Launch of the Economic Survey of Austria
Remarks by Angel Gurría,
Vienna, 2nd July 2013
Dear Chancellor Faymann, [Dear Minister Hundstorfer], Ladies and Gentlemen:
Thank you for welcoming me back to Vienna to present the Economic Survey of Austria.
I’m here today to share some good news. Austria’s prospects are among the strongest in Europe. Activity is picking up, and GDP is poised to increase by at least one and a half per cent next year. And at a time when most OECD countries face the risk of a lost generation, Austria’s rates of unemployment and youth unemployment remain among the lowest in the European Union.
Today is also a notable occasion, as it is the first time one of the OECD’s Economic Survey’s looks “beyond GDP” and into the main dimensions of well-being; those aspects of life that really matter for people. This follows the OECD How's Life framework, which measures well-being along 11 dimensions, like living conditions, quality of life, social connections and civic engagements. Here, we find more good news! Let me share with you some of our key findings.
Austria’s well-being goes beyond material prosperity
In Austria, economic development has gone hand in hand with social progress. In most of the dimensions of well-being we analysed, we found that the steady rise in GDP per capita was accompanied by a higher quality of life: more leisure time, stronger environmental standards, longer life expectancy, and more integrated, well-functioning social support network.
Our Survey highlights three key factors that underpin this successful combination of economic performance and overall well-being.
First, your private sector is largely based on family-owned, medium-sized enterprises that are constantly adopting new technologies and improving productivity, and also providing long-tenure jobs. Austria’s effective social partnership system also contributes to its rare and notable mix of strong job security alongside technological innovation and organisational flexibility.
Second, Austrian families provide many social services for themselves that are often carried out by public or private sector agents in other countries. For example, families provide the majority of care for young children, as well as support for elderly dependants. However, this leads to higher gender inequality in the distribution of family tasks, which is undesirable.
Third, the public sector plays a central and supportive role in the Austrian social model. Yes, it has complex federal governance and funding structures. It is also costly by international comparison, with the share of public spending in GDP at above 50%. But it delivers high-quality services that are valued by the population and helps reduce income inequalities.
Let’s be clear: Austria’s ability to intertwine economic development with strong communities, a more stable environment, healthy children and better social outcomes deserves recognition. But it is no cause for complacency. Our survey also highlights key challenges that could undermine the strength of Austria’s stable economy and thriving society. What is the most pressing challenge? The emerging social tensions that lie at the heart of Austrian society.
Tensions pull at Austria’s Social Fabric
Our Survey finds that well-being isn’t always well distributed. People from migrant backgrounds have not shared in well-being gains to the same extent as the average Austrian.
Immigrant groups are more likely to experience multiple disadvantages, such as low education and high unemployment, which have a negative and mutually reinforcing impact on their well-being. For example, nearly 15% of pupils who do not speak German at home dropped out after completing 8th grade in 2010. This is almost 4 times more than German-speaking pupils. In addition, the unemployment rate of migrants from non-EU countries is double the unemployment rate of Austrians.
The lack of skills amongst immigrant groups calls for remedial policies to better integrate them into the labour force. This should begin from early childhood, and focus particularly on improving the quality of German language education. It also requires social partnership approaches for migrant groups to enhance migrant families' awareness and capacities in supporting their children's health, education and other socialisation needs. The OECD is working on a ‘Skills System’ project with Austria, which should be particularly relevant to these vulnerable groups.
Demographic changes also pose a challenge to Austria’s impressive work-life balance achievements. Even though important reforms are already under way, the ageing of Austria’s population could undermine its fiscal sustainability. In the 40 years to 2010, the average effective retirement age fell by a full 6 years to below 60, while life expectancy increased by over 10 years.
Also, women are now better educated and are more likely to participate in the labour force than in the past. This is good news, but it means that new policies, like making high-quality institutional child care available and affordable for the parents of children at all ages, are needed to help families better reconcile their work and care responsibilities. The extensions of child care reconfirmed in last week’s stimulus package are already a step forward.
Other obstacles may impede Austria’s long-term sustainability
Lastly, I would like to address some of Austria’s other challenges. Let me begin with the environment.
Austria is faced with important environmental pressures arising from urban sprawl and the rapid expansion of road transportation. Our analysis suggests that there is room to better price externalities by making polluters pay; to better coordinate regional policies across all levels of government; and to better integrate regional, housing and transport policies.
Our comprehensive Environmental Policy Review of Austria will be published this autumn. It will provide a deeper analysis and additional assessments on environmental issues and notably on adaptation to climate change, a particularly topical issue given the recent severe floods in Austria.
Of course, Austria’s challenges cannot be viewed in isolation from the broader global economic context. Developments in the global economy are challenging Austria’s strong position in international production chains. Austria’s comparative advantages in medium technology activities are potentially threatened by catch-up economies. The OECD’s work on Global Value Chains can help Austria identify how it can make the most of these changing production patterns.
In Austria, this will require some modernisation of corporate governance and further opening of the service sector to competitive pressures. It will also require adapting the education system to meet the growing demand for workers with solid, generic skills, which are cultivated through life-long learning.
Ladies and Gentlemen,
We have high hopes for Austria. We are confident that your country’s ability to build social consensus will help it to successfully confront current challenges. In the past, we have seen how useful strong social networks have been, leading for instance to more decisive pension reforms than in many other OECD countries.
To increase the probability of success, it is important to broaden your social partnership to include vulnerable groups, like migrants, and to continue with on-going public sector reforms.
We have seen great contributions from Austria for many centuries, from Mozart’s great compositions, to Stefan Zweig’s novels, to Freud’s revelations. The OECD greatly values its long-standing relationship with a country that has been at the centrepiece of European culture, and is today and example of good economic policies. We look forward to further collaboration and engagement for many years to come.