Labour markets, human capital and inequality

Economic Policy Reforms: Going for Growth 2005

 

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Economic Policy Reforms is a new annual periodical – intended as a complement to the OECD Economic Outlook and OECD Eonomic Surveys – which gives an overview of structural policy developments in OECD countries. The report pinpoints structural policy priorities to enhance GDP per capita for all member countries, and ways to improve labour productivity and utilisation are identified on the basis of cross-country comparisons of policy settings.

 

Press Conference, London, 1 March 2005

Part I: Taking Stock of Structural Policies in OECD Countries

Chapter 1. Structural Policy Priorities

Over the past decade, the gap in GDP per capita relative to the United States has widened in a number of countries, including the large continental European economies and Japan. The gap is linked to lower hours worked per capita, lower output levels per hour worked, or both. This chapter describes broad trends in economic performance since the mid-1990s and summarises structural policy priorities for all member countries to enhance GDP per capita. The policy priorities are identified on the basis of cross-country comparisons of performance and policy settings.

Table: Structural policies and performance: proposed priorities

Chapter 2. Structural Policy Indicators

This chapter contains comparative OECD indicators for labour costs and labour taxation; unemployment, disability and sickness income support; labour market and product market regulation; barriers to competition, trade and investment, sectoral regulation, educational attainment and achievement; health expenditure; and public investment. These indicators have been used to identify the policy priorities that are discussed in this report.

Chapter 3. Country Notes

This chapter contains individual sections for each OECD member country and the European Union, presenting information on key policy priorities supported by a comparative analysis of the indicators in Chapter 2.

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

European Union 

Finland

France

Germany

Greece

Hungary

Iceland

Ireland

Italy

Japan

Korea

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Migration

Slovak Republic

Spain

Sweden

Switzerland

Turkey

United Kingdom

United States

See the follow-up Going for Growth 2006 recommendations by country.

 

Part II: Thematic Studies

Chapter 4. Product Market Regulation in OECD Countries: 1998 to 2003

This chapter describes trends in product market regulation in OECD countries over the period 1998 to 2003. The analysis is based on summary indicators of product market regulation that measure the degree to which policies promote or inhibit competition. The results suggest that regulatory impediments to competition have declined in all OECD countries in recent years. Regulation has also become more homogenous across the OECD as countries with relatively restrictive policies have, in some areas, moved towards the regulatory environment of the more liberalised countries. Within some countries product market policies have become more consistent across different regulatory provisions, although relatively restrictive countries still tend to have a more heterogeneous approach to competition. In general, domestic barriers to competition tend to be higher in countries that have higher barriers to foreign trade and investment, and high levels of state control and barriers to competition tend to be associated with cumrsome administrative procedures and policies that reduce the adaptability of labour markets. Notwithstanding recent progress in product market reform, a “hard core” of regulations that impede competition still persists in virtually all countries.

Chapter 5. The Retirement Effects of Old-age Pension and Early Retirement Schemes in OECD Countries

OECD research summarised in this Chapter demonstrates that public pension systems and other social transfer programmes (such as unemployment, disability or special early retirement benefit systems) embody significant early retirement incentives. New empirical evidence shows that these schemes have played a major role in depressing employment at older ages, most prominently in a number of continental European countries where the work disincentives are particularly large. Therefore, a removal of early retirement incentives could raise effective retirement ages appreciably. For instance, labour force participation rates of older workers could be increased by over 15 percentage points in most continental European countries.

Chapter 6. Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries

Policy and market failures can depress female participation in the labour force and current participation rates are below levels desired by women. Female participation can be boosted by a more neutral tax treatment of second earners (relative to single individuals), stronger tax incentives to share market work between spouses, childcare subsidies, and paid maternity and parental leaves. Married women indeed remain more highly taxed than men and single women, and the level of family support (through childcare subsidies and paid parental leaves) differs widely across countries. Part-time employment can also help reconcile work and family demands. However, preferences for part-time labour vary across countries.

Chapter 7. Long-term Budgetary Implications of Tax-favoured Retirement Saving Plans

In most OECD countries, governments promote private pensions by means of tax incentives, most commonly in the form of a tax exemption on contributions and investment income, with taxation applying instead on pension benefits. This Chapter provides a projection over the next 45 years of the budgetary impact of tax-favoured private pension plans in 17 OECD countries. The findings suggest that aside from leading to a deferral of tax revenues, such tax treatment of private pensions represents a net cost for public finances, largely because the taxes foregone on contributions and asset accumulation exceed taxes collected on pension benefits. Going forward, as larger cohorts reach retirement age and pay taxes on pensions, the net budgetary cost is expected to diminish in the majority of countries, but the impact on public finances will likely remain negative in most cases. The reason is that tax-favoured private pension plans tend to be used mostly by upper-income individuals who would most likely have saved equivalent amounts even without incentives. The Chapter discusses a number of alternative policy options that may help to broaden participation among lowerincome earners so as to raise the impact on private savings and diminish the budgetary cost. Compulsion is one option. Another is to change the design of occupational retirement plans so that enrolment is the default option. The valueof the tax incentives to participate could also be re-balanced in favour of lowerincome earners by replacing the tax deduction for contributions by a non-wastable tax credit.

How to obtain this publication

The complete edition of Economic Policy Reforms: Going for Growth is available from:

SourceOECD for subscribing institutions and many libraries

OECD Online Bookshop for non-subscribers

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