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2017 OECD ECONOMIC
SURVEY OF LUXEMBOURG
Better skills for more inclusive growth
Paris, July, 21th
@OECD
@OECDeconomy
http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm
2
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.
3
Well-being is high
Life is good in Luxembourg
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
0
2
4
6
8
10Income and wealth
Jobs and earnings
Housing
Work and life balance
Health status
Education and skillsSocial connections
Civic engagement and governance
Environmental quality
Personal security
Subjective well-being
Luxembourg OECD
4
Unemployment is low and declining
Unemployment rates, per cent of labour force
Source: OECD Economic Outlook 101 database.
0
5
10
15
20
2007 2009 2011 2013 2015 2017
Luxembourg Euro area
5
There is ample fiscal space
General government fiscal balance, per cent of GDP
Source: OECD (2017), OECD Economic Outlook: Statistics and Projections (database).
-2
-1
0
1
2
3
4
5
6
7
-2
-1
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
% of GDP% of GDP
6
But ageing costs are projected to rise
Gross public pension expenditure, per cent of GDP
Source: European Commission (2015), The 2015 Ageing Report: Economic and budgetary projections for the
28 EU Member States (2013-2060).
0
2
4
6
8
10
12
14
16
18
20
0
2
4
6
8
10
12
14
16
18
20
NLD IRL EST LVA GBR SVK SWE CZE LUX NOR DEU DNK POL EU HUN BEL SVN ESP FIN PRT AUT FRA ITA GRC
2013 2060
7
House prices are growing strongly…
Real house prices, index 2007=100
Source: OECD, Analytical house prices indicators database.
90
100
110
120
130
140
150
90
100
110
120
130
140
150
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Seasonally adjustedSeasonally adjusted
Luxembourg Australia Belgium Canada
France Germany Sweden
8
…and household indebtedness is rising also
Household debt, per cent of GDP or GNI
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of GNI (Gross National Income)
% of GDP (Gross Domestic Product)
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.
9
Economic growth is strong, but relies heavily
on the financial sector
Real GDP growth, year-on-year percentage changes
Source: OECD Economic Outlook 101 database.
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2007 2009 2011 2013 2015 2017
Luxembourg Euro area
10
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
0
5
10
15
20
25
30
35
40
45
0
5
10
15
20
25
30
35
40
45
FIN EST SWE LVA SVK DNK CZE POL ESP SVN AUT HUN PRT FRA EU DEU NLD IRL LUX ITA BEL GRC GBR
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.
11
The demand for skills is changing
Average annual change in total employment requiring different tasks (thousands)
- 6
- 3
0
3
6
9
12
15
18
- 6
- 3
0
3
6
9
12
15
18
1996-2008 2009-10 2012-15
Non-routine manual Routine manual Abstract
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.
12
Luxembourg has long attracted immigrants
to fill vacancies
Net migration flows, % of total population
0.0
0.5
1.0
1.5
2.0
2.5
0.0
0.5
1.0
1.5
2.0
2.5
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: STATEC.
13
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.
BETTER SKILLS FOR MORE INCLUSIVE
GROWTH
14
15
Computer skills are high
0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
40
45
50
FIN
LUX
NO
R
DN
K
SW
E
ISL
ES
T
LTU
AU
T
PR
T
ES
P
FR
A
GB
R
SV
N
DE
U
GR
C
LVA
EU
28
CZ
E
NLD IR
L
ITA
MLT
SV
K
BE
L
HU
N
HR
V
PO
L
BG
R
TU
R
RO
U
%%
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.
Share of people with computer skills, 2014
16
Skill mismatches are high
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.
Self-reported skills mismatch
As percentage of all employment, 2015
0
10
20
30
40
50
60
0
10
20
30
40
50
60
PR
T
FIN ITA
NO
R
BE
L
LVA
SV
K
CZ
E
NLD
PO
L
GB
R
EU
-28
FR
A
GR
C
ES
P
DN
K
IRL
SW
E
CH
E
LUX
DE
U
HU
N
SV
N
ES
T
AU
T
Overskilled Underskilled
17
Education scores show a persistent gap
Average PISA scores, 2009-2015
Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education.
460
465
470
475
480
485
490
495
500
505
460
465
470
475
480
485
490
495
500
505
Science Reading Mathematics
Mean scoreMean score
Luxembourg OECD average
18
Grade repetition is high
Share of 15-years old who repeated a year at least once, per cent
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
ISL
SV
N
GB
R
FIN
DN
K
ES
T
SW
E
KO
R
CZ
E
NZ
L
GR
C
LVA
PO
L
CA
N
SV
K
AU
S
IRL
ISR
HU
N
TU
R
US
A
OE
CD
ITA
AU
T
ME
X
DE
U
CH
E
NLD
FR
A
CH
L
LUX
PR
T
ES
P
BE
L
Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education.
19
The share of training in active labour market
policy spending is low
Per cent of GDP, average 2010-15 (or last available year)
Source: European Commission, Labour market policy (LMP) database.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
GBR EST SVK CZE GRC LVA SVN ITA DEU NOR POL PRT LUX EU28 BEL ESP HUN AUT NLD IRL FRA FIN SWE DNK
Training Total LMP measures
20
High marginal tax rates create disincentives to
work
Marginal Effective Tax Rates on increasing working hours, 2014
0
10
20
30
40
50
60
70
80
90
100
110
0
10
20
30
40
50
60
70
80
90
100
110
KO
R
CH
L
GR
C
ES
P
PR
T
ES
T
ITA
TU
R
LVA
US
A
SV
N
HU
N
SV
K
JPN
ISR
BE
L
OE
CD
FR
A
SW
E
AU
T
ISL
GB
R
CA
N
NO
R
PO
L
DE
U
CZ
E
NZ
L
NLD
CH
E
AU
S
FIN
DN
K
IRL
LUX
% of gross earnings% of gross earnings
Note: From 33% to 67% of average wage, supplements included, for married couple.
Source: OECD, Tax-Benefit Models.
21
Work disincentives for second earners are
high
Net personal average tax rates on second earners, 2015
0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
40
45
50
ME
X
CH
L
ISR
KO
R
NZ
L
AU
S
GB
R
IRL
GR
C
ES
T
CH
E
SW
E
ES
P
JPN
FIN
CA
N
PO
L
TU
R
ITA
NO
R
NLD
AU
T
US
A
SV
K
PR
T
CZ
E
LUX
SV
N
HU
N
FR
A
ISL
DN
K
DE
U
BE
L
% %
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).
22
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 low-skilled youth, older workers and second earners.
IMPROVING FURTHER THE INTEGRATION OF
IMMIGRANTS
23
24
The large immigrant population has a high
employment rate
0
5
10
15
20
25
30
35
40
45
50
PO
LS
VK
CZ
EH
UN
FIN
PR
TIT
AD
NK
GR
CS
VN
FR
AN
LD ISL
ES
PLV
AD
EU
GB
RE
ST
NO
RB
EL
IRL
SW
EA
UT
CH
ELU
X
% of total population A. Foreign-born population
1 January 2016
Non-EU28
EU28
-16
-12
-8
-4
0
4
8
NLD
SW
ED
NK
BE
LF
INF
RA
AU
TD
EU
NO
RT
UR
CH
ELV
AS
VN
SV
KIS
LE
SP
GB
RP
OL
ES
TIR
LC
ZE
GR
CIT
AP
RT
LUX
HU
N
% pointsB. Employment rateGap relative to native born, age 15-64, 2015
Source: Eurostat (2016), Population Statistics and Employment and Unemployment (Labour Force Survey) Statistics.
25
Non-EU immigrants face higher
unemployment
Unemployment rate by country of origin, age group 15-74, per cent
0
5
10
15
20
25
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Extra-EU-28
EU-28 countries
Luxembourg
Source: Eurostat, Employment and unemployment (Labour Force Survey) database.
26
The risk of poverty is high among non-EU
immigrants
Age 18-64, 2015
0
10
20
30
40
50
60
0
10
20
30
40
50
60
POL ISL CZE LVA EST PRT NLD NOR DEU GBR FIN HUN DNK FRA SVN EU28 AUT ITA SWE LUX BEL ESP GRC
Source: Eurostat (2015), "Living conditions and welfare: Income distribution and monetary poverty", Eurostat
Database, October.
27
Immigrants are under-represented in public
sector jobs
Share of employment in the public services sector, aged 15- 64, 2012-2013
Source: OECD/European Union (2015).
0
10
20
30
40
50
60
0
10
20
30
40
50
60
GR
C
ITA
ES
P
BG
R
LUX
SV
N
CZ
E
AU
T
DE
U
TU
R
LVA
ES
T
EU
OE
CD
CH
E
IRL
RO
U
SV
K
HR
V
ISL
HU
N
LTU
FR
A
BE
L
FIN
MLT
PR
T
PO
L
NLD
GB
R
DN
K
SW
E
%%
Among foreign born Among native born
28
Processing times for immigration of highly-
skilled non-EU workers is high
Time in weeks
0
2
4
6
8
10
12
14
16
18
0
2
4
6
8
10
12
14
16
18
GBR BEL DNK GRCNOR PRT AUS NLD ESP SWE FRA DEU IRL LVA CHE HUN POL SVK USA CAN EST FIN AUT CZE LUX ITA
Source: Deloitte (2016), Global Immigration Study.
29
Socio-economic status has a large impact on
student performance
Impact of socio-economic background, Performance in science, PISA 2015
0
5
10
15
20
25
0
5
10
15
20
25
ISL
ES
T
NO
R
LVA
CA
N
TU
R
ITA
FIN
JPN
KO
R
DN
K
GB
R
ME
X
ISR
US
A
AU
S
SW
E
NLD
GR
C
IRL
OE
CD
PO
L
ES
P
SV
N
NZ
L
PR
T
CH
E
DE
U
AU
T
SV
K
CH
L
CZ
E
BE
L
FR
A
LUX
HU
N
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.
30
Performance of students with immigrant
background is lagging behind
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
(régime préparatoire, PREP).
Source: OECD, PISA 2015 Database.
Performance in science, score points, PISA 2015
0
100
200
300
400
500
600
Preparatory Technical Secondary
Immigrants students Non-immigrant students
31
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
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
AU
S
ES
P
US
A
TU
R
ME
X
SW
E
NZ
L
ISR
CZ
E
DN
K
CH
L
NO
R
LUX
HU
N
SV
K
NLD
CA
N
GB
R
PR
T
OE
CD
CH
E
DE
U
ITA
IRL
BE
L
GR
C
JPN
SV
N
FIN
PO
L
ISL
LVA
FR
A
ES
T
AU
T
KO
R
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.
32
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.
33
For more information
http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm
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Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
