Director for Employment, Labour and Social Affairs in OECD Stefano Scarpettas presentation at the ROCKWOOL Foundation conference "Øget beskæftigelse kalder på reformer, der virker" in February 2018. The presentation was recorded and is available on the Youtube channel of the ROCKWOOL Foundation.

1. RECENT LABOUR MARKET
DEVELOPMENTS AND REFORMS
IN OECD COUNTRIES
The Rockwool Foundation Conference
February 2018
Stefano Scarpetta
Director
Directorate for Employment, Labour
and Social Affairs
OECD

2. The new Jobs Strategy framework
Objective
Dimensions
of labour market
performance
Policies
Enhance inclusive growth and well-being
More &
better jobs
Labour
market
inclusiveness
Resilience &
adaptability
Labour market policies and institutions, and other
structural & macroeconomic policies

3. OECD and DNK employment
back to pre-crisis levels
But DNK unemployment is still
above (due to greater labour
force participation).
3
Job Quantity
ISL
CHE
SWE
NZL
DNK
NLD
DEU
NOR
JPN GBR
CAN
AUS
ESTCZE
AUT
USAFIN
LVAISR
HUN
KOR
SVNLUX
PRT
SVK
IRLFRA
POL
BEL
CHL MEX ESP
ITA
GRC
TUR
40
45
50
55
60
65
70
75
80
85
90
40 45 50 55 60 65 70 75 80 85 90
2016
2006
A. Employment
Share of working-age population (15-64 years) in employment (%)
ISL
CHE
SWE
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA
FIN
LVA
ISRHUN
KOR
SVN
LUX
PRT
SVK
IRL
FRA
POL
BEL
CHL
MEX
ITA
TUR
0
2
4
6
8
10
12
14
0 2 4 6 8 10 12 14
2016
2006
B. Unemployment
Share of persons in the labour force (15-64 years) in
ESP
GRC
15
20
25
0 5 10 15 20 25
ISL
CHE
SWE
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA FIN
LVA
HUNSVN
LUX
PRT SVK
IRL
FRA
POLBEL
ESP ITA
GRC
10
15
20
25
30
35
40
45
10 15 20 25 30 35 40 45
2016
2006
C. Broad labour underutilisation
Share of inactive, unemployed or involuntary part-timers (15-64) in population (%),
excluding youth (15-29) in education and not in employment
TUR
40
60
40 50 60

4. 4
Job Quality
ISL
CHE
SWE
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA
FIN
ISR
HUN
KOR
LUX
PRT
SVK
IRL
FRA
POL
BEL
CHL
MEX
ESP
ITA
GRC
TUR
0
5
10
15
20
25
30
35
0 5 10 15 20 25 30 35
2013
2006
A. Earnings quality
Gross hourly earnings in USD adjusted for inequality
ISL
CHE
SWE
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA
FIN
ISR
HUN
KOR
SVN
LUX
PRT
SVK
IRL FRA
POL
BEL
CHL
MEX
ITA
TUR
0
2
4
6
8
10
12
0 2 4 6 8 10 12
2013
2006
B. Labour market insecurity
Expected monetary loss associated with becoming and staying unemployed
as a share of previous earnings (%)
SWE
NZL
DNK
NLD
NOR
GBR
AUS
EST
AUTUSA
FIN
LVA
ISR
LUX
IRL
FRA
POL
BEL
MEX
ITA
10
15
20
25
30
35
40
45
10 15 20 25 30 35 40 45
2016
2006
C. Quality of working environment
Share of workers experiencing job strain (%)
Earnings quality has not
improved in the past decade
Higher labour market
insecurity but lower job strain
(also in DNK)

5. 5
Inclusiveness
ISL
SWE
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA
FIN
LVA
ISR
HUN
KOR
SVN
LUX
PRT
SVK
IRL
FRA
POLBEL
CHLMEX
ESP
ITA
GRC
TUR
0
2
4
6
8
10
12
14
16
18
20
0 2 4 6 8 10 12 14 16 18 20
2015
2006
A. Low-income rate
Share of working-age population (18-64 years) with equivalent household disposable income
below 50% of the median income (%)
ISL
SWE
DNK
NLD
DEUNOR
JPN
GBR
AUS
EST
CZE AUT
USA
FIN HUN
KOR
SVN
LUX
SVK
IRL
FRAPOL
BEL
0
10
20
30
40
50
60
70
0 10 20 30 40 50 60 70
2014
2006
B. Gender labour income gap
Difference between average annual earnings of men and women divided by average
earnings of men (%)
NZL
DNK
NLD
DEU
NOR
JPN
GBR
CAN
AUS
EST
CZE
AUT
USA
FIN
LVA
HUN
KOR
SVN
LUX
PRT
SVK
IRL
FRA
POL
BEL
CHL
MEX
ESP
ITA
GRC
15
20
25
30
35
40
15 20 25 30 35 40
2016
2006
C. Employment gap for disadvantaged groups
Average employment gap as a percentage of the benchmark group (prime-age male workers)
Income inequality has
increased almost evrywhere
But labour markets have
become more inclusive in other
dirmnsions

6. 6
But the gap between foreign-born and
native-born is huge in Denmark
-15
-10
-5
0
5
10
15
-15
-10
-5
0
5
10
15
Gap in employment ratesGap in employment rates
Gap in employment rates between foreign-born and native-born, 2014
Percentages points
Source: OECD Economic Surveys: Denmark 2016.

7. 7
And this applies also to the second
generation
Difference in employment rates of native-born with foreign parents and native-
born with native parents, 15-34 year olds not in education (2013)
-30
-25
-20
-15
-10
-5
0
5
-30
-25
-20
-15
-10
-5
0
5
BEL DNK AUT NLD ESP FRA DEU SWE EU GBR LUX CHE USA CAN AUS
% points% points
Source: OECD Economic Surveys: Denmark 2016.

8. 8
Danish immigrants are mostly low-skilled
Low-skilled employment share among foreign-born and native-born men,
2012-13
Source: OECD Economic Surveys: Denmark 2016.
0
2
4
6
8
10
12
14
16
18
20
NOR SWE GBR OECD DNK
Foreign-born Native-born
Share of total employment

9. 9
Inequality between foreign-born and
native-born is high
Source: OECD Economic Surveys: Denmark 2016.
0
5
10
15
20
25
30
USA OECD GBR SWE NOR DNK FIN
% in the lowest decile
% in the highest decile
%
Share of persons aged 16 and older living in an immigrant household in the lowest
and highest deciles, 2012

10. 10
Income differences are particularly large
at the bottom of the distribution
Source: OECD Economic Surveys: Denmark 2016.
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
DNK USA GBR OECD SWE FIN NOR
Immigrant Native-born
Lowest decile of the income distribution, EUR
Annual equivalised disposable income of immigrant and native-born households, 2012

11. 11
And yet immigrants are often over-
qualified
Source: OECD Economic Surveys: Denmark 2016.
0
5
10
15
20
25
OECD GBR FIN DNK SWE NOR
% points
Difference in over-qualification rates between foreign-born and
native-born, 2012

12. 12
Persistently low productivity growth
Source: OECD calculations based on quarterly national accounts.
-8
-6
-4
-2
0
2
4
6
8
%
Q1 2000-Q4 2007 Q4 2007-Q1 2009 Q1 2009-Q4 2012 Q4 2012-Q4 2016
Hourly labour productivity
Real GDP divided by total hours worked

13. LABOUR MARKET REFORMS IN
EUROPE IN THE PAST DECADE

14. 14
Falling pseudo-coverage of
unemployment benefits, also in DNK
175 204
0
20
40
60
80
100
120
140
Insurance, 2014 Assistance, 2014 Total, 2007

15. 15
But coverage increased in DNK among the
unemployed between 2007 and 2014
2005
2007
2008
2010
2014
20%
25%
30%
35%
40%
45%
50%
30 35 40 45 50 55
overall
coverage
share of youth (%)

16. 16
But UB reforms that occurred in DNK since
2010 are starting affecting coverage rates
-50
0
50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
chang
ein
covera
ge,
ppts
Reason for entering unemployment Out-of-work duration
Job-search activities Characteristic of the previous job
Income/assets Years in the country
Age Other observable factors
Net compositional effect Total change
-20
-16
-12
-8
-4
0
4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2016
changeincoverage,ppts

17. An unprecedented wave of EPL reforms
in Europe since the onset of the crisis
17
OECD EPL index for individual dismissals
Preliminary estimates for post 2014 data
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Scale 0-6Scale 0-6
OECD average, 2013

18. 18
Short-term effects of EPL reforms:
hiring on open-ended contracts
 Immediate (+) impact on the share of permanent contracts
Share of permanent contracts in new contracts, percentages
18
20
22
24
26
28
30
32
34
36
% Slovenia
Reform:
April 2013
5
6
7
8
9
10
11
12
% Spain
Reform:
February 2012

19. 19
Long run effects of EPL reforms
** ***
***
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Wage and salary
employment
(%)
Wages
(%)
Wages, composition
corrected
(%)
Low-skilled share in
hours worked
(percentage points)
Business sector effects of flexibility-enhancing EPL reforms
Estimated effect of an average reform (reduction of 0.2 points of the EPLR indicator)

20.  The reform in Estonia (2009) increased unemployment.
20
But reforms during the crisis might
have temporarily worsened it
0
5
10
15
20
25
%
Estonia Lithuania Latvia
 Lithuania as a suitable control group for Estonia (e.g. Malk, 2013)
 Same results when micro and macro controls included.

21. 21
More generally, in bad times, EPL
reforms facilitate downsizing …
 Lower (no) costs if promoted during upturns
Estimated cumulated change of business-sector employment up to 4 years since the reform, in percentage
- 1.0
- 0.8
- 0.6
- 0.4
- 0.2
0.0
0.2
0.4
0.6
0.8
1.0
Before 0 1 2 3 4
Time since reform (years)
A. Economic upturn
- 1.7
- 1.5
- 1.3
- 1.1
- 0.9
- 0.7
- 0.5
- 0.3
- 0.1
0.1
0.3
Before 0 1 2 3 4
Time since reform (years)
C. Economic downturn

22. 22
… but this is not the case in dual
labour markets
 Lower (no) costs in countries with dual labour markets.
Estimated cumulative change of business-sector employment up to 4 years following the reform, in percentage
- 0.8
- 0.6
- 0.4
- 0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Before 0 1 2 3 4
Time since reform (years)
A. Incidence of fixed-term contracts 5 percentage points above the median
- 2.2
- 2.0
- 1.8
- 1.6
- 1.4
- 1.2
- 1.0
- 0.8
- 0.6
- 0.4
- 0.2
0.0
0.2
Before 0 1 2 3 4
Time since reform (years)
C. Incidence of fixed-term contracts 5 percentage points below the median

23.  Reform packages can be designed to attenuate, if not
eliminate, short-term costs
 The choice of complementary policies crucially depends
on:
 the stage of the business cycle,
 political-economy considerations,
 the country-specific labour market institutional framework
 fiscal space
23
POLICY OPTIONS

24.  Smaller employment costs with an effective activation
policy in place
 Especially if geared around early interventions (e.g. during notice)
 Scope for activation limited if effective programmes are not
already in place (their implementation takes time)
 Grandfather clauses: reforming EPL while preserving
workers’ accrued entitlements at the date of the reform:
 Evidence that GCs more than offset short-term costs
 But likely to delay the long-run efficiency effects of EPL reforms
 Sequencing of reforms: EPL reforms are less costly (in the
short-run) if product markets are competitive
24
LABOUR MARKET POLICY OPTIONS

25.  Collective bargaining: facilitating the firms adjustment on
other margins than downsizing can limit short-term losses
 e.g. the case of the 2012 labour market reform in Spain
25
LABOUR MARKET POLICY OPTIONS
***
**
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
Overall End of contract Dismissal Other
Predicted without the reform Observed
Effect of the 2012 Spanish reform on quarterly
separation rates

26. 26
Thank you
Contact: Stefano.Scarpetta@oecd.org
OECD Directorate for Employment, Labour and Social Affairs, via www.oecd.org/els
Follow us on Twitter, via @OECD_Social
OECD Employment Outlook, via www.oecd.org/employment/outlook
OECD Employment database, via www.oecd.org/employment/database