Going for-growth-oecd-2017-policies-for-growth-to-benefit-all

17 March 2017

Catherine L. MannOECD Chief Economist

OECD Going for Growth 2017

Policies for Growth

To Benefit All

http://www.oecd.org/eco/goingforgrowth.htm

ECOSCOPE blog: oecdecoscope.wordpress.com

Key messages

2

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 showed a mixed picture

• Reforms to work incentives and to encourage female participation are paying off

• Reforms in productivity-related areas have slowed

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

Growth in household disposable income (average annual rate, mid-2000s to latest year)OECD countries, households at median and bottom 20% income levels

3

Most people in many OECD countries have

seen little or no income growth for a decade

Source: OECD Income Distribution Database.

-1 0 1 2 3 4 5 6 7

GBR

SVN

DNK

FRA

ESP

JPN

ISL

AUT

HUN

BEL

FIN

OECD

CAN

KOR

NZL

Median household

income growth at

less than 2 %

-7 -6 -5 -4 -3 -2 -1 0

GRC

IRL

ITA

MEX

USA

PRT

NLD

LUX

DEU

Median household

income has fallen

Median

Bottom 20%

0 1 2 3 4 5 6 7

CZE

CHE

SWE

AUS

NOR

ISR

SVK

CHL

TUR

POL

LVA

EST

Stronger income

growth for median

household

4

Productivity gaps have widened, and

wage inequality is increasing

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.

Real compensation per workerIndex, 2001 = 100

Labour productivityIndex, 2001 = 100

Difference in pre-crisis vs post-crisis productivity growth and employment rates

5

Employment rates are above pre-crisis levels in

many countries, but productivity growth is weaker

Source: Economic Outlook database Database.

Countries where both

employment and

productivity growth have

fallen

Countries where

productivity growth has

fallen but employment

improved

Indicator of number of actions taken in response to OECD Going for Growth recommendations

6

Progress on the implementation of structural

reforms has declined to pre-crisis levels

… particularly for productivity-related reforms

Source: Going for Growth 2017

Indicator of number of actions taken in response to Going for Growth recommendations over 2-year periods

7

Stronger efforts to promote job market

integration of youth, low-skilled and women


8

These efforts to promote inclusiveness

are beginning to pay off


Differences in the employment rates of men and women

9

The gender gap in employment has fallen

over time


New priorities: The extended framework

Policies

(e.g. childcare)

Quantitative assessment

(performance-policy matching algorithm)

Employment Productivity Inclusiveness

Outcomes

(e.g. aggregate

employment)

Policies

(e.g. labour tax

w edge)

Outcomes

(e.g. total factor

productivity)

Policies

(e.g. administrative

burdens)

Outcomes

(e.g. gender gaps)

Inclusiveness comprises a number of

income and non-income aspects

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

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

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

Labour market: job quantity & quality

Income dimensions Non-income dimensions

o Matching of specific performance area and related policy settings

o OECD average set as benchmark

o When countries lie below OECD average in both a performance and the related policy area (lower left quadrant) -> candidate for priority

12

Going for Growth: algorithmic stage to

identify policy priorities

-2

-1

0

1

2

3

-3 -2 -1 0 1 2 3

OECD average

OECD average

Performance gap (standard deviation)

Gap in policy (standard deviation)

Performance & policy below

average

Policies

(e.g. childcare)

Desks' expertise

(qualitative assessment of country-specific

circumstances)

Quantitative assessment

(performance-policy matching algorithm)

Employment Productivity Inclusiveness

Outcomes

(e.g. aggregate

employment)

Policies

(e.g. labour tax

w edge)

Outcomes

(e.g. total factor

productivity)

Policies

(e.g. administrative

burdens)

Outcomes

(e.g. gender gaps)

5 priorities

New priorities: The extended framework

14

Outcome of the two-step process: Reform

recommendations for many specific policies


• 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

Going for Growth 2017 recommendations

span three key priorities

16

Key reform priorities: Skills


Preparing youth for labour market of the future while

improving gender balance

Recommendation Countries with a priority

Allocate resources in education more equitably BEL CRI CZE DEU DNK FRA HUN

ISL ISR LVA NZL POL PRT

SVK SWE USA

Expand and improve vocational training

ARG BRA CHN CRI DNK ESP EST

FRA GBR GRC IND ISR LUX POL

PRT TUR ZAFand education

Improve access to childcare ARG AUS AUT CHE CHL COL CRI

CZE DEU EST JPN KOR LTU LUX

MEX NZL POL SVK TUR USAand early childhood education

17

Key reform priorities: Firms


Promoting business dynamism and diffusion of

technology and knowledge


Boost return on innovation by enhancing R&D collaboration between universities and firms

AUS CHL COL CRI EST IRL ISL

ITA LUX PRT SVN

Improve efficiency of business services by reducing regulatory barriers to entry in professional services

AUT BEL CAN DEU ESP FRA

IRL LVA LUX MEX PRT SVN

Help innovative firms to reach new markets by addressing infrastructure bottlenecks

AUS ARG BRA COL CRI EST EU

IDN IND ISR ITA LVA POL GBR

USA

Raise efficiency and equity of tax systems by broadening the tax base and reducing tax expenditures ARG AUS AUT CAN COL DEU

ESP EST GRC ITA JPN NOR

TUR

18

Key reform priorities: Jobs



Facilitate firm entry by streamlining permits and licensing and cutting red tape

AUS BEL CAN CHL CHN CRI GRC

HUN IDN IND IRL ISR LVA POL SVN

ZAF

Boost job creation by reducing the tax wedge on low-skilled workers

BEL DEU ESP EST HUN ITA LVA NLD

POL TUR

Help laid-off workers to find a new job by raising the scope and efficiency of active labour market policies

ARG ESP EST GBR GRC ISR LVA

LTU SVN USA ZAF

Helping workers to cope with the rapid turnover of

firms and jobs

Pro-growth reforms can go

hand-in-hand with inclusiveness

Per cent of 2017 priorities

Share of countries with joint priorities in areas with potentially strong synergies

20

Packaging of reforms is key to achieving

inclusive growth


Effect of a 0.1% of GDP increase in ALMP spending on the re-employment probability – conditional on the regulatory barriers to entry

21

Job-search support will help workers coping with firm exit:

And this is more effective 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.

22

But in the past, countries have often missed

opportunities to benefit from policy synergies

Reform progress made in the areas of Going for Growth recommendations 2015-16

Note: Reform progress based on responsiveness to Going for Growth recommendations by policy area. Little progress corresponds to a reform responsiveness rate of 0 to 20% and some progress for a responsiveness rate of more than 20%.Source: OECD Going for Growth 2017, forthcoming on March 17: www.oecd.org/eco/growth/goingforgrowth.htm.

Little progress Some progress

Littleprogress

CHL, DEU,IDN

BEL, ESP, LUX, ITA

Someprogress

DNK, IND, JPN,POL, SVN, TUR

AUT, FRA, FIN,KOR, LVA

Labour market measures

Product market measures

http://www.oecd.org/eco/growth/goingforgrowth.htm

Thank you!

http://oe.cd/gfg


Main contributors:

Alain de SerresNicolas RuizAlberto Gonzalez-PandiellaOrsetta CausaMikkel HermansenAgnès Cavaciuti

http://oe.cd/gfg


Economy & Finance

Going for-growth-oecd-2017-policies-for-growth-to-benefit-all