBR EST SVK CZE GRC LVA SVN ITA DEU NOR POL PRT LUX EU28 BEL ESP HUN AUT NLD IRL FRA FIN SWE DNK
0.0
Source: European Commission, Labour market policy (LMP) database.
19
High marginal tax rates create disincentives to work Marginal Effective Tax Rates on increasing working hours, 2014 % of gross earnings
% of gross earnings 110
100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
KOR CHL GRC ESP PRT EST ITA TUR LVA USA SVN HUN SVK JPN ISR BEL OECD FRA SWE AUT ISL GBR CAN NOR POL DEU CZE NZL NLD CHE AUS FIN DNK IRL LUX
110
Note: From 33% to 67% of average wage, supplements included, for married couple. Source: OECD, Tax-Benefit Models. 20
Work disincentives for second earners are high Net personal average tax rates on second earners, 2015 % 50
45
45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
MEX CHL ISR KOR NZL AUS GBR IRL GRC EST CHE SWE ESP JPN FIN CAN POL TUR ITA NOR NLD AUT USA SVK PRT CZE LUX SVN HUN FRA ISL DNK DEU BEL
% 50
Note: Second earner at 67% of the average wage (primary earner at the average wage level), no children. The net personal average tax rate is calculated as the increase in income tax and employee SSCs (net of in-work benefits) paid by the family as a result of the second earner entering workforce divided by the increase in family gross income as a result of the second earner entering in the workforce. Source: Thomas and O’Reilly (2016). 21
Recommendations for better skills for more inclusive growth 1. Reduce grade repetition by providing earlier individualised support to students falling behind. 2. Improve the mobility between secondary education tracks through curriculum alignment and differentiated teaching. 3. Ease the upward mobility of vocational education students to tertiary education programmes. Strengthen career guidance and counselling to improve responsiveness of tertiary education to labour market needs. 4. Enhance access to lifelong learning by creating individual learning accounts and expanding the individual study leave. Tailor lifelong learning programmes to the needs of the low-skilled and older workers.
5. Adjust the tax and benefit system to increase incentives to work for lowskilled youth, older workers and second earners.
22
IMPROVING FURTHER THE INTEGRATION OF IMMIGRANTS
23
The large immigrant population has a high employment rate % of total population
A. Foreign-born population 1 January 2016
% points B. Employment rate Gap relative to native born, age 15-64, 2015 8
50 45 40
Non-EU28 4
EU28
35
0
30 25
-4
20 -8
15 10
-12
NLD SWE DNK BEL FIN FRA AUT DEU NOR TUR CHE LVA SVN SVK ISL ESP GBR POL EST IRL CZE GRC ITA PRT LUX HUN
0
POL SVK CZE HUN FIN PRT ITA DNK GRC SVN FRA NLD ISL ESP LVA DEU GBR EST NOR BEL IRL SWE AUT CHE LUX
5 -16
Source: Eurostat (2016), Population Statistics and Employment and Unemployment (Labour Force Survey) Statistics.
24
Non-EU immigrants face higher unemployment Unemployment rate by country of origin, age group 15-74, per cent 25
25
Extra-EU-28 EU-28 countries
20
Luxembourg
20
15
15
10
10
5
5
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
0
Source: Eurostat, Employment and unemployment (Labour Force Survey) database.
25
The risk of poverty is high among non-EU immigrants Age 18-64, 2015 60
60
50
50
40
40
30
30
20
20
10
10
0
POL ISL CZE LVA EST PRT NLD NOR DEU GBR FIN HUN DNK FRA SVN EU28 AUT ITA SWE LUX BEL ESP GRC
0
Source: Eurostat (2015), "Living conditions and welfare: Income distribution and monetary poverty", Eurostat Database, October. 26
Immigrants are under-represented in public sector jobs Share of employment in the public services sector, aged 15- 64, 2012-2013 % 60
Among foreign born
Among native born
% 60 50
40
40
30
30
20
20
10
10
0
0
GRC ITA ESP BGR LUX SVN CZE AUT DEU TUR LVA EST EU OECD CHE IRL ROU SVK HRV ISL HUN LTU FRA BEL FIN MLT PRT POL NLD GBR DNK SWE
50
Source: OECD/European Union (2015).
27
Processing times for immigration of highlyskilled non-EU workers is high Time in weeks 18
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
GBR BEL DNK GRC NOR PRT AUS NLD ESP SWE FRA DEU IRL LVA CHE HUN POL SVK USA CAN EST FIN AUT CZE LUX ITA
0
Source: Deloitte (2016), Global Immigration Study. 28
Socio-economic status has a large impact on student performance Impact of socio-economic background, Performance in science, PISA 2015 25
20
20
15
15
10
10
5
5
0
0
ISL EST NOR LVA CAN TUR ITA FIN JPN KOR DNK GBR MEX ISR USA AUS SWE NLD GRC IRL OECD POL ESP SVN NZL PRT CHE DEU AUT SVK CHL CZE BEL FRA LUX HUN
25
Note: Percentage of variance in student performance in science explained by ESCS, which refers to the PISA index of economic, social and cultural status. Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education. 29
Performance of students with immigrant background is lagging behind Performance in science, score points, PISA 2015 600
Immigrants students
Non-immigrant students
500
400
300
200
100
0
Preparatory
Technical
Secondary
Note: At the end of primary school, children are assigned to different programmes of secondary education: academic (enseignement secondaire, ES), technical (enseignement secondaire technique, EST) and preparatory (rĂŠgime prĂŠparatoire, PREP). Source: OECD, PISA 2015 Database. 30
Disadvantaged schools face greater shortages of educational resources Index of shortage of education staff Difference between schools in top and bottom quarters of socio-economic profile, PISA 2015 0.4
0.2
0.2
0.0
0.0
-0.2
-0.2
-0.4
-0.4
-0.6
-0.6
-0.8
-0.8
-1.0
-1.0
-1.2
-1.2
AUS ESP USA TUR MEX SWE NZL ISR CZE DNK CHL NOR LUX HUN SVK NLD CAN GBR PRT OECD CHE DEU ITA IRL BEL GRC JPN SVN FIN POL ISL LVA FRA EST AUT KOR
0.4
Note: Higher values in the indices indicate a greater shortage of educational resources. The socio-economic profile is measured by the PISA index of economic, social and cultural status. Source: OECD (2016), PISA 2015 Results (Volume II): Resources Invested In Education. 31
Recommendations for improving the integration of immigrants 1. Improve the availability of high-quality child care and provide incentives for fathers to share parental leave. 2. Continue to increase public supply of language courses. Diversify language training according to workplace needs. 3. To limit long periods of inactivity, speed up decisions on asylum applications and ease provisional labour market access for applicants with high prospects of being allowed to stay. 4. Ease immigrants’ access to public sector jobs. 5. Make resource allocation across schools more equitable and introduce incentives to attract more experienced teachers to disadvantaged schools.
32
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