2018 OECD ECONOMIC SURVEY OF GERMANY Sustaining strong and - - PowerPoint PPT Presentation

2018 OECD ECONOMIC SURVEY OF GERMANY

Sustaining strong and inclusive growth

Berlin, June 12th 2018

@OECD @OECDeconomy

http:/ / www.oecd.org/ eco/ surveys/ economic-survey-germany.htm

2

Wellbeing is high

Source: OECD (2017), OECD Better Life Index, w w w .oecdbetterlifeindex.org.

0.0 2.0 4.0 6.0 8.0 10.0 Income and wealth Jobs and earnings Housing Work and life balance Health status Education and skills Social connections Civic engagement and governance Environmental quality Personal security Subjective well- being

OECD Better Life Index, 20 17

Germany OECD

90 95 100 105 110 115 120 90 95 100 105 110 115 120 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Real GDP, Index 20 0 7= 10 0

Euro Area Germany

3

Economic growth is robust

Source: OECD (2018), OECD Econom ic Outlook: Statistics and Projections (database).

4

Relative poverty is low

Note: The poverty line is 60% of median household income. Household income is adjusted to take into account household size. Source: OECD (2018), OECD Social and Welfare Statistics (database).

5 10 15 20 25 30 5 10 15 20 25 30 CZE ISL DNK SVK FIN NOR FRA AUT NLD SVN LUX DEU HUN CHE SWE IRL BEL GBR POL OECD PRT KOR NZL ITA AUS GRC CAN JPN EST ESP LVA CHL USA MEX TUR ISR

Population with disposable incom e below the poverty line, % of population, 20 15

5

Unemployment is at a record low

Source: Statistisches Bundesamt.

2 4 6 8 10 12 2 4 6 8 10 12 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1

Unem ploym ent rate, % of labour force

6

Most German youth are in employment, education or training

Source: OECD (2017), "Education at a glance: Educational attainment and labour-force status", OECD Education Statistics (database).

5 10 15 20 25 30 5 10 15 20 25 30 ISL LUX NLD DNK SWE CHE NOR DEU JPN AUT NZL AUS SVN CZE BEL CAN GBR FIN ISR OECD USA LVA EST POL HUN PRT SVK IRL FRA CHL ESP MEX GRC ITA TUR

Youth not in em ploym ent, education or training (NEET), % of 15-29 year-olds, 20 16

7

Wage growth remains moderate

• 0.5

0.5 1.5 2.5 3.5 4.5

• 0.5

0.5 1.5 2.5 3.5 4.5 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1

Nom inal wage growth and inflation Year-on-year growth rates, %

Inflation Nominal wage rate

Note: Inflation is that of the Harmonised consumer price index (HICP). Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

8

High corporate saving contributes to the current account surplus

Source: OECD calculations based on OECD (2018), OECD National Accounts Statistics (database) and OECD (2018), OECD Economic Outlook: Statistics and Projections (database ).

• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0

• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Current account and saving-investm ent balance, % of GDP

Current account balance Saving-investment balance of corporations

CHALLENGES

9

10

Trend productivity growth has slowed

Note: Average annual grow th in trend labour productivity. Source: OECD (2018), "OECD Economic Outlook No. 102 (Edition 2017/ 2)", OECD Economic Outlook: Statistics and Projections (database).

0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 DEU GBR JPN FRA CAN SWE USA 1996-2006 2006-16

Average annual rate of labour productivity growth,

9 18 27 36 45 9 18 27 36 45 Total Low skilled Medium skilled High skilled Women Men

Em ployees earning low wage, % of all em ployees

Germany EU

11

Many workers earn low wages

Note: employees earning low wage are those earning less than two thirds of the median gross hourly earnings. Source: Eurostat (2018), Employment and working conditions (database).

12

Highly educated women earn much less than men

Source: OECD (2016), Education at a Glance 2016: OECD Indicators.

40 50 60 70 80 90 100 40 50 60 70 80 90 100 AUT CAN DEU FRA OECD NLD AUS GBR FIN DNK SWE

Wom en's earnings as % of m en's earnings, Tertiary education graduates, 20 14

13

CO2 emissions have fallen little in recent years

8.0 8.5 9.0 9.5 10.0 10.5 11.0 8.0 8.5 9.0 9.5 10.0 10.5 11.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CO2 em ission, tonnes per capita

Germany OECD

Note: Emission is production based. Source: OECD (2018), Green Growth Indicators (database).

14

Small particle emissions have not fallen recently

12 13 14 15 16 17 18 19 12 13 14 15 16 17 18 19 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mean annual concentration of PM2.5, µg/ m ³

Germany OECD

Source: OECD (2018), Green Growth Indicators (database).

USING FISCAL POLICY TO SUPPORT INCLUSIVE GROWTH

15

10 20 30 40 50 10 20 30 40 50 CHL NZL ISR MEX CHE KOR IRL AUS CAN GBR LUX USA ISL NLD JPN OECD NOR TUR DNK POL ESP PRT GRC FIN EST SVK SVN ITA CZE SWE FRA AUT DEU HUN BEL

Labour incom e tax and social security contributions, as % of labour costs, 20 17

Average tax wedge Personal income tax Social security contributions

16

Labour taxes on low incomes are high

Note: Income tax plus employee and employer social security contributions less cash benefits for single person, no child, earning 67% of average earnings. Source: OECD (2018), Taxing Wages Statistics (database).

17

Environmental tax revenue could be higher

1 2 3 4 5 1 2 3 4 5 MEX USA CAN CHL NZL JPN SVK CHE ESP AUS DEU FRA LUX ISL BEL NOR IRL PRT SWE GBR KOR EST HUN CZE GRC FIN AUT ISR NLD TUR ITA SVN DNK

Environm ental tax revenue, % of GDP, 20 14

Source: OECD (2018), "OECD Instruments used for environmental policy", OECD Environment Statistics (database).

18

Expenditure on primary education is low

4 8 12 16 20 4 8 12 16 20 FRA NZL IRL AUS NLD DEU OECD FIN JPN CAN SVN KOR BEL SWE AUT ISL USA GBR DNK NOR CHE LUX

Annual public expenditure in prim ary education, Per student, USD thousand, PPPs, 20 14

21.2

Source: OECD (2017), Education at a Glance 2017: OECD Indicators.

19

Ageing related spending will increase

Source: European Commission (2015), "The 2015 ageing report: Economic and budgetary projections for the 28 EU Member States (2013-2060)". Based on the reference scenario.

5 10 15 20 25 5 10 15 20 25 2020 2035 2060 % %

Projections on ageing related spending, % of GDP

Pensions, net Health care Long-term care

• Use fiscal leeway in a prudent manner, taking capacity constraints into

account, to lower the taxation of low wage earnings and to raise priority spending on childcare, education and life-long learning as well as for low- emission transport infrastructure.

• Index the legal pension age to life expectancy.
• Introduce spending reviews more broadly at the federal and Länder level

and use them to reallocate funding across broad spending fields.

More in the Key Policy Insights of the Econom ic Survey of Germ any 2018

20

Key recommendations for fiscal policies supporting steady inclusive growth

• Extend charging station infrastructure to promote electrification of road

transport.

• Develop congestion pricing.
• Remove regulatory hurdles to new low-emission urban transport services,

including ride-sharing.

More in the Key Policy Insights of the Econom ic Survey of Germ any 2018

21

Key recommendations for boosting green growth

BOOSTING PRODUCTIVITY AND PREPARING FOR THE FUTURE OF WORK

22

23

Technology diffusion has slowed

Multifactor productivity level of Germ an firm s, index 20 0 6 =10 0

Note:The Best performers are the top 5% firms with highest productivity within each 2-digit sector . Source: OECD calculations based on ORBIS dataset.

60 70 80 90 100 110 120 130 2006 2007 2008 2009 2010 2011 2012 2013

• A. Ma n u fa cturing

The rest Best performers 60 70 80 90 100 110 120 130 2006 2007 2008 2009 2010 2011 2012 2013

• B. Serv ices

The rest Best performers

24

Small and medium sized firms lag behind in productivity

Note: Large firms are firms with more than 250 employed persons. Source: OECD calculations based on OECD (2017), Entrepreneurship at a Glance 2017.

20 40 60 80 100 120 140 20 40 60 80 100 120 140 DEU DNK CHE SWE FRA ITA FIN ESP BEL AUT GBR NLD

Value added per person em ployed in SMEs, % of the level of large firm s, 20 14

Small (20-49 persons) Medium (50-249 persons)

25

Knowledge-based capital contributes little to productivity growth

Source: OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital transform ation.

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 GBR LUX ITA GRC NOR USA ESP DEU PRT NLD EST DNK CZE FIN FRA AUT BEL SWE

Contribution of KBC to labour productivity growth, Percentage points, business sector, 20 0 0 -14

26

Entrepreneurship has declined

80 90 100 110 120 130 80 90 100 110 120 130 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1

Num ber of new enterprises, index 20 12=10 0

Belgium Netherlands Germany

Note: the number of new enterprises is adjusted for business cycle components. Source: OECD (2017), Entrepreneurship at a Glance 2017.

27

Women’s entrepreneurship is low

Source: OECD (2017), Entrepreneurship at a Glance 2017.

5 10 15 20 25 5 10 15 20 25 NOR JPN DNK SWE EST DEU USA IRL ISL SVN LUX FRA HUN LTU AUT FIN ISR LVA CHE BEL GBR TUR ROU OECD SVK PRT CAN ZAF ESP CZE NLD AUS POL NZL KOR ITA BRA GRC CHL MEX

The share of self-em ployed wom en, % of total active wom en, 20 16

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 GBR JPN DEU PRT ESP USA CHE FRA ISR IRL GRC CHL FIN SVN NZL ITA CZE POL MEX LVA AUT NOR SVK TUR SWE AUS CAN BEL NLD HUN EST

OECD indicator of insolvency regim e, From least (0 ) to m ost (1) restrictive, 20 16

28

The insolvency regime is efficient

Note: The OECD insolvency regime indicator capture (1) personal costs to failed entrepreneurs, (2) lack of preventative and streamlining measures and (3) barriers to restructuring. Higher values of the composite indicator correspond to more inefficiency. Source: Adalet McGowan, M., D. Andrews and V. Millot (2017), "Insolvency regimes, zombie firms and capital reallocation", OECD Economics Department Working Papers, No. 1399.

29

The personal costs of failed entrepreneurs are high

Note: The subcomponent captures the stringency of the restrictiveness on the insolvency procedure on failed entrepreneurs, including the length of discharge period. Source: Adalet McGowan, M., D. Andrews and V. Millot (2017), "Insolvency regimes, zombie firms and capital reallocation", OECD Economics Department Working Papers, No. 1399.

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 CAN TUR USA AUS CHL GBR JPN LTU RUS AUT CHE CRI DNK ESP FIN FRA GRC IRL ITA LVA MEX NOR NZL SVK SVN BEL DEU EST HUN ISR KOR NLD POL PRT SWE CZE

The subcom ponent of the OECD insolvency indicator on personal costs of failed entrepreneurs, from least (0 ) to m ost (1) restrictive, 20 16

30

Low use of e-government raises costs of start-ups

20 40 60 80 20 40 60 80

JPN MEX ITA CHL CZE SVK DEU SVN CAN POL TUR HUN GRC PRT LVA ESP AUT LTU GBR BEL LUX CHE SWE IRL FRA NLD FIN NOR EST DNK

Individuals subm itting form s to authorities online, % of individual surveyed, 20 16

Source: OECD (2017), OECD Digital Econom y Outlook 2017.

31

Entry barriers to professional services are high

Source: OECD (2015), OECD Product Market Regulation Database.

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 SWE FIN GBR DNK CHE AUS NOR NZL NLD IRL MEX CHL EST OECD ITA JPN KOR FRA CZE ESP BEL SVN ISR DEU AUT SVK PRT GRC HUN CAN POL LUX TUR

Indicator of regulation in professional services, From least (0 ) to m ost (6) stringent

32

Internet connection speed is slow

Source: Akamai (2017), “Akamai’s state of the Internet report: Q1 2017 report”, https:/ / www.akamai.com.

30 60 90 120 30 60 90 120 GRC MEX FRA TUR ITA AUS LUX SVN EST LTU AUT CHL DEU POL PRT SVK IRL NZL DNK GBR FIN CZE HUN CAN LVA NLD ESP BEL NOR USA CHE JPN SWE KOR

Average peak connection speed, Megabits per second, Q1 20 17

33

Many jobs may undergo substantial changes

10 20 30 40 50 60 70 10 20 30 40 50 60 70 NOR NZL FIN SWE USA GBR DNK NLD CAN BEL IRL EST KOR ISR AUT CZE FRA POL ITA ESP SVN CHL DEU JPN GRC TUR SVK

Jobs at high risk of autom ation and significant change, % of all jobs

Jobs at high risk of automation Jobs at risk of significant change

Source: Nedelkoska, L. and G. Quintini (2018), "Automation, skills use and training", OECD Social, Employment and Migration Working Papers, No. 202, OECD Publishing, Paris.

Boost entrepreneurship and resource allocation

• Ease the conditions for bankrupt entrepreneurs to be discharged of debt after 3 years, while

maintaining adequate safeguards for creditors.

• Create a one stop shop to process all procedures for starting up a company online.
• Reduce restrictive regulation in the professional services, safeguarding quality standards and

consumer interests.

• Privatise government stakes in the Landesbanken, car manufacturing, telecommunications and

postal services.

Strengthen digital infrastructure through com petition

• Use the upcoming radio spectrum auction to promote competition in the mobile market.

Expand social protection for the self em ployed

• Make enrolment in public old-age pension mandatory for the self-employed who are not covered

by old-age pension insurance.

• Open access to public health insurance to all self-employed.

More in Chapter 1 of the Econom ic Survey of Germ any 2018

34

Key recommendations for boosting productivity and preparing for the future of work

IMPROVING SKILLS AND THEIR USE

35

36

Adults skills lag behind leading countries

PIAAC m ean proficiency scores in literacy

Note: The data refer to 15-65 year-olds Source: OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills.

240 250 260 270 280 290 300 240 250 260 270 280 290 300 FRA OECD AUT USA DEU DNK GBR CAN EST SWE AUS NLD FIN JPN

37

Literacy skills are low among workers with low education attainment

PIAAC m ean proficiency scores in literacy, by educational attainm ent

Note: The data refer to 15-65 year-olds Source: OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills.

200 230 260 290 320 350 200 230 260 290 320 350 JPN OECD DEU Less than upper secondary Tertiary Upper secondary

38

ICT skills lag behind leading countries, especially among the young

Population with above basic ICT skills, % of total population, by age cohort, 20 17

Source: Eurostat (2018), Individuals' level of digital skills (database).

15 30 45 60 75 90 15 30 45 60 75 90 EU28 FRA DEU SWE GBR AUT FIN DNK NLD 16-24 year-olds 25-54 year-olds 55-64 year-olds

39

Women’s skills are under-used

Note: Gender differences in problem solving skills at work is captured as the difference in of the mean use of skills between men and women. Source: OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills.

5 10 15 20 25 5 10 15 20 25 FIN GBR(Eng.) SWE USA DNK AUS CAN OECD FRA NLD DEU AUT JPN

Gender difference in PIAAC problem solving skills at work, % of the m ean use of skills by wom en

40

Educational attainment of disadvantaged students has improved

Note: The share of students achieving level 3 or above in all three PISA domains (reading, mathematics and science) among the 25% most disadvantaged students in their country according to the PISA index of economic, social and cultural status. Source: Agasisti, T., et al. (2018), "Academic resilience: What schools and countries do to help disadvantaged students succeed in PISA", OECD Education Working Papers, No. 167.

10 20 30 40 50 60 10 20 30 40 50 60 USA AUT FRA SWE OECD GBR AUS DNK DEU NLD FIN CAN JPN

Students with m id-level or higher PISA attainm ent, as % of disadvantaged students

2016 2006

41

Parents’ educational attainment influences children’s skills

Note: Difference in PIAAC literacy scores between individuals aged 25-65 with one parent educated to tertiary level and no parent educated to upper secondary level. The adjusted differences take into account differences in age, gender, education, immigrant and language background. Source: OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills.

10 20 30 40 50 60 10 20 30 40 50 60 AUS JPN SWE KOR CAN DNK NLD OECD AUT FIN GBR FRA DEU

Difference in PIAAC literacy scores between individuals with parents with high and low educational attainm ents

Unadjusted Adjusted for socio-economic background

42

The income of vocational graduates increases only little over their lifetime

20,000 40,000 60,000 80,000 100,000 20,000 40,000 60,000 80,000 100,000 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65

Yearly earnings of 25-6 5 year-olds m en, euros

Vocational upper secondary Vocational tertiary education General tertiary education age

Source: Economic Survey of Germany 2018.

43

Participation in lifelong learning could be higher

5 10 15 20 25 30 35 5 10 15 20 25 30 35 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Participation in life-long learning, % of population aged 26-6 4 , 20 17

Germany Sweden European Union

Source: Eurostat (2018), Education and training (database).

Im prove equity in education

• Raise quality standards in childcare and early childhood education.
• Expand primary education to high-quality full-day education programmes.

Reduce skill m ism atch

• Lower the tax burden on the wage income of second earners.
• Increase the minimum amount of time the second parent has to take parental leave, from the

current 2 months, for the couple to receive the maximum leave entitlement.

Im prove upskilling opportunities in the vocational education system

• Strengthen general education within vocational schools, and maintain the strong labour market
• rientation of vocational education and training.

Boost participation in life-long learning

• Offer more training programmes for the modular acquisition of qualifications in life-long learning

and foster the recognition of skills acquired on-the-job.

• Strengthen support for unskilled adults to obtain professional qualifications.

More in the Chapter 2 of the Econom ic Survey of Germ any 2018

44

Key recommendations for improving skills and their use

45

For more information

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