OECD Observer No 305 Q1 2016

Central banks: False beliefs and unhappy endings Information jobs: Databank Missing entrepreneurs OECD Economic Outlook No 305 Q1 2016

www.oecdobserver.org

ŠSerprix.com

The future of work

Spotlight: Ireland’s economy at the cutting edge

CONTENTS No 305 Q1 2016

36

EDITORIAL 2

2016: The year of implementation Angel Gurría, Secretary-General of the OECD

38 39

READERS’VIEWS 3

Climate change; Over growth?; Twitterings

NEWS BRIEF 4-5 Future pension pressures; Teachers’ salaries too low?; Soundbites; Economy; Country roundup; Naomi Klein; Other stories; Plus ça change

ECONOMY AND SOCIETY 7 9 11 12 13 14 15

False beliefs and unhappy endings William White What future for work?

Stefano Scarpetta It’s a gig, but is it a job?

An intern’s world?

Caroline Fouvet BlogServer Understanding the battle against extremism Andreas Schleicher Productivity conundrum

ECONOMIC OUTLOOK 18

Country snapshots

OECD.ORG 30

Help refugees integrate and contribute; Wikigender launches in French

40

43 44 45 46 47 48 50 51 52

Ireland’s economy: Still riding the globalisation wave David Haugh Innovating Ireland Business brief: Trinity lights the way forward Interview with Dr Patrick Prendergast, Provost and President, Trinity College Dublin, the University of Dublin Ireland’s innovation challenge. Roundtable of business, with: Enterprise Ireland, NERI, Amneal Pharmaceuticals, Microsoft Ireland, Stirling Behavioural Science Centre, The Stone Twins Well-being in Ireland Banking on Silicon Docks Business brief: Ireland: Open for investment Shaun Murphy, Managing Partner, KPMG in Ireland Casting off towards a blue future Lorna Siggins, Marine and Western Correspondent, The Irish Times From Goias to Galway From crisis to recovery: Overcoming scars and social costs Claire Keane Migration: A flexible return ticket Ireland’s global workforce The capacity conundrum

56

Recent speeches by Angel Gurría; List of OECD ambassadors Calendar

BOOKS

32

57

33

34 35

58 60

Reviews: Missing entrepreneurs; Governing megacities New publications; Most popular Review: Data-driven innovation; Crossword

62 64

The ups and downs of information jobs; Buying into e-commerce Main economic indicators Jobs are not just about how much money ORDER FORM... ORDER FORM

ISSN 0029-7054 Tel.: +33 (0) 1 45 24 9112 Fax: +33 (0) 1 45 24 82 10 sales@oecd.org Founded in 1962. The magazine of the Organisation for Economic Co-operation and Development

ADVERTISING MANAGER: Aleksandra Sawicka PRINTERS: SIEP, France; Chain of Custody certified.

OECD Publications 2 rue André Pascal 75775 Paris cedex 16, France observer@oecd.org www.oecd.org

Joan Burton on why skills matter, page 33

DATABANK 61

Published in English and French by the OECD EDITOR-IN-CHIEF: Rory J. Clarke PLANNING AND DEVELOPMENT EDITOR: Diana Klein EDITORIAL ASSISTANT: Neïla Bachene WRITER: Claire MacDonald EDITORIAL INTERNS: Lily Emamian, Catherine Partridge LAYOUT: Design Factory, Ireland ILLUSTRATIONS: Charlotte Moreau, Stik, David Rooney, André Faber PHOTO RESEARCH: Rory J. Clarke

www.oecdobserver.org ©OECD January 2016

Help refugees integrate and contribute, page 30

OECD.ORG 55

SPOTLIGHT ON IRELAND Sustaining Ireland’s recovery for all Angel Gurría, Secretary-General of the OECD Labour market reform: Why skills matter Joan Burton, Tánaiste (Deputy Prime Minister) and Minister for Social Protection, Government of Ireland, and Chair of the OECD Meeting of Employment and Labour Ministers 2016 Ireland’s economy: A solid recovery Michael Noonan, Minister for Finance, Ireland Ireland’s economy and the OECD: From bricks to brains Michael Forbes, Ambassador and Permanent Representative of Ireland to the OECD

Understanding the battle against extremism, page 14

Applications for permission to reproduce or translate all or parts of articles from the OECD Observer, should be addressed to: The Editor, OECD Observer, 2 rue André Pascal, 75775 Paris, cedex 16, France.

Spotlight on Ireland, from page 31

All signed articles in the OECD Observer express the opinions of the authors and do not necessarily represent the official views of the OECD or its member countries.

Reprinted and translated articles should carry the credit line “Reprinted from the OECD Observer”, plus date of issue. Signed articles reprinted must bear the author’s name. Two voucher copies should be sent to the Editor. All correspondence should be addressed to the Editor. The Organisation cannot be responsible for returning unsolicited manuscripts.

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.

2016: The year of implementation We owe it to our people, to our planet and to the future generations to ensure that the international agreements of 2015 are implemented.

Angel Gurría Secretary-General of the OECD

If hard-won agreement was the headline of 2015, implementation will be the feature for 2016. Agreements make the news; their implementation improves people’s lives.

As I wrote in these pages a year ago, in 2015 the hopes of the world would rest on global leaders as they prepared for historic summits. Those hopes were not dashed. In unprecedented fashion, the world spoke with one voice as agreements were forged on financing development at Addis Ababa in July, on the UN Sustainable Development Goals (SDGs) in New York in September, and at the UN Climate Change Conference (COP21) in Paris in December. We also achieved important progress on disaster risk reduction in Sendai in March, and on trade in Nairobi in December.

The OECD worked tirelessly in support of these important gatherings. Now, we must ensure that these agreements are adequately implemented.

Take climate, for instance. The commitment in Paris, achieved at the end of one of the warmest years on record, includes clear and ambitious targets for limiting the rise in global temperatures to below 2°C, a five-year review cycle, rules on transparency, and a framework for supporting developing countries. It lays the pathway to a more climate-resilient future, which governments must now follow by putting their agreements into action.

The OECD will support these efforts by providing data, analysis, monitoring and advice, helping policy makers address both the challenges and the opportunities. One such golden opportunity appears now: with oil prices low, OECD countries should act right away to slash fossil fuel subsidies. Apart from the low-carbon benefits, this would free up resources for other priorities, including addressing the fallout of the crisis and today’s sluggish world economy.

Together with the G20, we have also made major advances to improve global governance. In 2015 there was a major international agreement on tax, with the endorsement of the Base Erosion and Profit Shifting (BEPS) project. In 2016 we will seek its

2

implementation via an inclusive framework involving more developing countries. And we will continue to push for tax transparency under the Automatic Exchange of Information initiative.

We will also be supporting other G20 efforts to build an innovative, inclusive and interconnected world economy. Under China’s G20 presidency, our work on innovation, corruption, trade and investment will be at the forefront of policy debates. We are also working closely with Japan to support their G7 presidency.

The world’s growth engine is still in the repair shop. In our economic forecasting last spring, we showed some optimism, only for that to be followed by downward revisions during the year. The OECD Economic Outlook in November showed global growth prospects dimming again: a further slowdown in emerging markets that will weigh on global activity and trade, and subdued investment and spending in the advanced economies. Is there a silver lining that might lead us to revise our forecasts upwards for a change?

Job creation is slowly picking up in many countries, thanks to determined efforts by policy makers, while low commodity prices could help demand. However, over 40 million people in OECD countries remain without jobs–a third have been out of work for a year or more–and risk becoming trapped at the bottom of the economic and social ladder. A multidimensional approach is needed, with strong labour activation measures backed by interconnected social policies covering skills, gender, youth and equal opportunities.

To explore such approaches, the OECD hosted a major Policy Forum, back to back with an Employment and Labour Ministers’ Meeting on 14-15 January. The transformations that are shaping the future of work were explored at these important gatherings.

Our organisation scans these trends carefully, through our work on skills, innovation and well-being, and under our New Approaches to Economic Challenges (NAEC) initiative. With digitalisation, for example, we see new opportunities and markets, and are witnessing major shifts in skills, capital and workplace organisation. Moreover, our data reveal that when it comes to job creation, quality and quantity can go together as long as the right policy and institutional settings are in place.

One fundamental challenge to address in 2016 is how to reverse the perplexing slowdown in productivity growth that has characterised even the most advanced OECD countries since the early 2000s.

Could policies to address inclusiveness help productivity at the same time? After all, income inequality has widened in the past decade or so, and is at its highest level in 30 years in most OECD countries. With our NAEC mind-set, we must look at such issues holistically in our endeavour to make our economies and our societies more dynamic, resilient and inclusive. Is there a nexus between equality and productivity? Is it a two-way street?

Productivity and inclusive growth will lead the agenda at our annual OECD Ministerial Council Meeting (MCM) on 1-2 June, held

Readers’ views in conjunction with the OECD Forum, on 31 May-1 June, during the by now well-established OECD Week. The MCM will be chaired by Chile, allowing us to cast a spotlight on Latin America’s enormous potential. Indeed, during the MCM, we will be launching a Regional Programme for Latin America and the Caribbean at the OECD, giving further coherence and consistency to our work and engagement with the region.

A series of ministerial conferences will also feature in 2016: on fighting bribery and corruption in March, on strengthening the global food system in April, on the digital economy in June and on the environment in September.

We will be busy on other fronts as well.

With the refugee crisis in Europe, our work on migration and integration has taken on a unique relevance. And we continue to move forward with the policy agendas on gender, children’s well-being, education and skills, and much more. We also look forward to advancing the accession process with Colombia, Costa Rica, Latvia and Lithuania, and continuing to implement our different regional and country programmes.

It is a busy agenda. But I am sure that we will rise to expectations and deliver on it again. Now, more than ever, we must ensure that the important agreements that the international community reached in 2015 are properly implemented.

We owe it to our people, to our planet and to the future generations. www.oecdobserver.org/angelgurria www.oecd.org/about/secretary-general @A_Gurria

We welcome your feedback.

Send your letters to observer@oecd.org or post your comments at www.oecdobserver.org or www.oecdinsights.org

Climate change Vaclav Smil’s reality check on the fight against climate change is refreshing (“Energy transitions, renewables and rational energy use” in No 304 November 2015, see http:// oe.cd/1gu). Renewable energy sources have come on in leaps and bounds, but as Mr Smil warns, there is work to do, so in the meantime, the environmentally least damaging course is to make do with less. If only his phrase, “less is more”, became an election winner!

data, new research, new mindsets”.

The OECD needs to very urgently ask how the functioning of markets can be improved so that inequalities at global level and within countries are reduced, that the natural environment is managed in more sustainable ways, and that quality of life for all is enhanced.

Karlheinz Knickel, commenting on oecdinsights.org, “Policy coherence from new data, new research, new mindsets”, January 2016

R Delucenay, Oise, France

— Thanks for pointing out that, to give renewable energy a chance, policy makers must stop protecting old-world polluters (“Business innovation and climate change: Policy makers

Twitterings Shailey Hingorani @BurntCognac What will it take to implement SDGs? @OECDObserver has some ideas: http:// goo.gl/DVyZDh . #SDGs #UNGA #GlobalGoals

add fracking to this thinking? The activity is

Copito @copito61 @OECDObserver @OECD @FAOnews @OECDagriculture Maybe now, but at some point the global food production cartel will

new, but rushing to issue licences for it only

decide enough is enough.

must favour dynamism” in No 304 November 2015, http://oe.cd/1gx). I presume you would

binds us more tightly to old fossil fuels.

E Maria, NYC, US

Robert Went @went1955 Great! Who would have thought the @oecd

—

will launch a Centre for Opportunity &

I agree that effective policies will unleash

Equality ten or even five years ago?!

transformational capacities. Just wonder if

Tim Nelson @tanelsonaus

we’ve really escaped the historical delusion

Great session on climate disclosure by

of always underestimating the scale of the

@OECD at #COP21–investors need predictable

problem and overestimating our response?

and stable policy.

James Greyson, commenting on oecdinsights.org, “COP21 agreement: A decisive turning point”, December 2015

Julianne Hickey @JulesHickey

Over growth?

are vulnerable people and communities

“Sluggish growth, widening inequality,

@ClimateBonds @OECD @Bloomberg represented at that table? #pacificvoices

environmental precariousness, and market

isabelle finger @isafinger

volatility–is a sobering reminder of the

Whether or not use technology in the

myriad challenges facing policymakers”,

classroom is not the right question. The real

yes, definitely! And yes, of course, it is the

question is HOW to use it? #OECD http://

OECD’s role to “help design policy packages

bit.ly/1LJnAtw

to improve performance” by promoting “new

OECD Observer No 305 Q1 2016

3

News brief Future pension pressures Future generations are likely to find their pensions much less generous than today, according to a new OECD report. This is despite the fact that recent reforms in many countries have made pension systems more financially sustainable.

About half of OECD countries have taken measures to make their systems more affordable and flexible in the long term, while a third have made efforts to

strengthen safety nets and help the most vulnerable pensioners. Population ageing and changing labour market trends, such as the rise in temporary and often precarious jobs, both play a role.

Retirement ages have already increased steadily since the early 2000s, with retirement at 67 becoming the new 65 in many countries, and with several countries planning to delay retirement to as old as 70.

Soundbites Revolution not for all?

The heady progress of robotics, digital technology and biology opens the way for our first Renaissance in half a millennium.

But the knowledge-based 4th Industrial Revolution will produce many have-nots.

Jean-Pierre Robin, Le Figaro newspaper, 2 February 2016 (our translation from French)

See www.oecd.org/pensions

Forecast warnings From the economic viewpoint, what matters is not so much whether the world will be managed: it will not be. What matters more is whether a disaster will be avoided.

Teachers’ salaries too low?

Uncompetitive salaries will make it harder to attract the best candidates to the teaching profession, especially as the teaching workforce is ageing, with 35% of secondary school teachers at least 50

Households shoulder tax burden Corporate tax revenues have been falling across OECD countries since the economic crisis, putting greater pressure on individual taxpayers, OECD research finds. While average revenues from corporate incomes and gains declined from 3.6% of GDP to 2.8% between 2007 and 2014, revenues from individual income tax edged up from 8.8% to 8.9%, and value added tax (VAT) revenues grew from 6.5% to 6.8% over the same period.

“This underlines the urgency of efforts to ensure that corporations pay their fair share”, said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration.

Visit www.oecd.org/tax

4

Martin Wolf, Financial Times, 6 January 2016 ©Beawiharta Beawiharta / Reuters

Governments face many difficulties in financing education, the latest Education at a Glance finds. Between 2010 and 2012, even though GDP began to rise again in most OECD countries, public spending on primary to tertiary educational institutions fell in more than one in three OECD countries. Amid budget cuts, most governments have chosen to reduce primary and secondary teacher salaries rather than increase class sizes.

years old in 2013. High-performing countries in the PISA programme, such as Finland, Japan and Korea, tend to prioritise teaching and teachers over infrastructure and class sizes, though.

The rich world must take greater responsibility for climate change.

Narendra Modi, Prime Minister of India, Financial Times, 29 November 2015

Oh-la-la!

C’est impossible! French set to be the world’s most commonly spoken language by 2050 because of soaring population growth in sub-Saharan Africa Isabel Hunter, headline, www.dailymail.co.uk, 19 December 2015

See www.oecd.org/education

Economy The hesitant recovery expected in the latest OECD Economic Outlook (see page 18) is confirmed in the latest OECD composite leading indicators. These anticipate trends and turning points in upcoming trends, based on the likes of order books, building permits and long-term interest rates. The leading indicators point to stable growth momentum, particularly for Canada, Germany, Italy and Japan, but to a loss of steam in the UK and the US. Real GDP growth in the OECD area slowed slightly to 0.5% in the third quarter of 2015, down from 0.6% in the previous quarter. Private consumption was the main contributor, with 0.4 percentage points, followed by investment. Growth rebounded to 0.6% in Canada, following

-0.1% in the previous quarter, while contracting to 0.5% in the US, following 1% in the previous quarter.

OECD-area inflation picked up to 0.9% in the year to December 2015, compared with 0.7% in November. Excluding food and energy, the OECD annual inflation rate rose slightly to 1.9% in December.

The OECD area unemployment rate was stable at 6.6% in October 2015, 1.5 percentage points below the January 2013 peak. Some 40.4 million people were out of work, 8.5 million less than in January 2013, but still 5.9 million more than in July 2008, before the crisis. The unemployment rate fell by 0.1 percentage point in the euro area to 10.5%, while increasing in Japan by 0.2 percentage points to 3.3% and remaining stable at 5% in the US.

NEWS BRIEF

The OECD’s Better Policies report on Latin America urges countries to tackle the twin challenges of inequality and low productivity to raise living standards and to boost innovation: OECD countries have registered some 132 patents per year per million inhabitants since 2010, compared with 0.9 in Latin America. Meanwhile, a new Latin America-China partnership to foster mutual development strategies is encouraged, according to the latest OECD Latin American Economic Outlook. www.latameconomy.org/en/ Finland’s economy has weakened and new reforms will be necessary to restart growth, boost productivity, increase employment and restore competitiveness, according to the latest OECD Economic Survey of Finland. www.oecd.org/finland/ Unequal access to employment support hurts vulnerable laid-off workers in Sweden, according to a new OECD report. www.oecd.org/sweden/ Although Portugal has endeavoured to maintain its foreign aid programme since the economic crisis, its budget has been hit hard. A plan is needed to avoid a further decline and get back on a path towards internationally agreed targets, according to an OECD review. www.oecd.org/portugal Colombia has significantly improved its health system over the past 20 years, leading to a rise in life expectancy and a fall in infant mortality. But to maintain

Growth in unit labour costs in the OECD area slowed marginally to 0.3% in the third quarter of 2015, compared with 0.4% in the previous quarter. In the US and the UK, labour costs grew at a steady 0.5% in the third quarter, while slowing at a rate of 0.1% in the euro area.

As for trade, total (seasonally adjusted) merchandise exports of the G20 continued to contract by 0.9% in the third quarter of 2015, falling for the fifth straight quarter, while merchandise imports declined by 0.8%. In Canada, exports picked up by 0.8% and in China by 1.3%, while imports contracted.

its ambition of universal and highquality care, the country should focus on improving efficiency and strengthening financial sustainability. www.oecd.org/countries/colombia Australia should build on its the mental health reform to strengthen employment outcomes of people with mental health issues, according to a new OECD report. www.oecd.org/australia Switzerland’s recent economic performance has been impressive, but new reforms will be necessary to maintain high levels of prosperity and ensure future well-being, the latest OECD Economic Survey of Switzerland says. www.oecd.org/switzerland The Netherlands should invest in the long-term sustainability of the food and agricultural system, a new OECD report recommends. www.oecd.org/netherlands A long period of economic expansion in Chile has raised living standards and dramatically reduced poverty, but more needs to be done now to ensure that the country is in a position to move to a more inclusive and sustainable growth path, according to the latest OECD Economic Survey of Chile. www.oecd.org/chile Israel signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 24 November, making it the 91st jurisdiction to join the world’s leading instrument for boosting transparency and combating offshore tax evasion. www.oecd.org/israel

Consumer prices December 2015, % change on the same month of the previous year % 2.0 1.0

OECD total

0.9

1.9 0.8

0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 -7.0

-8.6 All items Food Energy All items non-food, non-energy

©Julien Daniel / OECD

Country roundup

Canadian author, filmmaker and social activist Naomi Klein with OECD Secretary-General Angel Gurría during the Coffees of the Secretary-General series on 24 November 2015 in Paris, France.

See http://oe.cd/Vw

Other stories Boosting transparency in international tax matters: 31 countries signed a tax co-operation agreement on 27 January to enable automatic sharing of country-bycountry information. See www.oecd.org/tax Trade agreements: The OECD congratulated the World Trade Organization and its members for their accomplishments at the 10th WTO Ministerial in Nairobi on 15-19 December 2015. “The WTO’s decisions will help keep trade in step with the digital economy, rationalise the treatment of agriculture, and bring developing partners more fully into the global trading system”, OECD Secretary-General Angel Gurría said. www.oecd.org/trade The sluggish global economy has led to excess steel capacity, and action is needed to address the challenge, according to industry and government officials meeting at the OECD’s Steel Committee in Paris on 30 November and 1 December 2015. Read more at www.oecd.org/industry/steel.htm

Plus ça change…

All professions should be ready to accept the diversification of skills and the relevant education as a modern reality; and the teachers should be ready to combine increasing professionalisation with more open recruitment of experienced people from other walks of life.

“Education, work and the quality of life”,

by JR (Ron) Gass, Director, OECD Centre for Educational Research and Innovation in Issue No 67, December 1973.

For latest updates on economic statistics, see www.oecd.org/std/statisticsnewsreleases.htm

OECD Observer No 305 Q1 2016

5

The Chilean public oil company (ENAP) promotes mechanisms that encourage social dialogue. Operating in the strategic energy sector, we need to have healthy DQG PXWXDOO\ EHQHĆ“ FLDO ODERU UHODWLRQV ZLWK HPSOR\HHV and partners.

ECONOMY AND SOCIETY

False beliefs and unhappy endings William White, Chair, OECD Economic and Development Review Committee

The global economy could now be even more vulnerable than it was in 2007

Could central bank policy be making the economy more vulnerable? A fundamental rethink is in order if worse outcomes are to be avoided.

The fundamental problem is that modern macroeconomics is based upon a false belief: namely, that the workings of the economy can be understood and therefore closely controlled, as though a machine in the competent hands of its operator. A philosopher would say that we have made a profound ontological error. We have failed to realise that what one can know about a system depends upon its very nature. And the nature of our economies is simply too complex to be understood, much less controlled.

Consider that the analytical frameworks generally accepted by central banks totally failed to see the crisis coming or, despite concerted and persistent action, the weakness of the subsequent recovery. That alone should have been sufficient to raise some fundamental analytical questions. Moreover, support for scepticism is provided by reviewing the actual practice of monetary policy over the last 50 years. Every aspect of it– including its objectives, instruments and

©André Faber

Central banks in the major advanced economies have been pursuing unusually lax monetary policies for many years.

Moreover, the ways in which they have done this have become increasingly experimental. These expansionary policies bear the risk of ending unhappily.

In large part, this single-minded pursuit has reflected the political reality that monetary policy has become “the only game in town”. Yet in no small measure, it also reflects some long-held but false beliefs about how the economy actually works. Moreover, absent any discipline imposed by an international monetary system, virtually every central bank in the world became engaged in a process of unprecedented monetary easing–the so-called “currency wars”. As a result, the global economy could now be even more vulnerable than it was in 2007.

indicators–has been subject to repeated change. Generally these changes have been in response to previous policies failing to deliver the intended results, or producing unintended and unwarranted side effects. In short, monetary policy has systematically got it wrong. There would then be nothing unwarranted about another fundamental rethink in response to recent events.

One approach with promise is to think of the economy not as a machine, but as “a complex adaptive system” with millions of interactive and adaptive

agents following simple behavioural rules. Such systems characterise car traffic, movements of crowds, the spread of crime and disease, social networks, etc.

These kinds of systems are everywhere in both nature and society, and exhibit recurrent instability and highly nonlinear outcomes. Does it make sense to assume that the economy, with all its flows and myriad interactions, should almost uniquely fail to exhibit these traits?

Clearly not. In fact, complex adaptive systems share key properties that have been well studied by other disciplines

OECD Observer No 305 Q1 2016

7

and could inform economic policy makers. First, they regularly break down, so be prepared. Second, the particular cause is irrelevant, so focus on systemic instability. Third, we lack the knowledge to optimise, so focus on avoiding truly bad outcomes. Fourth, the system is adaptive, so move forward and avoid the temptation of fighting the last war.

In sum, policy makers should be much more humble in their aspirations.

When the crisis struck, the consensus was to continue to pursue monetary stimulus, but in increasingly novel ways.

Yet to date, the rethinking of previous beliefs by central bankers has fallen well short of a needed “paradigm shift”.

We remain very much in a “muddling through” mode, with no real appetite for fundamentally reforming our current fiat money system, domestically or internationally, or for questioning the merits of using “still more easy money” to deal with a solvency rather than an illiquidity problem.

Why is this so? Back in the 1960s, scientist and philosopher Thomas Kuhn pointed out that “paradigm shifts” are hard to achieve even in normal times.

Intellectual capital built up over whole lifetimes is not easily jettisoned. For policy makers it is even more difficult, since raising questions implies the possibility, or even the outright admission, of previous policy errors.

More recently, Daniel Kahneman, a psychologist, has noted that major events, which deliver a shock to current beliefs– effectively non-normal times–typically result in a retreat into those beliefs rather than a fundamental rethinking of them. Given their respective histories, Germany will be forever fearful of government deficits and hyperinflation, while the US will always resist rising unemployment and a deflationary spiral.

In the absence of a paradigm shift about how the economy works and how it should be managed, monetary policy since 2007 has essentially been “more of the same”. It assumes that

8

easy money will eventually stimulate aggregate demand and that any unintended consequences can be ignored.

Unfortunately, both of these propositions are extremely doubtful. Interestingly, John Maynard Keynes expressed strong doubts about the former proposition, while Frederic Hayek, and also Hyman Minsky, expressed strong doubts about the latter.

While recognising the great contribution of central banks to restoring financial stability early in the crisis, there are good reasons for doubting that monetary policy will prove effective in stimulating global aggregate demand over time.

Much of what has been done smells of panic. By increasing uncertainty, policy actions might even have encouraged both households and corporations in the advanced economies to hunker down and spend less. Moreover, what is more certain is that, when monetary policy does work, it does so in large part by encouraging people to bring their spending forward in time. However, inciting people to spend by taking on higher levels of debt simply cannot go on forever. Could we now be approaching payback time?

It is simply a fact that global (nonfinancial) debt levels, relative to GDP, have been rising since the early 1980s and this trend has continued since the onset of the crisis in 2007. Far from being a time of deleveraging, the leveraging has continued. Worse, while the advanced market economies have shown a degree of moderation, the emerging market economies have sharply increased their debt levels. In particular, corporations in emerging markets have borrowed heavily in international bond markets, and largely in US dollars, which continue to rise. Emerging markets may have been part of the solution in 2007, but they are now part of the problem.

Easy monetary policies not only are unlikely to achieve their desired objectives, but their unintended consequences are becoming increasingly evident, too. There are sharp declines in

productivity growth almost everywhere, along with a slowdown in the formation of new businesses. It is not implausible that easy money has encouraged the “ever-greening” of zombie companies by

What we do know is that the health of many financial institutions is now under threat “zombie banks”. Moreover, the prices of almost all assets, whether financial or in property, have been bid up in many countries to levels that heighten the prospect of severe future losses. Who will suffer and what might be the systemic implications? We simply do not know.

Monetary policy has led us into truly unchartered territory.

What we do know is that the health of many financial institutions is now under threat. Bank profits, needed for capital accumulation, are being reduced by low credit and term spreads. Pension funds and insurance companies are threatened even more. Everywhere, there is the temptation to “gamble for resurrection”, again with unknown consequences.

The great American journalist HL Mencken once said, “there is always a solution to every human problem–neat, plausible and wrong”. We need to ask ourselves whether easy money is really the solution to the problem of ensuring the “strong, sustained and balanced growth” that we all desire. Or is this simply a false belief that threatens an unhappy ending? If so, it desperately needs to be rethought.

References Keynes, John Maynard (1936), The General Theory of Employment, Interest and Money, Macmillan, London White, William (2013), “Return from the dead?” in OECD Yearbook 2013, OECD Publishing, http://oe.cd/1dR White, William (2012), “Ultra easy monetary policy and the law of unintended consequences”, Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute Working Paper, No 126 White, William (2010), “Is financial stability enough?” in OECD Observer No 276-277, January, OECD Publishing, http://oe.cd/1dQ

ECONOMY AND SOCIETY

What future for work?

Stefano Scarpetta, Director, OECD Directorate for Employment, Labour and Social Affairs

enhance their employability via welldesigned training programmes.

Ageing will be just one of many factors underlying demographic change among countries and regions in the years ahead.

These changes will lead to further demographic imbalances across regions of the world, fostering labour mobility.

This, in turn, will create challenges and opportunities for sustaining and balancing economic growth and social cohesion through the effective integration of migrants, and the collaboration between sending and receiving countries.

Already, globalisation 2.0–our second factor–has increased the fragmentation of production processes as intermediate stages are performed by different suppliers and link many jobs across borders through so-called global value chains. It has had an effect not only on the types of jobs (the occupational structure), but also the type of tasks that constitute each job. A recent study by Sascha Becker and Marc-Andreas Muendler found that as a result of globalisation, the average German job expanded from entailing fewer than two tasks in 1979 to more than seven in 2006.

For all the signs of improving labour market conditions in many OECD countries, there is still a substantial way to go to close the jobs gap caused by the Great Recession of 2008-09.

Unemployment will continue to fall in most countries, but by the end of 2017, it will still be well above pre-crisis levels in a number of them.

While dealing with persistent joblessness, policy makers must confront at least three medium and long-term structural forces that are shaping the world of work more than ever: demographic change, globalisation and technology, especially the digital revolution.

Population ageing is gaining momentum in many OECD as well as emerging economies, raising concerns about the affordability of pension and health care systems as well as the prospect for economic growth and the risk of a secular stagnation. By 2050 one adult in three will be over 65 in the OECD, and in Japan, Korea and Spain, which are the most aged countries, the ratio will be nearly one adult in two. In China, the population is now ageing at a very rapid pace.

These changes will make it essential to promote active ageing, by strengthening incentives for older workers to stay longer in the labour market, while encouraging employers to hire and retain them and

The third main factor shaking the world of work is digitisation. Unprecedented and continuously growing computer power, Big Data, the penetration of the internet, artificial intelligence, the internet of things, and collaborative platforms, among other developments, are radically changing the prospects of what work is needed and by whom, and where and how it will be carried out.

Since the industrial revolution, major innovations, such as the steam engine, electricity and the assembly line, have led to the decline of some sectors, with large job losses, but to more productive and (often) rewarding jobs in expanding sectors, with substantial improvements in living standards.

Could it be different this time? Could “the second machine age” (or indeed, fourth industrial revolution) end up displacing not only less-productive jobs, but employment more broadly? Could the

OECD Observer No 305 Q1 2016

9

world of work be transformed?

According to some experts, such as Andrew McAfee and Erik Brynjolfsson, technological progress in the digital era evolves along a gradual but exponential trajectory with a strengthening tendency to replace human capital even in skilled tasks once considered to be beyond automation. The spectre of technological unemployment first highlighted by John Maynard Keynes in his 1931 essay, “Economic possibilities for our grandchildren”, has re-emerged with force. The evidence on this is mixed,

Could “the second machine age” end up displacing employment more broadly? however. Some argue that a large fraction of jobs in OECD countries are at risk of being substituted by computers and machines, but others argue that occupations will adapt to make better use of existing technology. Moreover, new complementary jobs will arise.

Indeed, Enrico Moretti suggests that for each job created by the high-tech industry, around five additional, complementary jobs could be created.

One thing is more certain: significant changes in occupational structure.

Already in the past two decades, job types have undergone a process of skill or routine-biased technical change. This brought a polarisation of labour demand between high-skilled non-routine jobs, such as those involving interpersonal skills or creativity, and low-skilled non-routine jobs, such as food services and security. Routine jobs (many of which are middle-skilled) are sought less as they are the ones most easily automated.

Digitisation will continue to change how existing jobs are carried out. Information technology tools are already required in all but two occupations in the United States: catering dishwashers and food cooking machine operators and tenders (though robot chefs might soon be in a kitchen near you). Similarly, in most OECD countries, workers in over 95% of large businesses and those in over 85% of

10

medium-sized businesses have access to and use the internet as part of their jobs, and workers in at least 65% of small businesses connect to the internet for work.

The digital revolution will continue to alter how work is performed. The internet has enabled more businesses to hire in competitive suppliers around the global supply chain, and workers to enjoy the flexibility and benefits of teleworking and freelancing, not least to top up their incomes. This has led to the flourishing of the “gig”, “on-demand”, “sharing”, “peer-to-peer” or “platform” economy, such as Airbnb, Uber, TaskRabbit and so on. Though still small in scale, the platform economy raises probing questions about wages, labour rights and access to social protection for workers, as well as employers and consumers. It is early to say, but nonstandard jobs appear to have risen during the recent recovery, often substituting for more traditional jobs in declining sectors. Some of these jobs may allow for greater flexibility for the workers but they often lack full coverage of social protection, have lower access to training opportunities and provide weaker career progression than those in more traditional, open-ended jobs. Moreover, the fact that under the platform economy workers are more likely to hold jobs and multiple income sources challenges the role of statutory working hours, minimum wages, unemployment insurance and other pillars of our traditional labour market institutions and policies.

Against this backdrop there are also pressures to facilitate greater labour mobility and promote incentives for workers and employers to take advantage of the new job opportunities that open up, wherever they may be. With today’s fiscal constraints, effective and welltargeted labour market programmes are needed more than ever. Comprehensive skills strategies are required, focusing not only on building adequate skills, but promoting skills adaptation to allow workers to evolve with new requirements.

Tax and benefits schemes must also evolve to protect those who lose out from

change, while social protection schemes need to reflect new work arrangements, such as consulting, freelance and other contracts that no longer fit into traditional employee-firm relationships.

In January 2016 the OECD hosts a Ministerial Meeting of Labour and Employment Ministers, preceded by a Policy Forum on the Future of Work (http://oe.cd/future-of-work). The OECD expects a strong mandate from ministers to develop a new and extended OECD Jobs Strategy in which such factors as ageing, globalisation and migration, digitisation, and new work practices will be key.

The new Jobs Strategy will not only draw the lessons from the recent crisis, but also look forward at how policy and institutions should evolve to allow workers to grasp the opportunities of the structural changes ahead, while receiving needed protection and support.

It will be an important chance for all stakeholders to forge a renewed social dialogue and ensure that, as with previous employment revolutions, the era now unfolding also yields more and better jobs.

References Autor, David H. (2015), “Why are there still so many jobs? The history and future of workplace automation”, Journal of Economic Perspectives, Vol. 29/3, pp. 7-30.

McAfee, Andrew and Erik Brynjolfsson (2014), The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies, W.W. Norton & Company, New York.

Moretti, Enrico (2010), “Local multipliers”, American Economic Review: Papers and Proceedings, No. 100, pp. 1-7.

OECD (2015), Employment Outlook 2015, OECD Publishing.

OECD (2015), Data-Driven Innovation: Big Data for Growth and Well-Being, OECD Publishing.

OECD (2014), Employment Outlook 2014, OECD Publishing.

OECD (2014), Measuring the Digital Economy: A New Perspective, OECD Publishing.

OECD (2013), OECD Skills Outlook 2013: First Results from the Survey of Adult Skills, OECD Publishing.

ECONOMY AND SOCIETY

It’s a gig, but is it a job? drivers contend they are effectively employees of Uber, and so entitled to be reimbursed for expenses, including the cost of buying petrol and maintaining their cars. Uber argues that they are independent contractors, which means it is not required to cover payroll taxes, health insurance and the cost of maintaining cars.

As The New York Times pointed out, the outcome of the case “could strike at the heart of the ride-hailing company’s business model.”

That’s not the only uncertainty hanging over the gig economy.

Despite all the hype there doesn’t currently seem to be a lot of evidence in US jobs data of a big upsurge in self-employment.

The same is true, too, of the UK, according to Ian Brinkley of The Work Foundation. But, as he also points, the emergence of the gig economy may still be “too recent a development to show up in the aggregate figures”.

©serprix.com

Indeed, given the rapid growth of services like Uber so far, it’s hard not to feel that we are witnessing genuine shift in the economy.

That may well continue, if for no other reason than demographics.

By many accounts, the so-called Millennial generation–the oldest of whom are now approaching their mid-30s–are particularly keen on gig working. According to research in the US, almost half of millennials “will choose workplace flexibility over pay”. Of course, a few years down the road, when they’re trying to feed children and pay school fees, Millennials’ taste for job security may well increase.

Time was when the only people who had gigs were long-haired types who stayed in bed till noon and played in bars till dawn.

These days, it seems, everyone’s hopping from one gig to another–drivers, software designers, cleaners. Bye-bye full-time work, hello freedom and flexibility. Well, maybe…

The “gig economy” has emerged as potentially one of the major shifts in the new world of work. It’s certainly one of the most eye-catching. Unlike other trends in this brave new world, the gig economy seems to represent a significant shift in what it means to be a worker. Depending on where you stand, it will either liberate millions of people to become mini-entrepreneurs free from the 9-to-5 grind or imprison them in a world of low-wage self-servitude and insecurity.

If you’re confused by what defines the gig economy, you’re not alone. The term is used to refer to everything from old-style temping to the sharing economy–think amateur-hotelier sites like Airbnb or car-rental sites like RelayRides. But it seems mostly to describe various forms of self-employment and independent contracting facilitated by online platforms like TaskRabbit and Uber. Indeed, in France, uberisation has become shorthand for the gig economy.

This ambiguity is not a trivial matter. Uncertainties over the gig economy, and what it means to be a gig worker, have sparked reviews and court cases in a number of countries. In the US, for example, a judge in California recently gave the green light to a group of Uber drivers to sue to establish their legal status. The

Indeed, for individual workers, that tension between the freedom of freelancing and the security of the 9-to-5 may become a core issue.

“There’s certainly something empowering about being your own boss,” Arun Sundararajan of the NYU Stern School of Business wrote in The Guardian. “[…] But there’s also something empowering about a steady pay cheque, fixed work hours and companyprovided benefits.”

There will be dilemmas, too, for government policy, both in terms of wider regulation of the gig economy and unleashing what some argue is its potential to create jobs. According to consultants McKinsey, it could contribute US$2.7 trillion, or 2%, to the global economy over the next 20 years and add the equivalent of 72 million full-time equivalent jobs.

But will they be good jobs? That question is relevant not just to the gig economy but to other trends in the world of work, such as temporary and short-term employment, both of which are on the rise. As we’ll discuss in the next post, some fear that the benefits of these shifts may be outweighed by the loss to workers of both income and job security. Brian Keeley Adapted from an article which originally appeared on www.oecdinsights. org on 5 October 2015.Visit www.ft.com/indepth/new-world-of-work and www.oecd.org/employment Brinkley, Ian (2015), “Hard evidence: how as the sharing economy changed job security”, The Conversation, August Dobbs, Richard, Susan Lund, James Manyika, Kelsey Robinson and John Valentino (2015), “Connecting talent with opportunity in the digital age”, McKinsey Global Institute, June Keeley, Brian (2015), “Say goodbye to the 9-to-5”, OECD Insights, October, http://oe. cd/1e5 Sundararajan, Arun (2015), “The “gig economy” is coming. What will it mean for work?”, The Guardian, July

OECD Observer No 305 Q1 2016

11

An intern’s world?

Caroline Fouvet* Shouldn’t we be delighted that some young interns fare so well in a particularly demanding job market? As Dan Zhang argues, these internships provide talented people with an opportunity to apply their academic knowledge directly within a professional setting.

Ben Lyons, who is co-director of Intern Aware (www.internaware. org), a UK-based campaign in favour of paid internships, also believes that compensation enables tech firms to attract people based on merit, while helping firms reduce costs and gain flexibility.

Is that what internships are really for? And is that not what the real job market is for? Should interns expect a large salary or just fair compensation to help them complete their education? And

The defining lines between an interns’ status and that of a worker risk becoming blurred

©Charlotte Moreau

what about the armies of interns who also perform real jobs but whose monthly pay is by no means comparable to the four-digit sums high tech interns receive? And what about the many real employees who are likely paid less than interns?

In 2015 the story of an unpaid intern working for an international organisation in Geneva who slept in a tent because he could not afford the rent made the headlines and sparked discussion on social media. Nowadays, internships–also known as job placements and stages–are almost an obligatory step on the way to finding a decent job, and are a requirement in some higher education courses. It is also a well-known fact that most interns are ready to undergo some financial hardship as a price for gaining good professional experience and adding value to their curriculum vitae in what has become a highly competitive global labour market. This is just as well, for although some job placements offer small stipends to keep the wolf from the door, too many internships offer no money at all. In France, for instance, internships of two to six months pay just over €550 per month, but under two months no pay is required.

Given this characterisation, it may come as a surprise to read a ranking recently released by Glassdoor, a job hunting website, which shows that in some sectors, such as finance and high tech, being an intern can pay as much if not more than regular jobs. In France, for instance, the Boston Consulting Group, ranked first among the companies that pay their interns the most, offered €2 200 a month, followed by Google with €2 000.

In the US, more dazzling sums are paid, especially in the tech industry. Dan Zhang, a sixth-year computer engineering doctoral student at the University of Texas in Austin collected data from coding interns at 100 tech and non tech firms, which show interns earning between US$6-8 500 a month in tech firms such Dropbox, Facebook and Microsoft. The data included the base salary and add-ons, such as benefits for housing, travel, and food.

And so, you might say? It sure beats living in a tent in Geneva.

12

This paradox shows that, although the number of internship positions is soaring, the defining lines between an interns’ status and that of a worker risk becoming blurred, to the detriment of the status of work itself, and of education too. It appears that the growing importance of internships as a means to stand out in a tremendously competitive job market is fostering new inequalities and creating distortions regarding people’s status and skills.

Surely, an internship should remain a training experience, designed to contribute to a student’s education by enhancing their professional skills, while increasing the odds of their obtaining a proper job upon completion. An intern and a full-time employee constitute a complementary force in a company to which they should contribute, but at different levels.

The impressive salaries earned by some interns should not overshadow the tough situation many unpaid interns find themselves in as they struggle to make ends meet in expensive cities like Geneva, London and Paris. A clearer legislation or agreed framework at the international level would be valuable to help define the interns’ status, work and entitlements, and to improve their situation. This also demands commitment, vigilance and oversight by governments and higher educational establishments, and more awareness among interns about their rights.

Internships offer a wonderful opportunity for students and firms alike to learn and progress, and to prepare for the future of work.

Underpaying or overpaying interns simply muddies this vision. *Caroline Fouvet was an OECD intern in 2015.

For more on French internship rates, see https://www.service-public.fr/ professionnelsentreprises/vosdroits/F32131 Lyons, Ben (2015), “Interns are workers, too”, in OECD Yearbook 2013, http://oe.cd/1gn Smith, Jack (2014), “The master list of tech internship salaries revealed” in Observer.com, February Weissmann, Jordan (2014), “An even longer list of tech internship salaries that will make your eyes water”, in Slate.com, December

ECONOMY AND SOCIETY

BlogServer Supporting women’s land rights: A debate on the Gender Evaluation Criteria (GEC) Lowie Rosales-Kawasaki

The Gender Evaluation Criteria is an important tool to assess the effectiveness of land tools in supporting women’s land rights and we look forward to learning about the best practices and lessons learned in using it throughout this discussion.

At the OECD Development Centre, our Social Institutions and Gender Index (SIGI) measures the social norms that discriminate against women.

More here: http://bit.ly/1PFlx7K

Are you in the 1%?

Oliver Denk

The productivity and equality nexus: Is there a benefit in addressing them together?

Gabriela Ramos

Productivity growth has slowed since the crisis and inequality has been getting worse. Could they be influencing each other? In the spirit of our integrated framework on inclusive growth and our New Approaches to Economic Challenges (NAEC) initiative, we believe that our efforts to address productivity and inequality could have a better chance of succeeding if we looked at the synergies and trade-offs emerging from policies to address them.

More here: http://oe.cd/1fx

Bringing help and hope to war victims: When Shennong meets Avicenna in Iraqi Kurdistan Anne-Lise Prigent

The UNHCR estimates that there are 2.5 million refugees and internally displaced persons in Iraqi Kurdistan. Many of them are Yazidis and Christians who have lost everything fleeing Daesh; others are Muslim. They are living in waste dumps, empty buildings, improvised camps…where sanitary conditions are catastrophic. Faced with this situation, Shennong & Avicenne felt they had to be next to the scattered populations who need their help. They raised funds to buy a truck in France to use as a mobile dispensary and a bus for women and children’s healthcare.

The 1% are back in the news following last week’s Oxfam report claiming that the world’s 62 richest billionaires own as much wealth as the poorest 3.6 billion people on the planet combined.

But what about labour income rather than wealth: who are the 1% when earnings are counted, and not shares, property, and so on?

More here: http://oe.cd/1percent

Backpacks and belonging: What school can mean to immigrant students Marilyn Achiron

How school systems respond to immigration has an enormous impact on the economic and social well-being of all members of the communities they serve, whether they have an immigrant background or not. Immigrant Students at School: Easing the Journey towards Integration reveals some of the difficulties immigrant students encounter–and some of the contributions they offer–as they settle into their new communities and new schools.

More here: http://bit.ly/1QTsHu8

How OECD and IEA contributed to COP21 Noe van Hulst

With the world welcoming the new comprehensive global climate agreement at COP21 aiming to limit the global average temperature rise to well below 2°C, it is worth noting the significant contribution that the OECD family has made.

More here: http://oe.cd/COPIEA

More here: http://oe.cd/1fy

A Californian enigma: Record-high agricultural revenues during the most severe drought in history

From Analysis to Action: Multidimensional Country Reviews

Guillaume Gruère

Mario Pezzini and Jan Rieländer

Drought in California has been in the headlines frequently these last three years, with startling pictures of empty reservoirs, rivers and canals, wildfires, disappearing snowpack and dry earth. The ongoing drought in the state is believed to be the most severe in the last 500 years.

Multidimensional Country Reviews (MDCRs) support developing countries in designing development strategies that aim for high impact. Many see the MDCR as a tool to implement the Sustainable Development Goals. The OECD’s 2012 Strategy on Development put forward the MDCR as a response to a twofold challenge.

More here: http://oe.cd/1fA

More here: http://oe.cd/CAdrought These extracts from blogs are courtesy of OECD Insights, OECD Education & Skills Today, Wikigender, Wikiprogress and other content and social media platforms managed by the OECD.

OECD Observer No 305 Q1 2016

13

Understanding the battle against extremism Andreas Schleicher, Director, OECD Directorate for Education and Skills

©Denis Prezat/CITIZENSIDE/AFP

But is that enough to fight radicalism and terrorism? Again, having good academic and social skills doesn’t seem to prevent people from using those skills to destroy, rather than advance, their

Young people become receptive to extremist ideas when their self-image, self-confidence and interpersonal trust are threatened A student on a demonstration in Paris holds up a sign saying “We’re all children of immigrants” Whoever has a hammer sees every problem as a nail. Those in the security business tend to see the answer to radicalism and terrorism in military might, and those in the financial business in cutting flows of money. So it is only natural for educators to view the struggle against radicalism and terrorism as a battle for hearts and minds. But the recent terrorist attacks in Europe have brought home that it is far too simplistic to depict extremists and terrorists as victims of poverty or poor qualifications.

More research on the background and biographies of extremists and terrorists is badly needed, but it is clear that these people often do not come from the most impoverished parts of societies. Radicals are also found among young people from middle-class families who have ticked all the boxes when it comes to formal education. And ironically, those terrorists seem to be well equipped with the entrepreneurial, creative, global and collaborative social skills that we often promote as the goal of modern education.

14

Norwegian students, for instance, where nine out of ten 15-year-old students with an immigrant background say they feel they belong at school, but fewer than four out of ten French migrant students say so.

The well-being of immigrant students is affected not just by cultural differences between the country of origin and the host country, but also by how schools and communities help immigrant students deal with the daily problems of living, learning and communicating.

But that’s no reason to give up on education as the most powerful tool for building a fairer and more humane and inclusive world. We know that individual trajectories towards extremism flourish in environments that lack social inclusion, well-being and social cohesion. Young people become receptive to extremist ideas when their self-image, selfconfidence and interpersonal trust are threatened by fragmented identities and conflicting world views. There is also a clear linkage between countries’ relative success in integrating and educating migrant children and the prevalence of extremism.

Our recent publication, Immigrant Students at School, suggests that, certainly in that area, public policy can make a major difference. It highlights how some countries do so much better than others not just in equipping disadvantaged and migrant children with strong academic skills, but also at fostering social integration among these groups. Look at

societies. It comes down to the heart of education: teaching the values that can give students a reliable compass and the tools to navigate with confidence through an increasingly complex, volatile and uncertain world.

Of course, that is difficult territory. To make one’s way through it, one has to strike a balance between strengthening common values in societies, such as respect and tolerance, that cannot be compromised, and appreciating the diversity of our societies and the plurality of values that diversity engenders.

Leaning too far in either direction is risky: enforcing an artificial uniformity of values is detrimental to people’s capacity to acknowledge different perspectives; and overemphasising diversity can lead to cultural relativism that questions the legitimacy of any core values.

Several ministers and commentators I have spoken with commend PISA for its efforts to build metrics to measure “global competency”, a set of skills that enables people to see the world through

ECONOMY AND SOCIETY

Productivity conundrum different eyes and appreciate different ideas, perspectives and values. Indeed, one of the most powerful responses to extremism and radicalisation seems the ability to read and understand diversity, while recognising that the core liberal values of our societies, such as tolerance, are the foundations on which this capacity rests.

Productivity problem % difference in productivity levels 2007-2013, selected countries* Canada

Mexico

2.4

Netherlands

This is where education comes in as well.

Universities and international schools– and the online learning programmes many of them now offer–are perfect venues in which these ideas and values can be shared and debated. It is therefore important to support and strengthen international education in its role as a global exchange of ideas.

The 5 million international students who cross borders–and oceans–to get the best possible education are also champions of intercultural dialogue and global understanding. There could even be many more of them if we invest in education sufficiently to be able to offer attractive opportunities for bright people in countries where the ideological battles for young people’s minds are increasingly fierce and the stakes alarmingly high.

Adapted from a post, which originally appeared on http:// oecdeducationtoday.blogspot.fr on 22 January 2016.

OECD (2015), Immigrant Students at School: Easing the Journey towards Integration, OECD Reviews of Migrant Education, OECD Publishing Visit www.theewf.org/ and www.oecd.org/pisa/

US

Labour Productivity

-1.8

-5.2

OECD

UK

5.6

0.8 -12.1

3.7

-1.7

Poland

But there is more to this. Since the end of the Second World War, liberal democracies have engaged confidently in the global battlefield of ideas. But in the 21st century, it seems that ideological hegemony will result from genuine and open dialogue for the common good.

Liberal and democratic ideas and values will have to prove their worth against competing world views.

2.7

-5.6

Japan

19.5

1.1

Multi-factor Productivty

-3

-8.7 1.9

7.5

-15 -10 -5 0 5 10 15 *See source for fuller list of countries Source: OECD (2015), The Future of Productivity, OECD Publishing

Since the economic crisis, productivity growth in OECD countries has continued to slow. Labour productivity rose by 3.7% in OECD countries from 2007 to 2013, and even fell in some countries, such as the Netherlands and the UK (see graph).

A Bank of France study reported in this magazine in 2014 showed an “impressive slowdown” in developed countries’ productivity growth since the start of the 2000s, and illustrates the ebbs and flows of US, euro area, Japanese, and UK productivity from 1890 to 2012.

Boosting productivity is not so much about working harder as working smarter, OECD experts underline; it reflects our ability to produce more output by better combining inputs, based on new ideas, technological breakthroughs and business models.

Innovations from the steam engine to digitisation have led to radical shifts in the production of goods and services, raising living standards and well-being.

But all this also makes the exact causes of the slowdown all the more perplexing, given the surge of new technologies since the 1990s. Indeed, according to The Future of Productivity, multi-factor productivity (MFP), which reflects combinations of labour, skills, technology and business approaches, actually dropped by 1.7% in the OECD area in 2007-2013, mostly in Europe.

What has caused this weak trend in productivity growth, how temporary is it and how can policy reverse it? These are key questions which the OECD is looking at, not least because productivity is seen as a driver of growth, innovation and well-being.

20

For The Future of Productivity, one explanation has been a slowdown in diffusion of global frontier innovations from the innovating core to all other firms. Policy reforms can help revive this “diffusion machine”, and the report lists a few, such as enabling businesses to experiment, improving skills and removing measures that favour lessinnovative incumbents.

Are there other causes? Take inclusiveness: could the lack of diffusion of innovation and inequality be connected? Could there be influences between widening income inequality and slower productivity growth, and if so, how could this relationship inform policies? And what about sustainability? What is the interplay, if any, between policies to boost productivity and environmental constraints–what Vermont’s Prof Joshua Farley calls the planetary boundaries of the Anthropocene? Such questions, which capture the mind-set of the OECD’s New Approaches to Economic Challenges (NAEC) initiative, could hold lessons for the future of productivity.

Farley, Joshua (2015), “Planetary limits, social needs and economics for the Anthropocene” in OECD Observer No 304, November OECD (2015), The Future of Productivity, OECD Publishing, http://dx.doi.org/10.1787/978926424 8533-en OECD (2015), “The Future of Productivity”, Policy Note, July, see http://oe.cd/futureofproductivity OECD Observer (2014), “Productivity’s wave goodbye”, No 300, Q3, http://oe.cd/wavegoodbye Ramos, Gabriela (2016), “The productivity and equality nexus: is there a benefit in addressing them together?”, on www.OECDInsights.org

OECD Observer No 305 Q1 2016

15

How do you measure

a Better Life?

For nearly a decade, the OECD has been working to identify societal progress – ways that move us beyond GDP to examine the issues that impact people’s lives. The OECD’s Better Life Index is an interactive tool that invites the public to share their thoughts on what factors contribute to a better life and to compare well-being across different countries on a range of topics such as clean air, education, income and health.

Over five million visitors from around the world have used the Better Life Index and more than 90 000 people have created and shared their personal Better Life Index with the OECD. This feedback has allowed us to identify life satisfaction, education and health as top well-being priorities. What is most important to you?

Create and share your Better Life Index with us at: www.oecdbetterlifeindex.org

The OECD Better Life Index enables you to rate countries according to the importance you give 11 topics. Each petal of the flower represents one topic and the size of the petal the country’s rating for that topic.

Find out more about how life compares in OECD countries by ordering the book How’s Life? Measuring Well-Being. Available now on the OECD Online Bookshop: http://www.oecd.org/bookshop

OUTLOOK

Country snapshots 2016-17 Extracts from OECD Economic Outlook No 98, November 2015 The country snapshots in the following pages are extracted from OECD Economic Outlook No 98, November 2015.

The next edition, No 99, is expected to be issued during OECD Week 31 May-2 June. For details and updates, including from the Interim Economic Outlook due in February, visit www.oecd.org/oecdeconomicoutlook Presenting the OECD’s twice-yearly view of the major economic trends and prospects for the next two years, the OECD Economic Outlook puts forward a consistent set of projections for output, employment, government spending, prices and current balances for over 40 countries.

Economic growth is projected to recover to 3% in 2017. Ongoing decline in resourcesector investment will be offset by strengthening consumption, non-resource sector investment and exports. Consumer Economic upswing price inflation will increase gradually as the economic upswing gathers momentum and the labour market starts tightening.

With prudential measures reducing downside risks from the housing boom, further monetary policy easing should be implemented in the event of a deepening downturn. The planned pace of fiscal consolidation is broadly appropriate but there is room for support if cyclical conditions deteriorate.

Boosting productivity requires improved framework conditions, in particular through a further shift towards indirect taxes, and reforms that enhance inclusiveness, such as improved childcare provisions for working families.

Climate change could increase the extent and frequency of Australia’s droughts.

Australia

GDP growth 2012

2015

Current prices AUD billion

Each issue includes a general assessment, chapters summarising key developments, projections for individual countries, an extensive statistical annex of key economic data, charts, tables and more.

Issue No 98 includes a special chapter called “Cool Policy: Climate change mitigation supporting growth”. The OECD Economic Outlook is available on i-Library at: http://www.oecd-ilibrary.org/economics/oecd-economicoutlook_16097408

The OECD Economic Outlook

Current prices EUR billion

www.oecd.org/bookshop

2.2

2.6

3.0

Austria

GDP growth

ISBN 978-92-64-22030-0

2017

A gradual recovery is under way and economic growth is projected to reach 1.7% by 2017. The recovery will be driven mainly by historically low interest rates, lower oil prices, a pickup in foreign demand and a weaker Gradual recovery euro. Consumer confidence remains weak but the income tax reform, to enter into force in 2016, will boost private consumption.

Close supervision of banks, in particular those active abroad, is essential to revive confidence. Reform backlogs in services hinder competition and reduce other sectors’ prospects of benefiting from cost-efficient intermediate inputs and the diffusion of new technologies. Growth could be further strengthened and made more inclusive by removing remaining impediments that restrict the scope of the elderly, in particular women, to participate in work.

Greenhouse gas emissions have declined since 2005.

Power of prognosis For forward-thinking decision makers

18

1 502.2

2016 % real change

2012 317.0

2015

2016

2017

% real change

0.8

1.3

1.7

Economic growth is projected to strengthen slowly. A pickup in private investment will be underpinned by favourable financial conditions and export growth is expected to benefit from stronger growth in Europe. However, household Slow pickup consumption will be held back by ongoing fiscal consolidation and wage restraining measures.

Nonetheless, activity should be sufficiently strong to allow a slow decline in unemployment. Inflation is set to tick up as the effects of lower energy prices dissipate.

The government’s fiscal consolidation plan is addressing one of the highest public debt-to-GDP ratios in the European Union, while making the tax burden less growth distortive. If the higher tax burden on consumption and capital were to be undermined by base erosion, the government would need to take corrective measures. The temporary wage restraining measures and tax shift from labour to consumption will promote employment and competitiveness, but need to be accompanied with further reforms of the wage formation process to link wages to domestic productivity. In addition, training measures aimed at vulnerable groups, notably immigrants, could make growth more inclusive.

Belgium has been making progress in reducing greenhouse gas emissions, but housing and transport-related emissions remain high.

Belgium

GDP growth 2012

2015

2016

Current prices EUR billion

387.4

2017

% real change

1.3

1.5

1.6

Economic growth is projected to recover in 2016, and reach 2.3% in 2017. The drag from falling energy investment should fade away by early 2016, while non-energy exports lead the subsequent pickup, with business investment Exports pickup following. As economic slack is taken up through 2016, inflation should increase to above the 2% midpoint of the Bank of Canada’s inflation target range in 2017.

Increases in policy rates are assumed in late 2016 and to be gradual thereafter. Further macro-prudential measures should be taken to contain financial stability risks from high household debt and house prices. Reductions in the general government budget deficit are set to decline, reflecting the incoming federal government’s pledge to run small deficits to finance infrastructure spending.

Reducing barriers to foreign direct investment in telecommunications, broadcasting and airlines, and continued efforts to increase the quantity and productivity of R&D would raise long-term growth prospects. To make growth more inclusive, targeted needs-based financial assistance to disadvantaged groups for tertiary education should be increased, the aid application process made more transparent and public health coverage of essential pharmaceuticals expanded.

Canada is not on track to meet its target of reducing greenhouse gas emissions by 30% relative to the 2005 level by 2030.

Canada

GDP growth 2014

The recession is projected to continue into 2016, due to needed fiscal adjustment, tighter monetary policy to contain inflation and a lack of investor confidence related to political uncertainty. A slow recovery is Lack of investor expected to unfold into 2017 as confidence confidence in macroeconomic policies improves.

Unemployment is set to increase further in 2016. Although inflation expectations have come down, the return of inflation to the central bank’s target is likely to be delayed by the recent sharp depreciation of the currency.

The prospects of a rapid improvement of the fiscal balance have deteriorated, which led to Brazil’s sovereign debt being downgraded below investment grade in 2015. Consequently, rebuilding confidence in macroeconomic policies remains the priority even though the recession makes fiscal tightening very difficult. In the medium term, stronger growth will hinge on the success of structural reforms, including a comprehensive reform of indirect taxes, lowering trade barriers and reducing administrative burdens.

Brazil has made remarkable progress in reducing greenhouse gas emissions.

Brazil

GDP growth 2012

2015

Current prices BRL billion

4 713.1

2016

2017

% real change

-3.1

-1.2

OUTLOOK

ECONOMIC OUTLOOK

2015

2016

Current prices CAD billion

1 974.8

2017

% real change

1.2

2.0

2.3

Economic growth is weak, reflecting low commodity prices, but is projected to pick up gradually over the next two years. Activity is now being sustained by public spending, but will get further impetus from stronger private Weak growth domestic and external demand. Inflation will remain temporarily high as a consequence of the sharp depreciation of the peso, but is projected to decline towards the central bank’s target as the effects of depreciation wear off and unemployment rises.

To contain inflation, the central bank raised its benchmark interest rate by 25 basis points, to 3.25%, in October 2015. However, given the expected decline of inflation and an expected rise in unemployment, monetary policy should remain accommodative, with negative real interest rates, as long as inflation expectations are well-anchored. Gradual budget consolidation is consistent with the fiscal rule and is needed for the public finances to adjust to lower copper prices.

Enhanced efforts are needed to diversify energy sources, as part of a broader effort to reduce greenhouse gas emissions.

Chile

GDP growth 1.8

2012

2015

Current prices CLP billion

129 027.6

2016

2017

% real change

2.2

2.6

3.3

OECD Observer No 305 Q1 2016

19

OUTLOOK Economic growth is projected to decline gradually to 6.2% by 2017. The announced infrastructure stimulus measures will help overall investment, but adjustment in several heavy industries is set to continue and this Gradual decline stimulus is not sustainable in the longer term.

Real estate investment is bottoming out, but working off housing inventories will take some more time.

Consumption is set to remain robust. Food and services prices are rising, but the absence of price pressures in other areas will keep consumer price inflation low.

Monetary and fiscal policies should accommodate the ongoing rebalancing of the economy, which will lead to more sustainable and inclusive growth. Spending should be targeted at areas that promote long-term inclusive growth, such as extending the social safety net, upgrading skills and ensuring equal access to public services. Pension reform should be stepped up to safeguard fiscal sustainability.

Meeting the commitment to increase the share of non-fossil fuels in primary energy consumption to about 20% and to have carbon emissions peak by 2030 will be aided by weakening growth and restructuring of the economy.

China

2015

Current prices CNY trillion

53.4

2016

6.8

6.5

6.2

Colombia

GDP growth 2015

Current prices COP trillion

664.2

20

GDP growth 2012

2016

2017

% real change

2.8

3.0

2015

2016

Current prices CRC trillion

2017

% real change

2.9

3.5

4.1

2017

% real change

Economic growth slowed in 2015 due to the fall in commodity prices, but is projected to gradually recover in 2016 and 2017 with investment and non-oil exports recovering. The sharp devaluation of the peso and the effect of El Niño have pushed inflation above the central Inflation bank’s target range. The peace talks set to above target conclude end-March 2016 will boost confidence and generate investment and jobs. Inequality and relative poverty have declined but remain high.

Monetary policy is assumed to move towards a neutral stance as the effect of El Niño on inflation should be temporary and the still negative output gap will contain price pressures. Fiscal consolidation in line with the fiscal rule is appropriate to maintain confidence. Reducing widespread informality by upgrading the quality of education and limiting the increase of the relatively high minimum wage would raise productivity and make growth more inclusive.

Colombia’s contribution to global warming has been low so far, but the expansion of extractive industries, urbanisation, road traffic and livestock grazing all pose challenges if decisive action is not taken.

2012

Costa Rica

22.8

GDP growth 2012

Output growth is projected to increase from 2.9% in 2015 to 3.5% in 2016 and 4.1% in 2017.

Exports will recover in 2016 following the slump in 2015, which was caused mainly by the closure of a large electronics plant. As the Recovering effects of falling oil prices wear off, inflation will exports pick up in the next two years. Unemployment will remain close to 10%.

Costa Rica has recently improved its monetary policy framework. In early 2015, the central bank introduced greater exchange rate flexibility as a further step towards full inflation targeting. Measures should also be adopted to restore fiscal sustainability, particularly the proposed reforms to raise tax revenue and contain public spending. Structural reforms are needed to boost productivity, make growth more inclusive, reduce unemployment, and boost competition and central bank independence.

Costa Rica has been acclaimed for its pioneering efforts on green growth, but the goal of decarbonising its economy still requires significant reduction in the transport sector’s emissions.

3.3

Economic growth picked up strongly in 2015, driven by private demand and a boost from EU-financed public investment. Supportive financial conditions, growth in wages and profits, and strengthening external demand are projected to support robust growth in 2016 and 2017. Rising domestic costs will push inflation Robust growth to the 2% target level in 2017.

Monetary policy remains appropriately expansionary to ensure that inflation returns to the target. But as soon as inflation is clearly increasing towards the target, the unconventional exchange rate policy–preventing appreciation against the euro–should be ended. Fiscal policy will become slightly restrictive, consistent with medium-term budgetary objectives. Reforms to expand labour supply, reduce skills mismatches and increase competition would boost economic convergence and help to make growth more inclusive.

The challenge for climate change policy is to reduce the high energy and carbon intensity of growth by shifting away from coal and improving energy efficiency.

Czech Republic

GDP growth 2012

2015

Current prices CZK billion

4 041.9

2016

2017

% real change

4.3

2.3

2.4

COUNTRY SNAPSHOTS 2016-17

GDP is projected to grow in 2016 and 2017 at just under 2%, supported by investment and a pickup in world trade. Households will continue to reap the benefits of low inflation and energy prices and a stronger labour market. Exporters will get a boost from the weaker effective Fiscal policy exchange rate and stronger growth in the tightening European Union.

While the accommodative monetary policy continues to maintain the euro exchange rate peg, the economy is reaching its capacity, thereby raising pressure for fiscal policy tightening.

To reduce tensions in local real estate markets, further macroprudential tools would be warranted to limit the risk of another house-price-driven boom-bust cycle, including raising property taxes and updating property values, in particular in Copenhagen.

To foster competition, regulation in retail and professional services needs to be eased.

Denmark has pioneered wind power and is a global player in production of wind turbines.

Denmark

GDP growth 2012

2015

Current prices DKK billion

1 866.8

2016

2017

% real change

1.8

1.8

countries within the euro area will persist. Inflation should edge up to just under 1.5% by the end of the projection horizon as the effects of cheaper energy wane and cyclical slack decreases, even though high uncertainties surround inflation projections.

Improving the credit channel of monetary policy transmission is a key priority, and requires completion of the banking union, swifter recognition of non-performing loans and, in many countries, better insolvency procedures. To foster growth and make it more inclusive, euro area countries should pursue fiscal and structural reforms to promote employment and social mobility, such as decreasing labour taxation and enhancing prioritisation of growth-enhancing investments, including in education and childcare. Joint actions to increase public investment could spur growth without raising debt ratios in the near term. Policies to better integrate immigrants have taken on heightened urgency, as they will be key to managing the recent wave of asylum seekers. Further product market reforms at the national level and completing the Single Market are essential to raise living standards and well-being.

The 2030 EU climate and energy framework commits to a domestic reduction in greenhouse gas emissions of at least 40% relative to 1990 levels.

GDP growth

1.9

2014

2015

Current prices EUR billion

Growth is projected to strengthen gradually in the coming two years. It will be supported by an upswing of investment and exports, which will benefit from stronger growth in the European Union. Private consumption will grow in line Investment with real household income. needed The government’s fiscal stance is broadly neutral and public debt is the lowest of OECD countries. More investment is essential to address some of Estonia’s needs, including on skills and education, and on infrastructure. Improving skills and reducing taxes on low labour earnings would boost employment and make growth more inclusive. Improving knowledge transfer to Estonian firms by promoting applied research and collaboration with foreign institutions would raise productivity.

Tax rates on energy sources should be aligned and raised according to their CO2 emission content.

Estonia

GDP growth 2012

2015

Current prices EUR billion

18.0

2016

2017

% real change

1.8

2.5

OUTLOOK

ECONOMIC OUTLOOK

2.9

10 030.3

2017

1.5

1.8

1.9

The economy is slowly coming out of a long recession. Economic activity was broadly flat in 2015, but is projected to strengthen in 2016.

Export growth remains subdued despite the weaker euro, as global demand for capital Coming out goods has weakened and exports to Russia have collapsed. Domestic demand is being held of recession back by rising unemployment, low income growth, weak confidence and ample spare capacity.

The budget deficit has risen above 3% of GDP for the first time since the mid-1990s. The government’s consolidation package, which is mainly based on spending cuts, will reduce the deficit, but only gradually because of the weakness of the economy. Structural reforms are essential to revive growth, ensure long-term fiscal sustainability and generate resources to support well-being.

Finland’s long-standing use of economic incentives, especially taxation, to promote green growth has considerably reduced the intensity of greenhouse gas emissions since 1990.

Finland

GDP growth 2012

GDP growth is projected to rise to almost 2% in 2016 and 2017, despite a slowdown in several emerging markets. Activity will continue to be supported by sustained monetary stimulus, a broadly neutral Hesitant recovery fiscal stance and lower oil prices. High private indebtedness will remain a drag on consumption and investment in many countries. Unemployment will decline only gradually, and the stark differences across

2016 % real change

2015

Current prices EUR billion

199.8

2016

2017

% real change

-0.1

1.1

1.6

Euro area

OECD Observer No 305 Q1 2016

21

OUTLOOK Economic growth is projected to rise gradually to 1.3% in 2016 and 1.6% in 2017 thanks to lower oil prices, less fiscal contraction and the cumulative effects of sustained monetary stimulus. Rising wages, exchange rate pass-through and stabilising Growth rises energy prices should bring a pickup in inflation, gradually despite significant economic slack. Low energy prices, strengthening external demand and pro-competitive reforms are expected to underpin an increase in consumption and export volumes. However, declining house prices and weak business confidence are continuing to weigh on investment, and unemployment will decline only slightly.

Budget deficit reductions over 2016-17 are assumed to be based on spending restraint, while income and corporate taxes and social security revenues are reduced as a share of GDP. This structural consolidation effort is the minimum necessary to control still rising public debt, but automatic stabilisers should be allowed to play freely to avoid endangering the still fragile recovery.

France’s greenhouse gas emissions intensities are relatively low, due to the preponderant role of nuclear power.

France

GDP growth 2014

2015

Current prices EUR billion

2 133.6

2016

2017

% real change

1.1

1.3

1.6

Economic growth is projected to strengthen in 2016, as a robust labour market, low interest rates and low oil prices underpin private consumption.

Weaker demand from emerging market economies will gradually be offset by stronger Strengthening exports to other euro area economies. Business investment is expected to recover with rising ahead capacity utilisation. The refugees with prospects to stay durably will enter the labour market gradually and can help reduce the impact of demographic change in the medium term. The unemployment rate will remain historically low. The current account surplus will narrow somewhat but will remain very high.

The budgetary stance is expansionary, which is appropriate to make room for near-term spending priorities related to structural reforms to raise inclusive growth and well-being and to address the needs related to the inflow of asylum seekers. Efforts to facilitate the integration of the new immigrants are needed to allow them to better integrate into German society and improve their employment prospects. More support is needed for youth with weak socioeconomic background in the education system. Better childcare and lower taxation on second earners would increase options for women who wish to work longer hours. Removing barriers to competition in services would strengthen innovation and investment, and could reduce Germany’s big external imbalance.

Steps to eliminate tax expenditures for activities with high CO2 emission intensity, and to align taxation of fossil fuels with their carbon content, would help Germany to reach its emissionreduction targets in a cost-efficient way.

Germany

GDP growth 2014

22

Greece

GDP growth 2012

2015

Current prices EUR billion

194.3

2016

2017

% real change

-1.4

-1.2

2.1

Economic growth was strong in 2015 but is projected to slow in 2016 as public investment declines and the fiscal stance becomes less accommodative. Activity should rebound in 2017 on the back of renewed public investment. Private Slower growth demand should remain fairly robust over the ahead coming two years. Economic growth and the public works scheme are projected to boost employment.

Inflation will pick up and could reach the central bank’s inflation target of 3% at the end of the projection period as economic slack disappears.

Fiscal policy is shifting to a broadly neutral stance. However, additional consolidation is needed to reduce public debt more quickly and expand the room to manoeuvre in the event of an adverse economic shock. Monetary policy is expected to be tightened in 2017 to contain inflation pressures through a combination of higher policy rates and a reconsideration of the expansion of the central bank’s balance sheet through the Funding for Growth schemes. Accelerating the slow income convergence process requires pro-competitive reforms in product markets to bolster private investment and productivity growth.

Carbon dioxide emissions have dropped considerably over the past decades, and Hungary is now a seller of tradable emission permits.

Hungary

GDP growth 2015

Current prices EUR billion

2 919.8

The economy slipped back into recession in the latter part of 2015 after growing in late 2014 and the first half of 2015. Growth is projected to gain some momentum in the second half of 2016 as confidence strengthens and as structural reforms finally take hold and boost exports and Second-half investment. Inflation remains low due to the very momentum depressed state of the economy. Unemployment will decline, but only gradually, which emphasises the importance of poverty reduction efforts.

While growth is fundamental to reducing the huge public debt burden in the medium term, meeting the fiscal targets is critical to contain debt and to ensure smooth financing for bank recapitalisation and further debt relief. Strengthening tax administration, including combating tax evasion, is a necessary component of this effort.

Recapitalising the banking system, reducing non-performing loans and lifting capital controls would ease financial constraints and so open a path for growth. Product market reforms would improve competitiveness and create jobs. Public administration reforms would reduce the regulatory burden and enhance the capacity of social programmes to protect the most vulnerable.

Subsidies for renewable energy need to be reviewed.

2016

2017

% real change

1.5

1.8

2012

2015

Current prices HUF billion

2.0

28 627.9

2016

2017

% real change

3.0

2.4

3.1

COUNTRY SNAPSHOTS 2016-17

The economy continues its robust recovery.

Strong household income growth and investment will fuel domestic demand in 2016.

However, as investment slows and interest rates increase, growth will begin to moderate. Lifting Robust recovery the capital controls introduced during the financial crisis is planned to begin in 2016.

Inflationary pressure is mounting as spare capacity is eliminated and wage settlements have been far in excess of productivity growth. As a result, monetary policy has started tightening. Further interest rate increases will be necessary to stop a wage-price spiral emerging. The fiscal deficit has fallen markedly, and the budget targets a small surplus in 2016. Accordingly, public debt is falling in relation to GDP. Windfall receipts that arise during the lifting of capital controls should be used to retire government debt, which carries a high interest rate.

Greenhouse gas emissions decreased following the crisis and are currently below the Kyoto-related target.

Iceland

GDP growth 2012

Growth is projected to pick up gradually next year and reach 5.5% in 2017. Public spending should gather pace, and the impact of the significant fall of the rupiah since early 2014, notwithstanding its recent strengthening, should provide a boost. Low Gradual pickup prices for many primary commodities and regulatory uncertainty will continue to hold back private investment.

While there remains ample room for fiscal support, to date the government has focused primarily on removing obstacles to its infrastructure investment plans. Inconsistent signals regarding protecting domestic industry, openness to foreign investment and free trade are hurting business confidence. A normalisation of monetary policy is constrained by the fall in the currency and its pass-through to inflation.

The almost complete removal of fuel subsidies at the beginning of 2015 was a very positive step.

Indonesia

GDP growth 2015

2016

Current prices ISK billion

1 775.5

OUTLOOK

ECONOMIC OUTLOOK

2017

% real change

4.1

2012

2015

Current prices IDR trillion

3.7

2.9

Economic growth is projected to remain robust, at around 7.25% over the projection period.

Public investment has picked up with faster clearance of key projects; better infrastructure and greater ease of doing business are promoting private investment; and more Robust growth generous benefits and wages for public employees are supporting private consumption.

Even so, large non-performing loans, high leverage ratios for some companies and difficulty in passing key structural reforms are holding the economy back. The current account deficit is widening as machinery imports increase, but is largely financed by rising foreign direct investment inflows.

Fiscal policy is assumed to remain supportive. Public investment in the energy, transport, sanitation, housing and social protection sectors is critical to raising living standards for all and can be financed through tax reform and reductions in subsidies.

The remaining slack in the economy and the disinflation process will provide room for some monetary easing by the end of the projection period. Creating more and better jobs will require further improving the ease of doing business, modernising labour regulations, implementing the goods and services tax and making land transactions easier.

Rapid economic growth, better household access to energy and more manufacturing activity will raise energy consumption, which is now highly subsidised and carbon-intensive.

India

8 615.7

2016

2017

% real change

4.7

5.2

5.5

The Irish economy is projected to continue its strong expansion in the next two years. Exports will rise in line with increasing demand in its trading partners. Business investment should remain robust thanks to rising profitability and Strong growth favourable financing conditions. Growth will ahead provide momentum to job creation and reduce the still high rate of unemployment, thereby spreading the fruits of the recovery more widely. Household consumption will be supported by labour earnings growth.

Fiscal policy is expected to exert a smaller drag on activity than in past years, while the government remains on track towards its medium-term goal of balancing the budget. Fiscal windfall gains from strong economic growth and low interest costs should be used primarily for more rapid reduction of public debt. A fiscal package of €1.5 billion in 2016 (0.7% of GDP) should prioritise getting more people back into work by revamping the tax and benefit system and enhancing activation policy.

Measures targeted on the agricultural sector will also be needed to meet Ireland’s target of a 40% reduction in greenhouse gas emissions by 2030.

Ireland

GDP growth 2012

2015

Current prices EUR billion

174.8

2016

2017

% real change

5.6

4.1

3.5

GDP growth 2012

2015

Current prices INR trillion

99.9

2016

2017

% real change

7.2

7.3

7.4

OECD Observer No 305 Q1 2016

23

OUTLOOK After a moderate pace in 2015, economic growth is projected to pick up to around 3.25% in 2016 and 2017. This increase in activity should keep unemployment low. A rise in the minimum wage, falling oil prices and budgetary measures to stimulate the economy will support domestic Keeping unemployment demand, while exports are likely to recover with the improvement in the global economy. low Pursuing an accommodative monetary policy is appropriate to prevent an appreciation of the sheqel, as long as inflation remains low and other major central banks maintain their expansionary stances. Property market tension poses a risk, however, and macro-prudential policy may need to be reinforced if necessary. The fiscal easing planned for 2016, including tax cuts and major spending increases, will make the medium-term public debt reduction objective more difficult to achieve. Stepping up structural reforms to strengthen competition in sheltered sectors would be beneficial to boost productivity and promote inclusive growth.

The commitment to reduce CO2 emissions per capita by 26% before 2030 is welcome but could be more ambitious.

Israel*

GDP growth 2012

2015

Current prices ILS billion

1 001.0

2016

2017

% real change

2.5

3.2

3.3

* 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.

GDP growth is expected to rise to 1.4% in 2016 and 2017. The labour market is improving, helping to drive private consumption higher.

However, bank credit remains constrained due to the large and still rising amount of non-performing loans, hampering investment Bank credit growth. Sluggish export market growth is constrained hindering exports. Large, although declining, economic slack will contain consumer price and wage inflation.

The government budget deficit will continue to decline gradually, as the economic recovery raises tax revenue and interest payments on the public debt decline. Extending the cuts in social security contributions is a priority to consolidate the recovery of the labour market. Further measures to address banks’ holdings of non-performing loans would strengthen the recovery.

Permanently shifting the tax burden from labour to consumption and real estate, and raising environmental taxes would strengthen the foundations of stronger, greener and more inclusive growth.

In recent years, the depressed economy resulted in a decline in carbon emissions.

Italy

GDP growth 2014

24

Japan

GDP growth 2014

2015

Current prices JPY trillion

487.6

2016

2017

% real change

0.6

1.0

0.5

The economy was hit by two shocks in 2015– an outbreak of the Middle East Respiratory Syndrome (MERS) and a marked slowdown in demand from China and other Asian countries– that reduced output growth to around 2.75%.

While the MERS outbreak has been resolved, Rebounding weaker demand from Asia remains a headwind from shocks to growth. Nevertheless, a pickup in private consumption is projected to increase output growth to 3% in 2016 and 3.5% in 2017, while inflation rises to around 2%.

The 2015 fiscal stimulus ought to be supplemented by further measures in 2016. With inflation far below the target range of 2.5% to 3.5%, an additional cut in the policy interest rate would be beneficial. The top policy priority should be wide-ranging structural reforms, including those in the 2014 Three-Year Plan for Economic Innovation, to sustain Korea’s growth potential in the face of rapid population ageing and to make growth more inclusive.

Korea continues to promote green growth, launching a second five-year plan and an emissions trading system in 2015 and boosting public investment in green technology.

Korea

GDP growth 2015

Current prices EUR billion

1 614.6

The economic expansion was derailed in 2015 by a sharp slowdown in demand from China and other Asian countries and sluggish private consumption. Output growth is projected to pick up from around 0.5% in 2015 to 1% in 2016, as rising real wages support consumer Public debt spending. However, with the consumption tax challenge hike in 2017, growth is likely to slow to 0.5%.

Headline consumer price inflation, which has fallen close to zero with the decline in oil prices, is projected to reach 1.5% by end-2017.

The government’s target of a primary surplus by FY 2020 remains a priority to put gross public debt, which has risen to 230% of GDP, on a downward trend. Above all, achieving fiscal sustainability requires faster output growth through bold and wide-ranging structural reforms. To sustain confidence in Japan’s public finances, a detailed and concrete consolidation plan to achieve the FY 2020 primary surplus target is essential. The Bank of Japan’s quantitative and qualitative easing should continue until the 2% inflation target is sustainably achieved.

Japan’s reliance on thermal energy sources increased sharply following the Great East Japan Earthquake, as all nuclear power plants were closed until mid-2015.

2016

2017

% real change

0.8

1.4

2012

2015

Current prices KRW trillion

1.4

1 377.5

2016

2017

% real change

2.7

3.1

3.6

COUNTRY SNAPSHOTS 2016-17

GDP growth is projected to accelerate to 3.1% in 2016 and 3.5% in 2017, mainly driven by domestic demand. High wage growth will further sustain household consumption.

Exports will pick up following the trade Accelerating recovery in the European Union and support growth investment, but export performance will be weakened by increases in unit labour costs.

Financial conditions are projected to improve, backed by the loose monetary policy in the euro area. Fiscal policy will remain prudent and planned measures for 2016 will increase the progressivity of the tax system. Efforts to reduce poverty and inequality, which are among the highest in the OECD, should continue, notably by reforming social assistance.

Lowering energy intensity from the current high level can help to reduce energy dependency and the sensitivity of the economy to changes of global energy prices.

Latvia

GDP growth 2012

2015

Current prices EUR billion

21.8

2016

2017

% real change

2.5

3.1

3.5

OUTLOOK

ECONOMIC OUTLOOK

Economic growth in 2016 and 2017 will remain anchored around 3%, supported by the strengthening cyclical position of the euro area and rebounding activity in the financial sector. Higher VAT rates and solid growth will boost inflation pressures, and Inflation pressures the next round of backward-looking wage indexation expected in early 2016 could also boost inflation.

In order to better attain its fiscal targets, the government should introduce more effective spending control, including a spending ceiling for the general government, in the mediumterm budgeting framework. The long-term sustainability of the pension system will also need to be addressed. Structural reforms should focus on increasing labour market inclusion by introducing separate income tax assessment of spouses, improving the availability of childcare, enhancing active labour market policies and reforming education to improve the attainment of students from disadvantaged backgrounds.

A key policy priority is to reduce carbon emissions, especially through further reforms of the transport sector, which accounts for more than half of the greenhouse gas emissions.

Luxembourg

GDP growth 2012

2015

Current prices EUR billion

43.5

Economic growth is projected to pick up from 1.75% in 2015 to 3.75% in 2017. Activity will be underpinned by continued private consumption growth and stronger exports.

The trend decline in the unemployment rate Growth to pick up will continue, and as a result wage pressures will slowly begin to mount.

The government’s fiscal stance is expected to be broadly neutral following a long period of strong consolidation. Further reforms are needed to reduce the tax wedge and shift taxation away from labour, which should reduce structural unemployment.

Improvements in the education system, easing restrictions on the employment of some foreign workers and policy measures that promote access to finance for young firms with high growth potential are needed for further productivity catch-up.

Lithuania’s energy mix has become significantly more environmentally friendly since it transitioned to a marketoriented economy.

Lithuania

GDP growth 2012

2017

3.0

3.0

2.9

After growing by 2.3% in 2015, real GDP is projected to grow in excess of 3% in both 2016 and 2017. The economy will benefit from a stronger US economy, the depreciation of the peso and the easing of problems in the construction Investment to sector. The implementation of important pick up structural reforms has also improved the business climate. Consequently, investment is picking up, and manufacturing activity is gradually accelerating, supporting a robust formal job market, boosting household incomes and consumption growth.

Monetary policy remains supportive, although interest rates will need to be raised once the US Federal Reserve raises its rates to forestall potential capital outflows. The budget deficit is being narrowed, but low oil prices may create some difficulty in achieving the objective by 2017.

Recent reforms have helped to address environmental challenges.

Mexico

GDP growth 2015

Current prices EUR billion

33.3

2016 % real change

2016

2017

% real change

1.7

2.9

2012

2015

Current prices MXN billion

3.7

15 624.1

2016

2017

% real change

2.3

3.1

3.3

OECD Observer No 305 Q1 2016

25

OUTLOOK Economic growth is projected to strengthen further and to remain broad-based. Private consumption and residential investment will remain robust thanks to the housing market recovery, employment growth and Strengthening growth a reduction in income taxes. The brighter economic outlook should further support business investment. The relatively strong performance of the Netherlands’ key export markets will underpin export growth.

Tax cuts and new expenditures in 2016 will broadly offset the tightening effects of previously decided fiscal consolidation; the resulting neutral fiscal stance is appropriate. The labour market would benefit from continuing the harmonisation of temporary and permanent contracts. Reducing mortgage interest relief and increasing the scope of the unregulated rental sector would improve the functioning of the housing market.

Following a recent court verdict, the government now targets lower greenhouse gas emissions for 2020.

Netherlands

GDP growth 2012

2015

Current prices EUR billion

645.0

2016

2017

% real change

2.2

2.5

2.7

Growth is projected to recover gradually in 2016 and 2017 as non-oil investment picks up in response to higher exports and some new oil investment projects start up.

Aggregate demand will also be sustained by Non-oil investment accommodative macroeconomic policies.

Unemployment will rise but remain low to pick up in the OECD context. Inflation has been temporarily boosted by currency depreciation but is otherwise contained by remaining cyclical slack. The extensive welfare state is cushioning the impact of the economic slowdown on well-being and protecting the vulnerable.

Monetary and fiscal policies are appropriately supporting activity, but will have to tighten as growth picks up. The use of macro-prudential tools to contain risks from high and rising house prices and household debt is welcome. Further improvement to the business environment, including shifting from direct to indirect taxation, and better business regulation and education outcomes would set the conditions for broad-based and inclusive growth.

Norway has a comprehensive framework for incorporating environmental issues into policy-making and a long experience in the use of taxation of greenhouse gas emissions

Norway

GDP growth 2012

2015

Current prices NOK billion

2 965.2

Economic growth is projected to slow to 1.9% in 2016 before recovering slightly in 2017.

Activity is being held back by a sharp fall in global dairy prices, softer external demand, a diminished boost from the Canterbury rebuild and a predicted drop in agricultural Growth to moderate output due to drought as a result of El Niño.

A normalisation of weather conditions, along with additional monetary stimulus and faster global growth, should provide greater support to exports and business investment in 2017.

Additional monetary accommodation is appropriate to support a return of inflation to the 1-3% target range. However, there are financial stability risks associated with the housing boom; further efforts to reduce barriers to house building in Auckland would help alleviate pressures. Fiscal consolidation should proceed as planned, but efforts to improve the well-being of the most vulnerable New Zealanders need to continue to make growth more inclusive.

Terminating the transitional arrangements that halve the number of emission permits (and hence their price) needed by emitters in the New Zealand Emissions Trading Scheme would improve environmental outcomes.

New Zealand

GDP growth 2012

26

2017

1.2

1.1

1.9

Real GDP should continue to grow around 3.5% annually, supported by solid investment and consumption growth.

Considerable infrastructure investment supported by EU funds will continue to Solid investment and underpin productivity and GDP growth, consumption growth despite a temporary slowdown in 2016 at the switchover of budget periods for EU funds.

Consumer price inflation is expected to gradually recover as the effect of sharp falls in energy and food prices fades.

The central bank is assumed to start raising interest rates from record low levels at end-2016, as economic slack diminishes and inflation turns up. Now that Poland has exited the EU excessive deficit procedure, the recently elected government plans various revenue reforms and higher spending on child benefits. In the context of weak revenue growth owing to low inflation, further consolidation efforts are needed to continue gradual deficit reduction in 2016. Further lowering incentives to use irregular work contracts would strengthen productivity, wages and inclusiveness.

Focusing infrastructure spending on renewable energy, rail and urban public transport would help reduce Poland’s dependence on coal and road traffic, with positive effects on the climate and public health.

Poland

GDP growth 2015

Current prices NZD billion

213.7

2016 % real change

2016

2017

% real change

2.3

1.9

2012

2015

Current prices PLN billion

2.3

1 629.0

2016

2017

% real change

3.5

3.4

3.5

COUNTRY SNAPSHOTS 2016-17

The economic recovery is projected to continue in 2016 and 2017, boosted by private consumption and exports. However, growth will ease from the high rate in 2015, as much of the current investment pickup is likely to lose Investment pickup steam once capital stocks have been rebuilt, following a decline in investment of nearly to lose steam 35% between 2007 and 2014. The pace of the recovery will allow further reductions of the unemployment rate, albeit only small ones.

The rebalancing of the economy has made significant progress with structural improvements in the fiscal and current account balances. However, potential growth needs to be further boosted to enable public and external debt to be put firmly on a declining path.

Hence, additional efforts to reduce corporate debt are essential for strengthening investment and accelerating the reallocation of credit towards the tradable sector, which would be particularly beneficial for exporting firms. Strengthening competition in energy and professional services sectors would lower input prices for other sectors and bolster export competitiveness. A comprehensive assessment of the effects of recent structural reforms is needed, including an evaluation of progress on implementation. Reducing the high share of long-term unemployment and young people not in education or employment would raise output and reduce inequality and poverty.

Although Portugal has been a leader in renewable energy, legacy remuneration schemes provided significant rents to incumbent electricity generators.

Portugal

2012

2015

Current prices EUR billion

168.4

2016

2017

% real change

1.7

1.6

1.5

The economy is in recession. Falling oil prices, international sanctions and capital flight have reduced investment, domestic consumption and imports. The large depreciation of the ruble has pushed inflation to double digits and reduced real incomes, especially of the poorest. Recovery will be only gradual against the backdrop of Economic an uncertain external environment and lack uncertainties of structural reforms. Unemployment will rise from the current low levels. Growth is projected to turn positive in 2017 as exports strengthen and domestic demand recovers.

The accommodative fiscal stance is appropriate, given the size of the demand shock. Targeted income support to lower-income groups would reduce poverty risks from large falls in real wages.

Fiscal consolidation is nevertheless needed in the medium term to adjust to lower oil prices and an ageing population. The scope for monetary policy easing will depend on declines in inflation and inflation expectations. Weakening bank balance sheets should be monitored closely to arrest the build-up of non-performing assets.

Measures to combat corruption, reduce the role of the state in the economy and to reinforce skills and innovation would raise potential growth. Energy intensity is high and Russia is one of the world’s largest emitters of greenhouse gases.

Russian Federation

GDP growth 2012

2015

2016

Current prices RUB trillion

2017

% real change

62.2

-4.0

-0.4

1.7

Economic growth has been robust in 2015 and is projected to increase to around 3.5% in 2016 and 2017. Improvements in the labour market and rising incomes will support private consumption. The launch of new car models and the modernisation of production lines by incumbent foreign investors will provide Improving additional momentum to the car industry. labour market Solid growth in the euro area and easing financing conditions will boost investment and exports.

After five years of fiscal consolidation, fiscal policy easing in 2014 and 2015 has provided room for strengthening measures to raise inclusive growth, notably active labour market programmes and social security exemptions for low-wage workers. However, as the Slovak Republic has one of the fastest-ageing populations in Europe, further debt reduction is needed in the medium term.

Widening the tax base, improving further tax collection and strengthening tax administration capacity are key.

Energy intensity is one of the highest in the OECD, but revenues from environmental taxation are among the lowest.

Slovak Republic

GDP growth 2012

2015

Current prices EUR billion

72.4

GDP growth

OUTLOOK

ECONOMIC OUTLOOK

2016

2017

% real change

3.2

3.4

3.5

Economic growth will be supported by strong exports and gradually recovering private consumption and investment. The improving labour market will raise incomes and the healthier corporate sector will boost investment and improve Unemployment to competitiveness. Growth will slow temporarily in decline gradually 2016 as investment is expected to decelerate, due to the lower inflow of EU funds. Unemployment will decline gradually, but remaining slack will contain inflation.

Continued corporate restructuring and dealing with remaining non-performing loans in order to revive credit activity remain priorities.

Further fiscal consolidation is needed given the high and rising public debt. Permanent measures are key to arrest growing public expenditure, but, at the same time, the incomes of the poorest need to be protected.

Well-designed structural reforms to education, health care and public administration could bring savings without jeopardising services.

Ageing pressures can be mitigated by raising the participation rates of the young and old. Growth could be raised further by lowering regulatory burdens, continuing to pursue the planned privatisation programme and boosting foreign direct investment.

Greenhouse gas emissions per capita are below the OECD average.

Slovenia

GDP growth 2012

2015

Current prices EUR billion

36.0

2016

2017

% real change

2.5

1.9

2.7

OECD Observer No 305 Q1 2016

27

OUTLOOK The outlook for 2016 and 2017 is uncertain and economic activity will likely remain subdued. Expected increases in electricity supply from investments in generating capacity should raise supply only by 2017, easing constraints that have hindered Uncertain outlook production and increasing investor confidence. Also, strengthening growth in major trade partners, such as Europe and the US, should reinforce export growth.

Inflation is hovering around the upper end of the target band, driven by the depreciation of the rand and higher electricity and food prices.

Fiscal policy has turned restrictive, constrained by a spending ceiling and the need to stabilise public debt. The combination of higher inflation and deteriorating economic activity is a dilemma for monetary policy, and any further tightening should be cautious.

Structural reforms–including improving the business climate and removing bottlenecks, and liberalising energy and transport markets–are needed more than ever to boost output, jobs and living standards for the whole population, and hence to make growth more inclusive.

South Africa is heavily dependent on coal, and is a very energyand carbon-intensive economy.

South Africa

Output will continue to grow briskly, at around 3% per year, supported by low interest rates and rising wages, which will lift consumption and inflation. Employment continues to grow and unemployment is Business investment declining. Business investment will increase further in response to rising demand, and to increase surging house prices will continue to support residential investment, but may also pose risks.

Monetary policy is expansionary, which is necessary to move inflation towards target. The housing market is overheating and further macro-prudential measures are called for. Phasing out mortgage interest deductibility would help to contain the rise in housing demand and household debt. The large inflow of migrants poses a challenge in terms of employment, housing and integration into society more broadly. Meeting this challenge will call for a vigorous programme of up-skilling and language training.

Greenhouse gas emissions ceased to increase decades ago, partly thanks to the long-standing carbon tax and participation in the EU Emissions Trading Scheme.

Sweden

GDP growth 2012

GDP growth 2012

2015

Current prices ZAR billion

3 262.5

2016

2017

1.5

1.5

2.0

Spain

GDP growth 2015

Current prices EUR billion

1 042.9

28

3 688.6

2016

2017

% real change

2.9

3.1

3.0

% real change

A robust economic recovery in Spain is projected to continue into 2016 and 2017, though at a gradually slowing pace as the positive impact of the depreciation of the euro, and lower oil and other commodity prices, dissipate. Low borrowing rates Robust recovery for businesses and households will also continue to provide support together with the fiscal stance, which is expected to be mildly expansionary over the next two years.

These factors, together with the implementation of significant structural reforms, are increasing business confidence.

As public debt remains high and growth is firming, the government should resume gradual and steady consolidation to reduce the deficit and put debt firmly on a downward path. Further product market reforms and increasing innovation are crucial to boost the economy’s productivity. Reforms to improve training for the unemployed and strengthen public employment services are critical to reverse the increase in inequality since the crisis and make growth more inclusive.

Premiums paid over market prices to renewable electricity producers have induced a large increase in the share of wind and solar energy in total electricity generation.

2012

2015

Current prices SEK billion

2016

2017

% real change

3.2

2.7

2.5

Economic growth is projected to strengthen gradually, as a pickup in global demand offsets the headwinds from the strong currency. Ultra-low interest rates, robust population growth, mainly driven by Growth to strengthen immigration, and lower import and commodity prices will support domestic gradually demand. Resuming growth and the recent depreciation of the franc should allow inflation to become positive at the beginning of 2017.

Interest rates are set to remain negative until inflation becomes firmly positive. The automatic fiscal stabilisers should be allowed to play fully as the economy adjusts to the strong franc. Productivity can be boosted by increasing competition, especially in the telecoms and energy sectors, and by pushing forward with reforms in agriculture.

Switzerland’s greenhouse gas emissions are low thanks to its plentiful nuclear and hydroelectric power.

Switzerland

GDP growth 2012

2015

Current prices CHF billion

623.9

2016

2017

% real change

0.7

1.1

1.6

COUNTRY SNAPSHOTS 2016-17

GDP growth is projected to increase from 3% in 2015 to above 4% in 2017, as political uncertainties are assumed to fade, employment continues to rise, and the exchange rate depreciation and the gradual strengthening of global markets support Tight monetary export growth. The geopolitical crisis at the policy needed southern border and the associated influx of refugees pose challenges. Currency depreciation until October has strengthened price competitiveness, but has also weakened household confidence, created pressures on corporate balance sheets and added to already high inflation.

Large external funding needs and volatile international capital market conditions warrant cautious macroeconomic policies. Monetary policy should remain tight to ensure inflation is controlled, and it may have to be tightened if inflation remains persistently above target. Room is probably available for fiscal support, although shortcomings in fiscal transparency at the general government level make judgments in this area difficult.

Progress in implementing programmed structural reforms will be crucial to rebalance demand and strengthen growth.

Turkey’s carbon footprint per capita is lower than in the more advanced economies, but is growing at one of the fastest rates in the OECD area. The government’s recent announcement of a quantitative emission path for the period 2020-30 should help to set concrete energy efficiency measures, such as stronger harmonisation of tax rates on fuels in different uses, and will promote investment in renewable energy.

Turkey

GDP growth 2012

2015

Current prices TRY billion

1 416.8

2016

2017

% real change

3.1

3.4

4.1

Economic growth is projected to continue at a robust pace over the coming two years, driven by domestic demand. House prices have continued to rise, although housing supply is edging up.

The unemployment rate has stabilised at around 5.5%, and recently wage growth has picked up.

Projected increases in labour productivity should Robust pace underpin real wage growth. The trade deficit of growth has remained contained, but weak global trade and past currency appreciation are holding back exports. Inflation is expected to increase towards the 2% inflation target as pressures on capacity emerge.

This projection assumes the Bank of England will begin to raise its policy rate in early 2016, and then raise it gradually through 2017 to ward off excess demand pressures. The pace of fiscal consolidation has appropriately been smoothed to around 1% of GDP per year and now involves smaller reductions in spending on public services than earlier planned. However, the decision to significantly lift the minimum wage will increase labour costs, possibly lowering the contribution of employment to GDP growth.

The UK has made significant progress in its climate change mitigation efforts. It has established a long-term framework with a unilateral commitment to reduce greenhouse gas emissions to 80%

United Kingdom

OUTLOOK

ECONOMIC OUTLOOK

of their 1990 level by 2050, delivered through five-yearly reduction targets. To help reach this ambitious objective at low cost, carbon emissions could be taxed more uniformly by increasing the low implicit rates now faced by some sectors.

GDP growth 2014

2015

2016

Current prices GBP billion

1 816.4

2017

% real change

2.4

2.4

2.3

Output remains on a solid growth trajectory, propelled by household demand. Steady employment gains continue to push down the unemployment rate and other indicators of labour market slack. Domestic demand will continue to be sustained by supportive financial conditions, the improving labour market and the A solid boost to household purchasing power from low trajectory energy prices and the stronger dollar. However, the boost from these influences should gradually subside, and will be damped by weaker export growth due to sluggish external demand and the recent strengthening of the dollar.

Monetary policy remains very accommodative, which is consistent with stubbornly below-target inflation, subdued wage pressures and hints of downward pressure on inflation expectations. However, as the economy has returned to near full employment, policy rates are assumed to increase by end-2015.

Subsequent increases, which will depend on incoming data, are assumed to gradually lift the federal funds rate to 2% by end-2017.

Public debt is above historic norms, but the budget deficit continues to narrow and slowing health expenditures have improved longterm prospects. Targeted measures to encourage inclusive longerterm growth remain appropriate, such as expanding the earned income tax credit to boost labour market participation among less-skilled workers.

US greenhouse gas emissions are high relative to OECD averages, and policies to reorient energy production could be a timely way to complement ongoing support to aggregate demand from monetary policy.

United States

GDP growth 2014

2015

2016

Current prices USD billion

17 348.1

2017

% real change

2.4

2.5

2.4

Power of prognosis The OECD Economic Outlook

For forward-thinking decision makers ISBN 978-92-64-22030-0

www.oecd.org/bookshop

OECD Observer No 305 Q1 2016

29

OECD.ORG

Help refugees integrate and contribute

©Andrew Wheeler/OECD

economic incentive of helping the millions of refugees living in OECD countries to develop the skills they need to work productively and safely in the jobs of tomorrow.

Filippo Grandi At a joint high-level conference in Paris in January, the heads of the OECD and UN High Commission for Refugees (UNHCR) called on governments to scale up their efforts to help refugees integrate and contribute to the societies and economies of Europe.

In 2015 more than 1 million people crossed the Mediterranean Sea to look for international protection in Europe. In total, about 1.5 million claimed asylum in OECD countries in 2015. This is almost twice the number recorded in 2014 and was the highest number ever recorded. Yet, asylum seekers represent only about 0.1% of the total OECD population and represent less than 0.3% of the total EU population.

The OECD and UNHCR stressed not only the moral imperative but also the clear

“Integration is a dynamic two-way process which requires both the individual and society to make considerable efforts,” UN High Commissioner for Refugees Filippo Grandi said at the joint conference. “In order to play a full role in the social, economic and cultural life of their host country, refugees need to achieve equality of rights and opportunities. States have an important role in this process, ensuring that refugees play a positive and active part in the integration process, particularly in terms of the services provided to them and in ensuring that they are received by welcoming communities.”

The OECD also released a report at the conference on Making Integration Work: Refugees and others in need of protection, which provides the main lessons from the experience of OECD countries in fostering the integration of refugees. The report highlights many good practices to tackle key barriers and support lasting integration of refugees and their children. It stresses the importance of early intervention, including providing access to language courses, employment programmes and integration services

as soon as possible, including for asylum seekers with high prospects to remain.

It also stresses the need to help migrants settle where jobs are and not necessarily where housing is cheaper. The report also underlines the need to adapt integration programmes to reflect the diversity of migrants in terms of skills and the specific needs of refugees.

“Far from a problem, refugees can and should be part of the solution to many of the challenges our societies confront,” said OECD Secretary-General Angel Gurría at the Paris conference. “They bring the hope of a better life and a better future for their children and ours. But to realise this potential, a substantial investment is needed to provide immediate support and help the refugees settle and adapt and develop their skills. It is a difficult and costly task in the short term, with a high pay-off for all in the medium to longer term”.

Read Mr Gurría’s full speech at: http://oe.cd/1fg More information on migration and refugees, visit www.oecd.org/migration-insights See also “We are entering a new era of migration”

by Jean-Christophe Dumont, in OECD Observer No 303, September 2015, see http://oe.cd/17y OECD (2016), Making Integration Work: Refugees and others in need of protection, OECD Publishing, http://10.1787/9789264251236-en

Wikigender launches in French Seven years after creating the Wikigender portal in English, the OECD Development Centre launched the French version on 16 December 2015.

The French Ministry of Foreign Affairs and International Development, International Francophone Organisation and the French Development Agency were among those associated with the launch.

French is one of the world’s most spoken languages and is particularly widespread in Africa, where there is a strong demand for gender-related information. The new portal allows users to exchange ideas, research and data in promoting gender equality and the rights of women and girls around the world. Users can edit and comment, and follow Wikigender on Facebook. Already there are more than 1 500 articles posted on the English language portal, and the addition of French will further this collaborative and interactive approach to informing better policies on gender. www.wikigender.org/fr/

30

Order this now! www.oecd.org/bookshop

Sustaining Ireland’s recovery for all page 32

Why skills matter, page 33

A solid recovery page 34

From bricks to brains Spotlight, January 2016 www.oecdobserver.org ›Sections ›Spotlights

page 35

Still riding the globalisation wave page 36

Innovating Ireland page 38

OECD Observer Roundtable: What policies for innovation? pages 40-43

Ireland’s economy

At the cutting edge

Banking on Silicon docks page 44

Maritime: Casting off for a blue future page 46

From Goias to Galway page 47

Overcoming the scars and social costs page 48

Migration’s two way ticket page 50

Ireland’s global workforce page 51

The capacity conundrum

©George Karbusa

page 52

For an offprint of this OECD Observer Spotlight, contact observer@oecd.org

OECD Observer No 305 Q1 2016

31

SPOTLIGHT

Sustaining Ireland’s recovery for all Angel Gurría, Secretary-General of the OECD

technological innovation from the foreign sector to domestic SMEs. Financial support for innovation should be rebalanced away from tax incentives–which often suit multinationals better–to direct funding, which is more accessible to smaller firms. Steps should be taken to ensure all firms can access the global talent pool.

To draw all these strands together, productivity needs a crossgovernment policy champion. But boosting productivity and growing the economy shouldn’t be an end in itself. Sustainably

Ireland is once again among the leading lights of the OECD’s economies improving citizens’ living standards must be the over-arching goal.

Ireland has experienced seven tough years to get its economy on the right track and its public finances under control.

©OECD

Better-off households contributed progressively more, while core welfare payments to the retired and the unemployed have been largely protected. Remarkably, Ireland’s tax and transfer system still does more to reduce inequality than any other in the OECD.

When I launched the OECD’s 2011 Economic Survey of Ireland, the Irish economy was in the depths of a deep recession. Two years ago, the clouds were beginning to clear. Today, I am delighted to see how far and how quickly the country has bounced back.

The economy is powering ahead and is the fastest-growing in the OECD. Strong growth is making a big difference in people’s lives, allowing the social scars of the crisis to slowly heal. Having peaked at over 15%, unemployment has fallen below 10%, while the economy is creating more than 1 000 jobs a week, most of them full time, and average earnings are picking up. Net emigration has fallen to a third of its 2012 peak as the labour market improves.

These successes owe much to the government’s steadfast commitment to reform. The banking system has been restructured and recapitalised, the fiscal deficit significantly reduced, government debt put on a declining path, public administration efficiency increased, and public employment services revamped. Ireland is on the right path!

Now is the time to secure the recovery, to ensure that restored prosperity is shared by all and to build resilience for the challenges ahead. Foreign investment has long been the cornerstone of Ireland’s dynamic IT, medical devices, pharmaceuticals and financial services sectors. Dublin’s cuttingedge IT cluster, the so-called “Silicon Docks”, houses the European headquarters of the biggest names in the global digital economy.

In contrast, Irish-owned small and medium-sized enterprises (SMEs) continue to lag behind, dragging aggregate productivity growth down to only 0.5% per annum–about a quarter the level in 2000. To give productivity a shot in the arm, government policy needs to better support the diffusion of knowledge and

32

One area where huge strides have been made is in labour activation. The government has been trying to transform a largely passive welfare system into one where a person’s first day on welfare marks the first step on their path back to work.

But challenges remain. There are still around 120 000 people who have been unemployed for over a year. Many of these people lack the necessary skills to participate in the recovery. Efforts to redesign the apprenticeship system are therefore welcome.

More can be done also to end unemployment and poverty traps.

Sometimes, as with housing and family income supplements, financial assistance is withdrawn too quickly as you earn more.

At the same time, child care costs are 40% of the average wage, the highest in the OECD. Much more needs to be done to make child care affordable, particularly for low-income families.

In Ireland’s case, ensuring an inclusive recovery also means further reducing emigration, welcoming home those who left in recent years, and better integrating those who have arrived since the turn of the century, and continue to arrive in relatively large numbers.

One striking feature of the migrant population, both into and out of Ireland, is that they are highly educated. More than half have post-secondary qualifications. Ireland needs to do better at attracting back its emigrants once they have benefitted from international experience, as well as integrating highly qualified immigrants into the domestic labour market.

Ireland is once again among the leading lights of the OECD’s economies. In the months and years ahead, the challenge is to make sure the recovery is sustainable and inclusive. The OECD stands ready to work with Ireland every step of the way to design, develop and deliver better policies for better lives.

Extract adapted from a speech delivered for the launch of the OECD Economic Surveys: Ireland in Dublin, 15 September 2015. Data may have evolved since time of delivery.

Read the full speech here: http://oe.cd/1f4. See also www.oecd.org/ireland.

SPOTLIGHT

IRELAND

Labour market reform: Why skills matter Joan Burton, Tánaiste (Deputy Prime Minister) and Minister for Social Protection, Government of Ireland, and Chair of the OECD Meeting of Employment and Labour Ministers 2016*

©Rights reserved/www.JoanBurton.ie

Ireland’s job market has improved markedly, thanks in no small part to strong policies for new skills to meet evolving demands and engagement with people out of work.

Ireland’s policies for recovery since 2011 have targeted employment creation through measures to promote enterprise and competitiveness.

These have been set out in successive annual statements of our Action Plan for Jobs. The growth in employment of 140 000 since early 2012 suggests these policies have met with a great deal of success. At the same time, Ireland has been implementing a series of labour market reforms under an overall strategy framework called Pathways to Work. These reforms broadly aim to ensure that the supply side of the labour market is supportive of employment growth. In particular, the focus has been on ensuring that as many as possible of the jobs created during the recovery are taken up by unemployed welfare recipients–particularly those people who were displaced in the employment collapse of 2008-09 and subsequently faced long periods out of work.

A major plank of the Pathways to Work strategy has been to reform our working-age benefits system and the way it interacts with the delivery of employment services. This has involved the creation of rebranded and revamped Intreo public service offices, which bring together the employment service with the payment system for jobseekers’ welfare payments and the community welfare service that delivers basic safety-net payments. The objective has been to ensure that newly unemployed people are engaged as quickly as possible with employment-service support.

Within the overall Pathways to Work approach, and in response to the EU Recommendation on a Youth Guarantee, our engagement with the young unemployed happens on a faster schedule than the targets for older jobseekers. In designing our approach to youth labour market issues, we had the benefit of a study issued by the OECD in 2014.

Having concentrated initially on reforming procedures for engaging early in the unemployment spell, we moved on in 2015 to a major programme for people who are already long-term unemployed. This is being achieved through the deployment of third-party resources in employment-service delivery, specifically for people who have been receiving jobseekers’ welfare payments for a year or more.

Skills development Pathways to Work is focused primarily on assistance in reentering employment. However, for people who fail to find employment in reasonable time, a range of opportunities is available to increase their employability. The importance we attach to skills development is shown by the types of opportunities offered. For the young unemployed, for example, almost three-quarters of the programme opportunities are in further education and training. (Others are in work experience and temporary employment programmes).

Vocational education and training provision for the unemployed form only a small part of Ireland’s overall effort to ensure that our people have the skills and qualifications required in a modern economy, now and into the future. Ireland has been undertaking a steady process of reform and improvement to the education system in recent years–with a particular focus on vocational provision. Major recent milestones in this process include the establishment of SOLAS, a new authority for further education and training, and an apprenticeship review that is leading to the establishment of 25 new apprenticeships in areas such as information technology, financial services, transport, tourism and hospitality.

Good job The scale of Ireland’s ambition in relation to upskilling is indicated by the strategic targets for education that we established as part of the EU 2020 process. We set out to reduce the proportion of young people classified as early school leavers from 11.4% in 2010 to 8% in 2020; by 2014 this figure had already fallen to 6.9%.

We also set out to increase the share of 30-34 year-olds who have completed tertiary or equivalent education to at least 60% by 2020; this figure stood at over 52% in 2014, well above the EU average of 38%.

There is evidence that the strategy followed under Pathways to Work since 2011 has supported a flexible labour market that allows the unemployed to share in the economic recovery. This is suggested, for example, by the fact that employment growth of 140 000 since early 2012 has been accompanied by a decrease of almost 120 000 in unemployment. In addition, long-term unemployment has fallen even more rapidly than overall unemployment, down from a peak of 9.5% in early 2012 to 5.0% by the middle of 2015. The impact of employment growth on both overall and long-term unemployment has thus been relatively strong compared with past recoveries.

Our work will continue on the refinement and development of policy to address the changing needs of a modern economy and society, and we will be launching updates of both Pathways to Work and the National Skills Strategy in early 2016. * “Building More Resilient and Inclusive Labour Markets” is the title of the ministerial meeting held at the OECD Conference Centre on 15 January. A policy forum on the Future of Work precedes the meeting on 14 January. For more information on these events, see http://oe.cd/future-of-work

OECD (2015), Economic Survey: Ireland, OECD Publishing OECD (2014), “Options for an Irish Youth Guarantee”, OECD Youth Action Plan, available at http://www.oecd.org/ireland/YouthActionPlan-IrishYouthGuarantee.pdf

OECD Observer No 305 Q1 2016

33

SPOTLIGHT

Ireland’s economy: A solid recovery Michael Noonan, Minister for Finance, Ireland

approach, which has focused on both the supply and demand sides of the market, is based on reactivating the unemployed through education, training and mentoring, and creating the right conditions for the private sector to create employment.

Putting the public finances on a sound and sustainable footing has been another key priority of the Irish government. Put simply, stable public finances are a pre-requisite for economic growth. To that end, the government set out a series of fiscal targets to bring

An inclusive recovery where the economic benefits are widely spread is a key objective

©AFP ImageForum

down the deficit on a phased basis, which I am pleased to say we overachieved each and every year. The underlying deficit fell from 8.6% of GDP in 2011 to an estimated 1.5% of GDP in 2015, with Ireland set to exit the Excessive Deficit Procedure as a result.

The recovery in the Irish economy is well under way. Determined policy responses to the fiscal, economic and financial sector challenges Ireland faced are now bearing fruit, with Ireland expected to be among the fastest-growing economies in the OECD this year and next.

The recovery has gained momentum over the last two years, with GDP expanding by over 5% in 2014, and by 7% in the first three quarters of 2015. GDP per capita is now above the pre-crisis peak recorded in 2007.

The expansion in economic activity, initially led by the exporting sectors, has become more sustained, with domestic demand now making a strong positive contribution to growth. Companies are once again investing in the real economy, and household consumption is expanding thanks to growing employment and rising household incomes.

I have always regarded the labour market as the best barometer of trends in the Irish economy and am particularly pleased that the latest figures show broad-based employment growth across the Irish economy, with increases recorded throughout the country and in virtually all economic sectors. The latest figures show that 140 000 net jobs have been created since the low point of the crisis, representing an 8% increase in the level of employment. As a result, the unemployment rate fell to 8.8% by December, representing a decline of over 6 percentage points from its peak in 2012. This however is not the end point; policy efforts will continue to focus on further reducing the unemployment rate.

We were careful to ensure that consolidation measures were strategically implemented in a manner that was least damaging to economic growth. In line with OECD research and recommendations, we have broadened the tax base through curtailment and elimination of tax expenditures, and reduced revenue volatility by focusing on more sustainable tax bases.

This is but one example of the great assistance the OECD’s expertise and independent advice has been to Irish policy makers throughout the crisis. More recently, I would like to thank the OECD for its work on the 2015 Economic Survey of Ireland, which provides a prescient analysis of the challenges now facing Ireland. The survey, along with previous OECD research, has highlighted the need to improve the tax and welfare system to remove potential disincentives to work. The government has sought to address these problems by lowering marginal tax rates faced by middle earners, a group that, as the OECD has shown, faces high marginal rates.

I also welcome the OECD’s focus on the theme of inclusive growth in the survey. The economic recovery has not yet filtered through to all; ensuring an inclusive recovery where the economic benefits are widely spread is a key objective for us, and the best way to achieve that is to ensure a return to full employment.

Ireland is moving further along the road to recovery. We have regained our competitiveness and stabilised our public finances, and are making significant progress in bringing the economy back to full employment. We have laid the foundations for a solid and sustained recovery. The task now is to build upon the gains we have made in recent years and to keep the recovery going.

Visit www.finance.gov.ie Noonan, Michael (2011), “Ireland: Confident of a return to force” in OECD Observer, No 284, Q1, OECD Publishing, see www.oecdobserver.org OECD (2015), OECD Economic Surveys: Ireland, Paris

These are significant achievements and are testament to the continued success of the whole-of-government approach we have taken in addressing the challenges in the labour market. Our

34

Ireland’s economy and the OECD From bricks to brains Michael Forbes, Ambassador and Permanent Representative of Ireland to the OECD

©Michael Dean/OECD

Nothing has demonstrated Ireland’s shift to modern economic policies more concretely than our decision to become a founder member of the OECD in 1961. Since then the OECD has been a trusted partner in our economic and social policy evolution.

The year 2016 marks the 50th anniversary of an OECD report entitled Investment in Education, issued in 1966 (see ad below). It was the first major sectoral report by the OECD on Ireland, and set in train a new approach to education in our country and showed us how we could address economic and social development through education. To meet the challenges and opportunities of engagement in the world economy, Ireland would from then on use education to help propel our development–in other words, our economic policy and work focus would move from bricks to brains. Free secondary education, which was introduced in 1967/68, was a first step in a process that was to set off a profound and positive social transformation.

Since taking up my post as ambassador to the OECD in 2012, I have personally witnessed the importance of Ireland’s engagement with the OECD as we grappled with the consequences of the international financial crisis and worked our way back to economic health. I have seen how the organisation’s advice has

SPOTLIGHT

IRELAND

helped our government in charting a reliable course out of those troubled economic waters to where we are now–the fastestgrowing country in the OECD–and how working with the OECD helps bring about positive, transformative change.

In February 2014 a government team led by the Taoiseach (prime minister) and the Tánaiste (deputy prime minister) visited the OECD in Paris for a day of policy discussion. The visit, which came

The OECD remains key to our economic and social progress at the invitation of OECD Secretary-General Angel Gurría as part of the OECD’s Leaders’ Forum programme, allowed us to assess the progress of our economic recovery and to exchange ideas on how the OECD could contribute further to improve domestic policy in Ireland.

As with all member countries, the OECD’s in-depth peer reviews on areas such as the labour market and job activation have informed this progress. The biennial Economic Surveys of Ireland have been of particular value to our government; the most recent edition was launched in Dublin by the OECD Secretary-General in September 2015, and it provided a further opportunity for meetings with the Taoiseach, finance minister, foreign affairs and trade minister, and leaders from trade unions and business.

Ireland will continue to draw upon the analysis and support of the OECD in our search for better public policies across government.

We will forget neither the role the OECD played in the emergence of our modern economy and society in the 1960s nor its assistance more recently in our recovery from the 2008 economic crisis. The OECD remains key to our economic and social progress.

OECD (1966), Investment in Education: Ireland, Educational Investment and Planning series, OECD Publishing.

Progress reports Order the OECD Economic Survey of Ireland now! www.oecd.org/bookshop The 1966 Investment in Education report is available as a scan at OECD Library & Archives.

Contact observer@oecd.org to request your pdf.

OECD Observer No 305 Q1 2016

35

SPOTLIGHT

Ireland’s economy: Still riding the globalisation wave David Haugh, OECD Economics Department

media, like Google, Facebook, Twitter, Airbnb and LinkedIn.

©George Karbus Photography/AFP

But Ireland’s success riding the globalisation wave goes far beyond the new economy. Three other key sectors– pharmaceuticals, medical devices and financial services–have also enjoyed a tide of investment: eight of the top 10 global pharmaceutical companies have a significant presence in Ireland centred on Cork, while half of the world’s top 50 banks and top 20 insurance companies operate out of the International Financial Services Centre in Dublin.

The recession in Ireland was long and deep, but has been followed by a marked recovery. Why is the expansion in Ireland so strong?

At the Cliffs of Moher, on the west coast of Ireland, surfers test their limits in an emerald barrel, Aileens, one of the world’s great surfing waves. Like those surfers, Ireland is back up after a banking and fiscal wipeout and riding the globalisation wave again, and in style. Ireland has come a long way since the dark days at the end of 2010, when–with a broken banking system and locked out of sovereign debt markets–it entered a three-year EU-IMF programme. In 2016 the economy should expand by over 4%; while that is slower than the more-than-6% real growth notched up in 2015, it would maintain Ireland’s place as the fastest-growing OECD economy for the third year running.

The public deficit has fallen steadily to 2% of GDP, public debt has declined from a peak of 120.3% to around 100% of GDP, and the banking system is back on its feet. Jobs growth is robust, with the unemployment rate sliding down from a peak of 15.1% to 9.3%.

36

Recessions caused by banking crises are notoriously long and recoveries muted, as several other EU countries have found out. The recession in Ireland was indeed deep and protracted, so why has the expansion in Ireland been so strong?

In two words: foreign investment.

Between 2009 and 2013, an extraordinary €125 billion (61% of GDP) of foreign direct investment (FDI) flowed into Ireland.

Even in the midst of the banking and fiscal crisis and emigration surge, quietly,

It’s either move up in the innovation system or move out almost under the radar, foreign capital and brains continued to flow into Ireland.

The most visible evidence of this lies in so-called “Silicon Docks”, situated in the rejuvenated docklands of Dublin port.

This is the heart of Ireland’s information technology (IT) cluster. Long-standing investors in Ireland, such as IBM and Microsoft, have now been joined by the European, Middle Eastern and African headquarters of the biggest new names in software, online services and social

These investments did not happen overnight: Ireland’s policy makers have laid the ground to attract capital over decades, at least going back to the 1960s when, thanks partly to OECD advice, a major effort was made to boost education and promote Ireland as a European enterprise destination. By the 1990s, Ireland had developed high-value attributes for innovative global business that the latest financial crisis did not remove.

However, like riding the Aileens barrel, the globalisation wave requires a constant adjustment and flow of new ideas–witness the transformation of Ireland’s IT sector from hardware in the early 1980s to software in the 1990s and 2000s, and pharmaceuticals from basic chemicals to active ingredients.

Moreover, for all its progress, Ireland’s innovation system still lags behind other small advanced countries, such as Austria, Denmark, Finland, Sweden and Switzerland, where business investment as a percentage of GDP is at least twice as high as in Ireland. Boosting this innovation dimension is the key to Ireland’s long-running goal to unlock greater spillovers from the huge pool of foreign investment to Irish-owned firms.

Dublin’s Silicon Docks, Cork’s marine technology and Galway’s medical devices sector show what can be done as clusters of foreign and local firms, supported by fine universities and research centres.

But more is needed.

Bluntly speaking, it’s either move up in the innovation system or move out. There is nothing automatic about linkages between the foreign and local firms–multinationals source worldwide along complex value chains. If locally owned firms succeed in these clusters, it is because they have developed smart products and services to sell and give their multinational clients an advantage over competitors. These spin-offs remain too limited, and spreading such successes requires tuning up the innovation system to better serve the needs of small dynamic firms, which are the harbingers of new, value-enhancing business in most cutting-edge economies.

Research organisations that focus on shorter-term product- and processrelated research are required–Enterprise Ireland’s new Technology Centres have promising potential in this regard. Ireland has expanded its tax credit for research and development (R&D), and it has many features of international best practice.

This is a clever step, since R&D tax credits don’t lead to the old trap of picking winners. However, tax credits assume a certain cash flow, which small startups might not have. Instead, direct R&D funding would suit smaller firms more, and some rebalancing of policy in this way would help them innovate. Building small firm capacity to absorb new ideas is also important; expanding industrial doctorate and master’s programmes that link enterprise to research institutions would generate a new cohort of entrepreneurs.

Finally, generating spillovers from FDI requires patience, a lot of it–local firms only started to join the medical devices cluster a decade after the first core foreign investors arrived in Ireland.

Even if Ireland gets all this right, it still faces the challenge of getting more people on board for the ride. Despite Ireland’s return to strong growth, a large group of people remains stranded on the beach, unable to reap the benefits.

Long-term unemployment is all too high and the employment ratio is low at around 62%, compared with over 70% in

Move up in the innovation system or move out Investment in Ireland’s Knowledge-based capital, slowdown in annual average growth

SPOTLIGHT

IRELAND

the highest marginal income tax rate on around the average wage, compared to just over five times the average wage for the OECD as a whole.

Clearly, their tax would be better served developing the potential talent and perspectives of everyone, including those out of work, rather than funding welfare to such an extent that it keeps far too many people inactive in what risks becoming a two-speed Ireland. The solution is to get

% 8

The social consensus that has long underpinned policy making is not beyond risk

6

4

2

0 1995-2000

2000-2007

2007-2010

Source: OECD (2015), OECD Economic Surveys: Ireland 2015, OECD Publishing http://dx.doi.org/10.1787/888933275168

Scandinavia and the UK. In Ireland there are high rewards for being educated– teachers’ salaries are among the highest in the OECD area, for instance–but stiff penalties for the less skilled. This gap, partly a consequence of Ireland’s globalised economy, contributes to the highest rate of inequality at market income in the OECD. The fact that there is not more discontent and a more destabilising social divide owes something to Ireland’s generous tax and welfare system, which brings inequality down to around the OECD average. However, the social consensus that has long underpinned policy making is not beyond risk. For a start, welfare is expensive, requiring high taxation rates, even on relatively modest incomes.

Strikingly, workers start paying almost

a wider cross-section of people back into activity. The government has started to advance this approach by adopting more active labour market policies. Improving training for the unemployed and reducing high marginal effective tax rates at low incomes (some families face a marginal effective tax rate of 60-70% on incomes between €16 000 and €32 000 per annum!) that penalise going out to work should now be priorities.

It is said that a crisis is an opportunity, and Ireland can emerge stronger and more innovative than before. If Ireland can create a world-class innovation system to bridge its foreign and domestic firms, while opening up the jobs ladder for everyone, it’ll handle the twists and rolls of the next the globalisation wave with aplomb.

References Kennedy, Seán et al. (2015), “Taxes, income and economic mobility in Ireland: New evidence from tax records data”, OECD Economics Department Working Papers, No. 1269, OECD Publishing, http://dx.doi.org/10.1787/5jrqc6zlgq31-en O’Connor, Brendan et al. (2015), “Searching for the inclusive growth tax grail: The distributional impact of growth enhancing tax reform in Ireland”, OECD Economics Department Working Papers, No. 1270, OECD Publishing, http://dx.doi.org/10.1787/5jrqc6vk3n30-en OECD (2015), Economic Survey: Ireland, OECD Publishing OECD (2015), OECD Economic Outlook, OECD Publishing

OECD Observer No 305 Q1 2016

37

SPOTLIGHT

Innovating Ireland Ireland has well-known firms such as Guinness for beer and beverages, Ryanair for air travel, and Smurfit Kappa for paper and packaging, not to mention dairies, beef and fish. However, for a small country that has turned itself into a thriving pharmaceutical and IT hub, Ireland is not awash with global brands in these sectors. Compare with, say, Finland which has Nokia, or Sweden which has Ericsson. True, there is Airtricity, but that innovative wind energy firm now belongs to an overseas company.

R&D policy Direct government funding and tax incentives for business R&D in 2013, as a % of GDP, selected countries Indirect government support through R&D tax incentives

Direct government funding of BERD USA

And according to a post on LinkedIn’s Pulse by Christopher Jimeson, a business consultant, Ireland is building a reputation in precision engineering in the aviation industry, such as Eirecomposites, Schivo Group (originally Waterford Tool Company) and DPF Engineering.

But in general, the Irish R&D and innovation system, while not a complete laggard (see chart), should be further up the field.

Encouraging more spill-overs into the Irish economy would likely improve productivity, create more and better jobs, and support broad socioeconomic development across Ireland (see article by David Haugh).

KOR AUT SWE FRA BEL GBR NOR ESP IRL

As with many OECD countries, productivity growth in Ireland has been falling for some time. Although Ireland’s multinational sector thrived through the crisis, the domestic small- and medium-sized enteprises (SME) sector has seen relatively low levels of competitiveness, productivity and R&D spending.

Strengthening the performance of domestic firms will help rebalance the Irish economy, generate new sources of growth and jobs, and further enhance the country’s attractiveness for foreign direct investment (FDI).

This means focusing on the business environment for young, innovative firms, ensuring that innovation programmes have sufficient scale to be efficient and improving the balance between indirect support for business innovation–through R&D tax incentives–and direct support, which is better suited to these firms.

The government could help strengthen Ireland’s domestic sector by shifting the balance away from tax credits and towards more direct support for innovation. R&D tax credits accounted for some 70% of all government supports in 2013. Though well designed and efficient in supporting business R&D in general, cash-strapped smaller firms derive little benefit from them. Direct support– contracts, grants and awards for mission-oriented R&D, etc–can complement existing tax incentives and can direct public funding to areas of high social and economic returns. It can also help address specific barriers in the Irish innovation system, such as boosting science-industry co-operation.

Moreover, Ireland has relatively few young patenting firms and young firms do not scale very well in many OECD countries, limiting their contribution to innovation, growth and jobs. Policy makers should therefore carefully assess whether any policies inadvertently constrain the growth of such firms. These may include reducing barriers to entrepreneurship as well as access to public procurement. Support for business accelerators and incubators, and better access to research and technology are

38

DNK ITA CAN JPN AUS CHE 0

0.1

0.2

0.3

0.4

Source: OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm and Main Science and Technology Indicators, www.oecd.org/sti/msti.htm, June 2015. http://dx.doi.org/10.1787/888933274317

particularly valuable for young firms and SMEs, and Enterprise Ireland’s new Technology Centres can help in this regard.

Policies that strengthen the digital economy also help, and the National Digital Strategy rightly emphasises the importance of digital technologies for Ireland. Improving uptake of fixed broadband connections, which is below the OECD average, and for mobile broadband, which is slightly above it, would act as a boon for small innovative businesses as they reach out to global firms at home as well as to markets in the euro area and beyond.

For more on innovation, contact Dirk.Pilat@oecd.org Jimeson, Christopher (2015), “Irish aerospace industry at the Salon du Bourget, Hall 4 A4”, LinkedIn Pulse, May OECD (2015), “Improving SMEs’ access to finance to boost growth and job creation in Ireland”, Ireland Policy Brief, OECD Better Policies Series, OECD Publishing, September OECD (2015) “Better innovation policies for better lives”, Ireland Policy Brief, OECD Better Policies Series, OECD Publishing, September OECD (2015), OECD Digital Economy Outlook 2015, OECD Publishing OECD (2015), The Innovation Imperative: Contributing to Productivity, Growth and Well-Being, OECD Publishing

Business brief

Trinity lights the way forward GBHI puts particular focus on translating research. How is Trinity positioned for this?

©Rights reserved

Interview with Dr Patrick Prendergast Provost and President, Trinity College Dublin, the University of Dublin

We’re strong on frontier research and on applied research and we don’t differentiate too much: all applied research started out as frontier, and all researchers want to see their discoveries applied. Since 2008 we’ve averaged seven spin-out companies a year, many of them very successful. Innovation is essential for an ageing population; the World Health Organization estimates that by 2050 there will be more than two billion people aged over 60, most of them in the developed world. Countries will need to draw on expert research to put in place policies, products and services to deal with this demographic change. Trinity will play a leading role.

How does Trinity encourage innovation?

Trinity has produced more entrepreneurs than any other university in Europe Tell us about your university.

Trinity is located in a stunning historic campus in the heart of Dublin’s city centre–it’s Ireland’s highest ranked university and one of the world’s top 100, and also one of the world’s oldest universities, founded in 1592. We’re multidisciplinary and this is reflected in the rich, diverse achievements of our alumni who include three Nobel Laureates: Samuel Beckett in literature, Ernest Walton in physics and William C Campbell in medicine, as well as the political thinker Edmund Burke and the former President of Ireland and UN High Commissioner for Refugees Mary Robinson.

You’ve just received a major donation from Atlantic Philanthropies.

How did this come about?

Yes, the Global Brain Health Institute (GBHI) is one of Atlantic Philanthropies’ five legacy projects before the foundation closes down activities. It’s a 15-year programme between Trinity and the University of California. GBHI will train global leaders in brain health by the rapid translation of research into policy. Trinity has been awarded about US$72 million, one of the most generous grants for a single project anywhere in the world.

This benefaction came about through the vision of Atlantic Philanthropies’ single benefactor, Charles F Feeney, whose philosophy of “Giving while Living” has inspired Bill Gates and Warren Buffet. Atlantic Philanthropies chose Trinity because we are world leaders in neuroscience and research into ageing. Trinity leads the Irish Longitudinal Study on Ageing (TILDA), which allows researchers from numerous disciplines–including epidemiology, neuroscience, social policy, psychology, economics, nursing–to collate research to develop a full understanding of ageing in all its aspects.

We’ve focused strongly on this over the past decade, with the aim of incorporating innovation, entrepreneurship and creativity into the way we research and educate. We’ve proactively enabled technology transfer, corporate partnership and knowledge exchange; and through our business incubator, LaunchBox, we provide students with seed funding and mentoring to grow their business ideas.

We’re also using our pivotal location in the heart of Dublin city to catalyse the arts; we’ve launched an open competition, the Trinity Creative Challenge, inviting artists to propose interdisciplinary projects with a Trinity focus. The five winning projects will be shown in college in April 2016; they include performance, visual art, music, film, design, animation, and gaming.

Our college initiatives are having effect. The private equity research firm, PitchBook, has published the results of its independent survey. Over the past five years, Trinity has produced more entrepreneurs than any other university in Europe. Our combination of interdisciplinary research capability with innovation, entrepreneurship and creativity is potent and justifies Atlantic Philanthropies’ faith in us. I’m excited about the products, policies and services that will emerge from Trinity over the next few years, and about educating the next generation in the skills that Ireland, and the world, needs most.

Sponsored by

www.tcd.ie OECD Observer No 305 Q1 2016

39

SPOTLIGHT

OECD Observer Roundtable

Ireland’s innovation challenge NERI A 10-point plan

Ireland has bounced back from the crisis to become one of the OECD’s most dynamic economies.

A key help has been the continued inflow of capital investment from abroad, allowing the country to bolster its position as a European hub for the likes of IT, finance, pharmaceuticals, engineering, and more. Ireland has been an attractive destination for global high-value investments for decades, yet its own innovation system lags that of other similar-sized OECD countries. Closing the gap would strengthen the country’s long-term outlook, but how can this be done?

Tom McDonnell, Nevin Economic Research Institute, Dublin, Ireland*

In our OECD Observer Roundtable, we put the question to a distinguished panel representing a range of perspectives:

Enterprise Ireland Towards recognising and rewarding innovators

©Rights reserved

Julie Sinnamon, CEO, Enterprise Ireland

For Enterprise Ireland (EI), “innovation means business”. There is clear evidence that innovative companies perform better, grow quicker and are more sustainable.

Innovation is one of the four pillars of EI’s strategy to grow Irish industry.

To harness innovation for economic impact, companies need a blended suite of interventions. This must be marketled and market-informed, and given that the majority of our clients are small and medium-sized enterprises (SMEs), it must also be impactful for all companies and at all stages of development.

EI’s direct innovation-building interventions include financial assistance with in-company research and development (R&D) and business processes through to innovation management training. When dealing with an all-pervasive process, and driving it with multiple interventions, high standards and regular programme reviews are vital for ensuring the optimal

40

impact from taxpayers’ money. The recent European Committee for Standardization in Innovation Management will help our client companies to benchmark and manage their innovation while providing a clear framework for improvement.

One important facet of innovation is the connection of companies to external sources of innovation, and this connectivity is a key indicator of innovation intensity. Ireland’s publicly funded research system has an important contribution to make as a significant source of disruptive opportunities and access to globally connected, innovative people. EI provides research commercialisation funding, commercialisation support services (to close the “investability” gap) and co-financing for market-led industrial collaboration. Such support must also be market-led, executed using commercial practices and in an environment that is as “industry-like” as possible.

Given that success in innovation is dependent on people, it is imperative that researchers from the Irish publicly funded research system participating in these activities are properly recognised and rewarded, and this requires some more work. In addition there is a substantial contribution made to the research system by researchers who are not Irish citizens, with a significant proportion of those being from countries outside the European Economic Area. Given the global competition for talent, more needs to be done to ensure that those researchers, where willing, get the opportunity to contribute to economic impact in Ireland when they finish their research.

Visit www.enterprise-ireland.com

©Rights reserved

What would you do to promote innovation in Ireland and what policies would you like to see introduced?

The economy’s innovative capacity is a function of education and skill levels, government policies that support research and development (R&D), and the quality of capital markets, among other things. The government has a critical role to play in this regard.

Innovation and R&D are fundamental determinants of international competitiveness, productivity gains and economic growth. Ireland’s gross domestic

Establish a state investment bank to raise affordable funding for innovating enterprises expenditure on R&D was just 1.6% of GDP in 2012 compared with 2.4% for the OECD and 2.8% for the US. Combined government and higher education spending on R&D according to the OECD was less than 0.8% of GDP in 2012 compared with 1.1% for the EU and 1.2% for the US. A 10-point plan might look like this: 1. Increase government and higher

education spending on basic and applied research, targeting 1% of GDP. 2. Provide incentives (such as subsidies)

to take up science, technology, engineering and mathematics courses at undergraduate and postgraduate levels.

3. Establish a state investment bank to

raise affordable funding for innovating enterprises, including seed funding for high-potential start-ups.

penalise failure and risk-taking.

5. Address market failures in the

provision of high-speed broadband access.

6. Increase education budget for early

years learning (targeting disadvantaged households as a priority).

7. Reform the patent system to prevent

market incumbents from locking in advantages and excluding new entrants, and shorten patent protection in the IT sector.

8. Provide grants for adoption of new

technologies by small and mediumsized enterprises (SMEs).

9. Increase support for horizontal links

among the state, higher-level institutes and enterprises.

10. Protect child care, family, housing

supports and health care services at sufficient levels to avert child poverty, which has an extremely damaging effect on human capital formation.

Given Ireland’s relatively low revenue/GDP ratio by EU standards, there appears to be some scope for policies to increase the revenue to pay forthese policies.

Contact Tom.McDonnell@NERInstitute. *The Nevin Research Institute is supported by a number of unions affiliated to the Irish Congress of Trade Unions (ICTU); see www.nerinstitute.net

Amneal Pharmaceuticals Wanted: Home-grown scientists Chirag Patel and Chintu Patel, CEOs and Chairmen, Amneal Pharmaceuticals

©Rights reserved

We are in the midst of starting up our operations at our facility in Cashel, which will be dedicated to research

and development (R&D) as well as the production of meter-dosed inhalers and dry-powder inhalers. We are also going to focus on developing and producing biosimilars–approved biological products that are comparable to originator biologics

Another area of government focus should be creating and maintaining vital and reliable infrastructure, so manufacturers like us can receive incoming raw materials as well as distribute and ship our final products across Europe and the United States without disruptions.

A big part of our employee population will be skilled individuals

Visit http://amneal.com

Microsoft Ireland Ireland could be a pioneer in cloud services

in terms of safety and effectiveness. These are all high-end specialty medications for the treatment of life-threatening diseases such as cancer, asthma and chronic obstructive pulmonary disorder (COPD), which will be distributed across Europe and the United States.

Continuous innovation will stem from ongoing testing of ingredients, drug delivery components, product formulation and stability. These medicines will be produced on very sophisticated manufacturing lines equipped with a high level of automation and quality control systems. We are constantly in search of the best new technological advancements to enhance the patient experience.

Ultimately, our goal is to ensure that patients around the world can reasonably afford safe and effective medicines to enable them to live healthy lives.

While a favourable investment climate is essential to our success in Ireland, recruiting for scientists, engineers and R&D specialists is an important part of the equation. We expect to hire 250 to 300 employees, and a big part of our employee population will be skilled individuals capable of developing and manufacturing high-quality medicines.

We plan to work with research communities and universities down the road to find the right talent for our organisation. However, the government must work on building home-grown talent, particularly in the areas of science, technology and engineering, and place greater emphasis on these courses across the education system to provide a base of skilled workers in these disciplines. A deep and diverse talent pool that we can tap into will be important to our longterm success and driving innovation in our Ireland operations.

Cathríona Hallahan, Managing Director, Microsoft Ireland

©Rights reserved

4. Reform bankruptcy laws to not overly

SPOTLIGHT

OECD OBSERVER ROUNDTABLE

Microsoft celebrated 30 years in Ireland in 2015. In that time as a company we have grown and changed a lot: we’ve gone from being a software company to a devices and services company embracing a Cloud First, Mobile First world.

With a team of 1 200 people working in software development, research and development, engineering, sales and marketing, and the data centre, Ireland is the only location outside our headquarters in Redmond, Washington, that has every aspect of our business located in one place.

Critical to our success in furthering innovation has been the great work environment we have created. Flexible and diverse, and with an emphasis on collaboration, we have nearly 50 nationalities represented in Microsoft Ireland today, reflecting the diversity of our customers throughout Ireland and the globe.

We recently announced our investment in a new campus to house our team under one roof, which will support our objective to continue to lead and innovate through

OECD Observer No 305 Q1 2016

41

SPOTLIGHT

OECD Observer Roundtable

To ensure that Ireland’s next generation is its most innovative yet, Microsoft became an official European partner for the CoderDojo Foundation (www.coderdojo. com), which introduces children to technology and coding at a young age.

We also work closely with the start-up community in Ireland. Through our Microsoft BizSpark programme we have supported 2 000 Irish start-up companies since the programme launched in 2008.

Finally another European-wide problem we’ve been focused on finding a solution

We have supported 2 000 Irish start-up companies since 2008 to is youth unemployment. In response to both the crisis and the requirements of our ecosystem of partners, to fill job opportunities we’ve partnered with FIT* to create an initiative called Youth2Work.

Through an initial €3 million investment from Microsoft, the programme is on track to reach 10 000 young people through training.

We are very supportive of government efforts to drive more cloud usage. Ireland has huge potential to become known as a pioneer in the use of cloud services–in the private sector but critically also in the delivery of citizen service. We’re ambitious for Ireland and its future–and look forward to continuing our relationship with the country.

Visit www.microsoft.ie * Read more about FIT (Fastrack into IT) at http://fit.ie/

Stirling Behavioural Science Centre Innovation for well-being Liam Delaney, Professor of Economics and Director, Stirling Behavioural Science Centre, University of Stirling* A key potential for innovation in Ireland lies in engaging the developing literature on behavioural science. The creation of the Behavioural Insights Team in the UK and similar efforts across the world, along with

42

example of how this might be done.

©Rights reserved

reinventing productivity and business processes, building the intelligent cloud platform, and creating more personal computing for our customers.

Liam Delaney a sustained focus on practical applications of behavioural science, offers an important source for innovation.

Public policies in Ireland should be driven increasingly by ideas from a wide range of disciplines, such as psychology and behavioural economics, tested more

Public policies in Ireland should be driven increasingly by ideas from a wide range of disciplines

For such measures to provide a key impetus for innovation in Ireland, they must be fed into the democratic process and become accepted as measures by which governments can be held to account by their electorate. This will require widespread consultation across society.

By combining a focus on behaviourally designed, ethically driven and smartly evaluated public policies with a greater focus on wider measures of well-being, Ireland could innovate across a wide range of public policies that are crucial to people’s welfare. www.stir.ac.uk/management/research/behaviouralscience-centre/ * See http://rms.stir.ac.uk. Prof Delaney is formerly of University College Dublin.

Visit www.oecdbetterlifeindex.org

The Stone Twins Education, but not any education Garech Stone, The Stone Twins Brand Consultancy, The Netherlands

cleverly and adapted more rapidly. This should be driven by more nimble crossdepartmental teams with capacities to develop and evaluate policies with a solid foundation in the literature and in international experience. This would facilitate the development of a wide range of innovative agendas, from financial regulations that are grounded in how people actually make financial decisions to the development of health services that reduce waste caused by a wide range of behavioural biases.

The development of a core group of civil servants working in collaboration with academics, practitioners and other stakeholders to develop such policies would be a key step.

As well as grounding policy in such principles, a related innovation is to rethink what is the ultimate goal of public policy. GDP, while extremely useful, is not a good measure of overall societal well-being. Developing metrics based on a wider set of criteria is crucial: the OECD Better Life Index provides one key

Promoting innovation in Ireland does not require the establishment of another quango, the extending of tax credits or the bannering of a fluffy marketing slogan, such as “Innovation Comes Naturally”.

If the Irish government is serious about promoting innovation, then it must rethink the fundamental principles of primary- and secondary-level education.

Reforming education to take a more holistic approach is the only way to cultivate a true innovation agenda.

SPOTLIGHT

Well-being in Ireland In general, the current education model revolves around the rote learning of lists and prose, and culminates in exams and grading. It prioritises academic ability–valuing languages, sciences and mathematics at the expense of the arts

Ranking of well-being topics by users of the Better Life Index in Ireland 12%

10.05% 10.02%

Conformity kills innovation

True innovation–the one that is a powerful economic force and driver of prosperity– comes from a culture of questioning and shared knowledge. Innovation requires an open, fluid network.

Here in the Netherlands, my little boy goes to a vrije–or Waldorf–school. This educational approach has its foundations in anthroposophy, a philosophy founded

by Rudolf Steiner. It is a schooling fuelled by the ideal of bringing forth every child’s unique potential, while respecting the talents and merits of others. Waldorf (Steiner) education encourages creativity, and celebrates the three I’s of imagination, inspiration and intuition. Most of the students turn out to be well-rounded, intelligent and, importantly, everinquisitive. Unlike the state schools, this education appears to provide a fertile place for facilitating the fresh thinking where innovation can happen. After all, the innovators of tomorrow will be those who have learnt to think for themselves.

Visit www.StoneTwins.com

9.66% 9.01%

8.96%

8.67%

8.58%

8.43%

8%

8.26% 6.78%

6%

and humanities. But within this narrowly conceived curriculum (which is geared primarily towards university entry), it produces too many clones: children who regurgitate reams of facts, yet possess no critical thinking skills. Conformity kills innovation.

In addition, the education system pigeonholes children when they’re too young by forcing them to specialise, and continually encourages competition and individualistic goals. All these things stifle innovation.

11.04%

10%

4% 2% 0%

Life

n ctio

isfa

sat

ife

rk-L Wo

e

anc

Bal

alth He

n atio

c Edu

s Job

e nt om me iron Env

Inc

ng

usi Ho

ety Saf

nt nity me mu age Com c eng i Civ

Irish users give greater importance to life satisfaction, work-life balance and health.

Ireland’s country ranking in the 11 well-being dimensions

Environment

Ranking out of 36 countries Housing

Civic engagement

Income

Health

Jobs

Life satisfaction

Community

Safety

Education

Work-life balance

See www.oecdbetterlifeindex.org/ For note on Ireland’s OECD Better Life Index, visit http://oe.cd/1ge

OECD Observer No 305 Q1 2016

43

SPOTLIGHT

Banking on Silicon Docks of the downturn, its marketing campaign to attract international tech firms into the area has succeeded in luring in companies such as Indeed.com, HubSpot, Dropbox and Facebook.

What seems certain is that low tax is not the only draw; true, at 12.5% Ireland’s corporate tax rate is one of the lowest in Europe, though it is also true that many other jurisdictions offer low

Silicon Docks also helps to attract IT investment to the rest of Ireland

©REUTERS/Cathal McNaughton

taxation, yet do not gain the same levels of inward investment.

Ireland’s highly skilled, well-educated and technologically savvy workforce has also been cited as a draw, while being an Englishspeaking country within the euro area is an obvious asset.

Furthermore, the magnetic power of the Silicon Docks community is an attraction in its own right.

While Silicon Docks’ original fraternity of behemoths has outgrown its original office space, with many of the global tech names expanding their presence there, it has morphed into a tech cluster, which spans central Dublin and gathers a cohort of Irish entrepreneurs, too.

Even in today’s “weightless” global economy, location has solid value. After all, it is no coincidence that Silicon Docks, the nickname of Dublin’s high-tech hub, should emerge in Ireland.

The culmination of a long-term vision to regenerate the capital’s dilapidated port area and a dogged determination to convince a still-budding if surging Google to set up its international headquarters in the capital in 2003, Silicon Docks, like Silicon Valley in California, is now attracting global attention. While technology companies such as Apple, Microsoft and Hewlett Packard all set up headquarters in Ireland beginning in the 1970s, it was Google’s arrival in Dublin’s docks that consolidated the country’s attractiveness with a new contemporary edge.

It quickly became the pull factor for other investors, and today Silicon Docks, transformed by Dublin Docklands Authority (www. dublindocklands.ie) is home to some 50 international tech firms, including the world’s leading “born-on-the-internet” companies in sectors such as search, games, e-commerce, online payments, personal services and marketing.

The cluster effect of the big names Google, Facebook, Amazon, Yahoo, eBay and Twitter convinced US messaging service Slack to open its European office in Dublin in 2015, while Airbnb moved its European HQ to Dublin in 2014, creating 100 new jobs. Linkedin has also added its name to the list.

The Industrial Development Authority (IDA), the semi-state body charged with attracting foreign investment, estimates that the internet sector is worth over 40 000 direct jobs, €2 billion in wages and €1 billion in corporate taxation, and predicts it will create an additional 45 000 jobs by 2018.

The IDA showed vision setting up an emerging business unit in 2010 under its Horizon 2020 plan to attract new investors. In spite

44

It also helps to attract investment to the rest of Ireland. The tech world has been embedded outside the capital for decades, with giant tech companies, such as Apple in Cork and Hewlett-Packard (HP) in Galway. Indeed, Galway’s own tech hub is now flourishing, with a solid talent pool flowing from local universities, and the presence of several major US tech companies including IBM, Cisco, HP and SmartBear Software. In 2015 HP’s new innovation centre opened, marking its 44th year in Ireland. Apple also has heightening interest in Galway with its plans to create a monster data centre. Apple’s European headquarters in Cork now employs more than 4 000 people, making it the city’s largest private-sector employer. Some of Cork’s youngest technology companies, including Xanadu, Trustev and Teamwork, are thriving, and others are bubbling up in rural towns such as Skibbereen.

Efforts by these firms to reach out to the next generation show they are keen to stay. Some teach kids how to code and develop software; others are investing in partnerships with schools and universities.

Can Silicon Docks keep thriving, and investment in Cork and Galway and other places too? Much depends on global trends in technology, but also on constantly improving government policy towards innovation, skills and global trade. By spurring a stronger, more dynamic, sector, including among home-spun businesses, Ireland could become Europe’s silicon coast. Claire MacDonald See more on the Industrial Development Authority at www.ida.ie Newenham, Pamela (2015), Silicon Docks: The Rise of Dublin as a Global Tech Hub, April, Liberties Press Patnaude, Art (2015), “Tech Workers Flock to Dublin’s Silicon Docks”, in The Wall Street Journal, May

Business brief

©Shaun Murphy

Ireland: Open for investment

Shaun Murphy Managing Partner KPMG in Ireland

The start-up environment is exceptionally dynamic Ireland had the highest rate of economic growth in the EU in 2015. Strong exports, increasing employment and a highly attractive foreign direct investment (FDI) offering have helped the Irish economy stage a strong recovery writes Shaun Murphy, Managing Partner of KPMG Ireland.

The economic shocks experienced by Ireland following the 2007 crash were severe. A credit squeeze, increased personal taxation and reduced exchequer spending created significant economic and business challenges.

Faced with a rebuilding of its economy and international reputation, the Irish government and other stakeholders successfully set about the task of restoring our credibility. In 2016, Ireland is expected to record the strongest GDP rate of growth in the EU and an unbroken pattern of inward investment has helped Ireland reaffirm its record of long term growth and stability.

Notwithstanding a number of challenging years, Ireland’s record of delivery as a first class destination for international investment was rarely if ever called into question–proof if it were needed of the underlying strengths of Ireland as a location of choice for foreign direct investment (FDI).

For government, the tasks involved in maintaining Ireland’s attraction for businesses of every type and size have been significant. Firstly, in the context of a pan-European debate about how best to get economies back on track, the Irish government successfully restored the country’s reputation with international creditors. The efforts of government and the effectiveness and reputation of the tax collection function of the Revenue Commissioners were fundamental–further reaffirming our national economic credentials.

Secondly, state agencies and IDA Ireland in particular continued to work to promote Ireland’s business appeal. The commercial focus of embassies and the leveraging of a well-connected diaspora have all played their part. The results have been impressive. IDA Ireland has reported a strong performance in 2015 with the creation of over 19 000 new jobs, the most ever recorded in the agency’s 67 year history. High performing sectors such as financial services, agribusinesses, pharma and technology, to name just a few, have reinforced Ireland’s position as an FDI hub.

This long-term attractiveness of Ireland as a secure and stable home for inward investment is evidenced by the facts. Over 1 200 companies

from global giants to high-growth brands have chosen Ireland as their strategic European base. Intel recently marked its 25th anniversary in Ireland, with an accumulated investment in their Leixlip Campus near Dublin of US$12.5 billion. In 2015 Microsoft celebrated its 30th year in Ireland, while in 2014 Xilinx marked its 20th year here and Citi and Bristol Myers Squibb their 50th.

These stories of investment success speak for themselves and help promote a cycle of investment motivated and reassured by the Irish performance of these companies.

Total employment in FDI in Ireland now stands at almost 175 000 people, the highest level in the history of the IDA. In 2015 there were 213 investments, up from 197 in the previous year. According to the American Chamber of Commerce in Ireland, US companies have $204 billion in foreign direct investment in Ireland, representing 9% of all US investment in the EU and 4.5% worldwide.

Inevitably, the tax environment plays an important role in helping senior decision makers choose Ireland. We have a stable tax regime with an extensive tax treaty network. The main company taxation benefits of being headquartered here include a highly competitive 12.5% corporation tax rate for active trading businesses, an attractive research & development tax credit regime, and tax depreciation for capital expenditure on intellectual property (IP).

The start-up environment is also exceptionally dynamic. Forbes magazine recently listed Dublin as one of the top seven cities in the world for start-ups. Ireland has the youngest workforce in Europe with 40% of the population under 29 years old. Ireland’s education system ranks in the top ten in the world according to the IMD Competiveness Yearbook 2015, which also ranks Ireland first in the world for the availability of skills, openness to new ideas and flexibility and adaptability when faced with new challenges. Furthermore Ireland is undoubtedly an attractive destination for internationally mobile and skilled people. Quality of life indices regularly rank cities such as Dublin in the upper reaches of global league tables.

The Irish government has recognised the need for tax certainty to help maintain our inward investment track record. The 12.5% rate is established and is settled policy of all of Ireland’s major political parties, both in government and opposition. The level of social cohesion and political agreement about pro-business policies is striking. In an uncertain world, Ireland also shows an emphatic commitment to the EU, providing further reassurance to investors. In conclusion, there is no complacency about Ireland’s position as a location of choice for business and stakeholders remain focused on providing the most attractive mix of reasons to choose Ireland.

Sponsored by www.kpmg.ie OECD Observer No 305 Q1 2016

45

SPOTLIGHT

Casting off towards a blue future Lorna Siggins, Marine and Western Correspondent, The Irish Times

sea-based economy to its full potential.

It has identified five key sectors: blue energy, aquaculture, maritime coastal and cruise tourism, marine mineral resources, and marine biotechnology.

Meanwhile, the European Marine Board, representing key research institutions across the community, has recently identified the need for greater focus on the deep sea environment, below 200 metres. “Earth’s inner space” of cold and dark abyssal plains and hydrothermal vent ecosystems may hold secrets to the origins of life, it says.

©2010 ERSI

Mr Coveney’s ambition is to ensure that Ireland secures a stake in what he describes as the “blue century”. A report published by the Socio-Economic Marine Research Unit of NUI Galway, a university on the west coast, during the summer of 2015 noted that Ireland’s maritime sector was performing better on average than the general economy, at a growth rate of 8-9% between 2010 and 2014.

Open any atlas, look at any globe, and Ireland appears as a small green island on Europe’s Atlantic rim. But in fact, Ireland’s territory is almost the size of Germany, and mostly blue.

If you asked Vice-Admiral Mark Mellett, the current head of the Irish military what sovereign territory he is responsible for, he would point to a 1 million square kilometre horizon, equivalent to ten times the land size, with some 93% of it underwater.

Mr Mellett, the first Naval Service officer to hold such a senior position in the Irish defence forces, would also wax lyrical about the economic opportunities offered by a sea area with some of the most biologically rich fishing grounds and some of the most energetic waves in the north-east Atlantic–and with potential for “trillions” of euros in hydrocarbons and renewable energy.

46

Over 40 years after Ireland traded access to its waters by European fleets for EU concessions for the agricultural sector, Mr Mellett’s appointment in September reflects a very different approach by the Irish state to the marine. Such was the lack of enthusiasm in opportunities beyond the coast during the 1970s that those appointed to marine affairs would joke about being responsible for “fish and ships”.

No longer. Simon Coveney, current holder of that portfolio, is a keen sailor whose passion for the sea led to an integrated marine plan, Harnessing Our Ocean Wealth, published in 2012. It has a target of doubling the value of Ireland’s “blue economy” by 2030.

Parallel with this is the EU’s own blue growth initiative, which recognises the need for considerable investments in science and technology to develop the

Marine-related employment rose from 17 425 to 18 480 full-time equivalents in 2012-14, with turnover of about €4.5 billion a year.

Developing the marine economy is a long game. Irish scientists are already heavily involved in national and international projects, ranging from seabed mapping to locating and protecting cold water coral on the continental shelf to measuring ocean acidification caused by the rise in carbon dioxide levels in the atmosphere.

Some have worked with the European Space Agency on monitoring and forecasting of jellyfish blooms that can have a negative impact on fish farms, for instance. Other projects include research into wave and tidal energy to using sail power for propelling naval ships. Organic cod farming is also under development.

Research is focused at NUI Galway and at University College Cork, which is part of an Irish maritime energy research cluster

involving Cork Institute of Technology and the Naval Service. The state-run Marine Institute in Galway is designed to play an overarching role in co-ordination.

Raising the funds for this research and scientific work is a challenge, whatever the long-term benefits. EU and Irish public funding geared towards applied research tends to favour valid projects

The target is to double the value of Ireland’s “blue economy” by 2030 with immediate job creation prospects and private-sector funding. Yet as the OECD argues, a truly innovative climate needs public funding for basic research.

Professor Colin Brown, the director of NUI Galway’s Ryan Institute, gives an example from the domain of earth observation.

He explains that high-frequency radars geared to monitor the sea surface can measure wave heights and sea surface currents. These data can then be input into hydrodynamic computer models with meteorological data, such as wind speeds, and can then be used to forecast the energy available. Such innovations for smart energy use also have the potential to predict flooding and sea surges.

shipping firms along Ireland’s coast, but decried the Irish people’s generally indifferent attitude towards the sea and their preference for land on an island where beef forms more of the national diet than fish or seafood (most of which is exported). Some blame this paradox on a deeply rooted fear among some communities of the hostile oceans that for years claimed so many lives when fishers were dependent on small canvas boats called currachs, others on the fact that fish on Fridays was seen a penance rather than a pleasure, and still others on the political influence of the Irish livestock industry.

Dublin, and the beginnings of marine tourism on an Atlantic rim that is now a magnet for surfers worldwide.

These attitudes are changing, and Dr Ireland lived just long enough to see the development of a multimillion-euro fishing industry in ports such as Killybegs in County Donegal, the founding of a maritime museum near his home in

Marine Co-ordination Group (2012), Harnessing Our Ocean Wealth: An Integrated Marine Plan for Ireland, www.ouroceanwealth.ie/about-plan

Though Irish proverbs like “the sea receives its own” (originally in Gaelic Irish) reflected that historical fatalism, Dr Ireland also noted more positive sayings. “The person who owns a boat will one day find their reward” was one that he particularly liked to share with political leaders. Recent progress in Ireland’s blue economy suggests that his subtle message has finally been heeded.

References De Courcy Ireland, John (1992), Ireland’s Maritime Heritage, An Post, Dublin

European Marine Board (2015), “Delving Deeper: How can we achieve sustainable management of our deep sea through integrated research?”, EMB Policy Brief No 2, November

From Goias to Galway Brazilian Jobert Marinho stands in the doorway of his local gym, where he trains, in Gort, County Galway, November 2014. Irish migration is no longer just about leaving the country, but moving to it, too, and from all over the world. Migration to Galway, for instance, was strong during the Celtic Tiger years, leading Ireland’s third largest urban area to become one of Europe’s fastest growing cities. Mr Marinho moved to Gort with his family five years earlier from

the central Brazilian state of Goias, joining some 400 of his compatriots in this rural town of 2 600 people.

Known locally as Little Brazil, according to reports, at one point a third of residents were Brazilian. The billboard on the left announces the visit to Gort’s boxing club of Olympic boxing champion Katie Taylor.

Visit http://cityofgalway.net

©Paul Faith/AFP

Prof Brown believes a real breakthrough is in the offing, and though he compliments the Irish government on its investment in marine renewable energy innovation, he believes climate change should figure more strongly in their funding considerations.

His vision would have found hearty support from another leading advocate of the sea, the historian John de Courcy Ireland, who died 10 years ago in April.

Dr Ireland ploughed the seas as a young man, working for several merchant navies, and was later decorated by countries around the world for his services to the sea, including the likes of France, Spain and Argentina.

Dr Ireland always praised the hardworking small ports and family-run

SPOTLIGHT

IRELAND

OECD Observer No 305 Q1 2016

47

SPOTLIGHT

From crisis to recovery: Overcoming scars and social costs Claire Keane, OECD Directorate for Employment, Labour and Social Affairs

only one-fifth were unemployed, and close to half held full-time positions before leaving. A further 13% were in part-time jobs. Many emigrants who were employed prior to leaving Ireland reported low levels of career satisfaction.

A lack of career opportunities, as well as underemployment in the case of part-timers, were likely drivers of the emigration upsurge.

Migration does not have to be all bad news–returning migrants can bring back skills and experience gained abroad; indeed, emigrants returning to Ireland

©David Rooney

Close to a quarter of Irish households fall into this “jobless” category, compared with just one-tenth across Europe

The economic and financial crisis has posed a stern test of many countries, though in Ireland, which enjoyed a boom for over a decade, the challenge was particularly stark. The scars are still there, but so are opportunities.

Well-targeted, sensitive social policies can yield positive results.

The scale of the economic and social shock that Ireland has experienced in recent years was one of the worst in OECD countries. GDP and average household disposable income fell by 16% peak to trough, while unemployment soared from a low of 3% in 2007 to a peak of 15% in 2012. A collapse in the construction sector and a banking crisis that rippled well beyond Irish shores left the Irish government unable to borrow in international bond markets.

A €67.5 billion financial assistance plan was thrown as a lifeline from the troika of the EU, the European Central Bank and the International Monetary Fund. Tough

48

reforms and austerity were bitter pills to swallow by an electorate that took the brunt. It has been a long journey, with Ireland finally exiting the financial assistance programme in December 2013. Economic growth has accelerated to become the highest in the OECD, unemployment has fallen towards 9%, and public finances have improved ahead of forecasts.

Nevertheless, the crisis has left deep scars. Recent research by the OECD found that one in six Irish-born people live outside Ireland, the highest rate of any OECD country. Since the onset of the recession in 2008, around 650 000 people have left Ireland, or about 13% of the current Irish population, far more than the population of any city outside Dublin.

Those emigrating were mainly highly skilled and, perhaps surprisingly, employed, too. A 2013 study examined emigrants’ labour force status and reasons for emigration and found that

tend to earn a wage premium of 7%.

But not everyone returns. The recent wave of emigration from Ireland has consisted of higher numbers of people over 30 than in the past, including people with children. This group may be less likely to return, and represents a cost to the government that had invested in their education. Moreover, there is a less visible, but nonetheless serious, social and psychological toll of migration to take into account, particularly on families. Households in rural areas were more likely to have experienced emigration recently, which may lead to the depletion of young people from rural areas. Emigration has also been linked to a decline in mental health among the mothers of emigrants.

Economies take time to adjust to the skills gap emigrants leave behind.

Luckily Ireland today is a labour market destination, and though migration to Ireland fell sharply at the onset of the recession, it continued during the recession with over 450 000 migrants arriving between 2008 and 2014. The integration of migrants and their children has become a policy priority, particularly in light of the current refugee crisis faced

by Europe. Some 80% of migrant children are concentrated in 23% of schools,

a concentration that risks causing “ghettoisation” and slower integration into Irish society.

A better jobs market would certainly be helpful. Despite falling unemployment, long-term unemployment remains high–close to 60% of the unemployed have been out of work for at least a year (see article by David Haugh). Research shows that being out of the labour market for extended periods can result in persistently lower wages and higher rates of unemployment in the future; indeed, getting the long-term unemployed back to work becomes harder the longer they remain out of work.

Ireland has a high proportion of “jobless households”, where no one works, or works low hours only. Close to a quarter of Irish households fall into this category, compared with just one-tenth across Europe. Moreover, a recent report showed that the proportion of households with children reporting difficulty in making ends meet doubled from 31% to 61% between 2008 and 2011, which is not surprising given an average drop in household income of 16%. This economic strain has affected family relationships, with parents reporting more frequent arguments and lower relationship satisfaction. Research shows that financially stressed parents become less affectionate, while the deterioration of child-parent relationships is associated with higher child anxiety, poorer conduct and worse educational performance.

Young adults have also suffered, which is a wide policy challenge, for as OECD research shows, what happens in the first 10 years of young people’s working lives affects not only their careers, but their personal circumstances and happiness, too. In Ireland, youth unemployment rose from 9% in 2007 to 30% in 2012. The Irish NEET rate–this stands for young people who are “Not in Employment, Education or Training”–doubled from 11% in 2007 to 22% in 2010. Underemployment is also an issue with 41% of those over 25 and 31% of those under 25 having no choice but

to work part-time. Clearly, it is becoming necessary to focus policy on the needs of young people, through labour market schemes, education and more.

As writers in this edition argue, Ireland must work hard to stay on the innovative, globalisation wave. However, innovation should not apply just to the likes of finance, pharma or fibre optics. New skills in sharing and caring also matter,

The importance of social skills has never been greater both in support of other sectors and as generators of value. Recent EU research shows that four lower-skilled positions are created for every high-skilled position, as high-skilled workers increase the demand for child care, restaurants, leisure, etc. Research in Germany has shown how workers reacted to job losses by upgrading tasks that are difficult to offshore and improving interpersonal and multitasking skills. In fact, while technology may be automating routine jobs, the importance of social skills has

SPOTLIGHT

IRELAND

never been greater. Non-cognitive skills, such as agreeableness and perseverance, can be taught and acquired, and today, initiatives such as mentoring nurture these non-cognitive skills.

In fact, given Ireland’s renowned culture of hospitality, policies aimed at developing “soft” skills in contemporary services could prove key in competing for investment in today’s weightless global economy.

The identification and building of skills, both cognitive and non-cognitive, and providing an ever more attractive location for high-skilled workers, including returning emigrants and immigrants, will pave the way for Ireland’s future success.

References OECD (2015), Economic Surveys: Ireland, OECD Publishing OECD (2015), OECD Skills Outlook 2015: Youth, Skills and Employability, OECD Publishing, http://dx.doi.org/10.1787/9789264234178-en Visit the OECD Migration Database at www.oecd.org/migration See also http://oe.cd/1eU and www.oecd.org/ireland

Order this now! www.oecd.org/bookshop

OECD Observer No 305 Q1 2016

49

SPOTLIGHT

Migration: A flexible return ticket 25-44 year-olds, many of them leaving jobs.

Despite this trend, since 2013 migration to Ireland has started to follow a less negative trend. In the 12 months to April 2015, 80 900 people emigrated from Ireland, a slight 1.2% drop on the previous year. Of that group, 35 300 were Irish nationals, down by 13% on the previous year.

©Phil Crean /Alamy Stock Photo

The numbers arriving have risen, with immigration in 2015 increasing for the third year in a row, up 14% in the last year to 69 300. However, just 12 100 of those

Nationals from outside the EU form the largest category of immigration

Today, bolstered by steady economic growth and an emerging confidence in Ireland’s future, the government is taking a new tack by fostering a bolder engagement towards emigration and the diaspora.

2006. There was a rise in positive net migration that year too, to 104 800.

However, the crisis triggered a sharp reversal in migration flows with immigration suddenly halting in 2009 and emigration increasing.

Actively encouraging Irish nationals to come home, with key strategies for connecting with the Irish worldwide, is more than a wish, but is a central part of the government’s first paper on the subject, Global Irish: Ireland’s Diaspora Policy, issued in March 2015. As Enda Kenny, the Taoiseach (prime minister), writes in the foreword of the publication, the economy is “creating opportunities for our people here and we want them to be able to come home.”

Between 2010 and 2013, emigration levels of Irish nationals jumped from 28 900 to a peak of 50 900; more than 600 000 have left since 2008.

However, figures published by Ireland’s Central Statistics Office (CSO) in April 2015 suggest that while the trend is shifting favourably, a return to positive net migration among Irish nationals may still be some way off. At the peak of the Celtic Tiger in 2007, emigration among Irish nationals dropped to 12 900, while the number of Irish people returning home rose to 30 700, up from 18 900 in

50

“For the first time, during the Celtic Tiger if a person was born here they expected to work here. We felt we’d turned a corner, changed history. So forced emigration was the most emotive area of the 2008 recession,” says Alan Barrett of the Economic and Social Research Institute (ESRI). For him, the government’s innovative steps to mobilise its overseas workforce is a response to the changing nature and profile of the migrants who are flowing in and out of Ireland today.

Until the 1990s, emigration was largely composed of the indigent and unskilled.

Today college graduates and young professionals leave, while the average age has risen, too: rather than the 15-24-yearold group of yore, the new wave is led by

were Irish. In fact, nationals from outside the EU form the largest category, reaching 30 400 following a rise of nearly 20% on a year earlier. Indeed, as the economy continues to rally, it is largely thanks to strong net inflows of non-EU nationals that net negative migration has fallen so sharply in the last three years.

The profile of foreign nationals coming to Ireland is also shifting towards more highly qualified people. When Microsoft’s Bill Gates chose Dublin in 1986 as the hub to localise his firm’s software for Europe, it attracted one of the first waves of foreign technology graduates to Ireland.

Today, about a third of the company’s 1 100 staff in Dublin is non-Irish.

However, this inflow of skills has not yet generated a sufficient “brain gain” to close some stubborn skills gaps, particularly in engineering, information technology, finance and health care.

Also, a moratorium on recruitment to the public health sector during the crisis resulted in many qualified health and education professionals leaving.

The construction industry has also been affected, with 17% of Irish emigrants having worked in the industry, including the likes of civil engineers,

IRELAND

Ireland’s global workforce While courses aimed at existing workers, such as through Springboard Courses, can plug some of this skills gap, a return of more Irish skills from abroad would be welcomed, too. “We will not achieve our target if we do not attract at least 100 000 people back home to take up jobs,” said Damien English, minister for skills, research and innovation, in a parliamentary discussion in May 2015 (see http://bit.ly/1RxQD7d). Recruitment drives have been launched, while firms like Grafton Recruitment and the Social House in Dublin hope to entice workers home with positive statistics, including an improving job market and rising salaries among returnees.

Meanwhile, the government also has its work cut out to ensure Ireland provides new opportunities for people who have not left the country, in some cases deliberately standing their ground, as witness the “We’re Not Leaving” campaign in 2013.

As articles in this edition show, policies are starting to pay off. By adopting the kind of policies recommended by the OECD to enhance innovation and promote more spillovers from Ireland’s cutting-edge sectors, emigration should once again become just another choice.

Claire MacDonald References Barrett, Alan and Jean Goggin (2010), “Returning to the question of a wage premium for returning migrants”, National Institute Economic Review, Economic and Social Research Institute, Dublin Government of Ireland (2015), “Global Irish: Ireland’s Diaspora Policy”, Department of Foreign Affairs, March; see www.dfa.ie/media/globalirish/global-irish-irelandsdiaspora-policy.pdf Glynn, Irial, Tomas Kelly and Piaras MacEinri (2013), Irish Emigration in an Age of Austerity, University College Cork, Cork Irish Abroad Unit, Department of Foreign Affairs and Trade, and UCD Clinton Institute (2015), Global Irish Civic Forum Report, UCD Clinton Institute, Dublin OECD (2015), OECD Economic Survey of Ireland, OECD Publishing Visit the Central Statistics Office’s website at www.cso.ie

Argentines perform Irish dancing for Saint Patrick’s Day in Buenos Aires The writer James Joyce was unique in many ways, but when he left Ireland in 1904, he was joining a tradition of expatriate Irish writers. Difficulty publishing at home in what was then a conservative country was one reason for his departure: in his 1912 poem, “Gas from a burner”, he referred to Ireland as “This lovely land that always sent Her writers and artists to banishment.” But Joyce also declared that after his death “Dublin” would be found inscribed on his heart.

Today the word “Joyce” is in turn inscribed in Ireland’s own heritage.

Ireland’s diaspora, whether artistic or economic, is now seen as an asset to be harnessed, and today the government is actively engaging with the Irish abroad. As Ireland’s Taoiseach Enda Kenny once said, “The 5 million voices of this small nation are hugely amplified by the 70 million around the globe.”

Ireland has the highest share of nationals living abroad among OECD countries, with around 17% of Irish-born persons aged 15 and over living overseas. The diaspora is a diverse body with no set profile. They work across a wide range of sectors, have different reasons for living outside Ireland, and are a mix of young and old. What they have in common is culture and identity, as expressed today through writing, dance and music, as well as business. The diaspora transcends borders, as the by now global celebration of Saint Patrick’s Day on 17 March demonstrates. Diaspora with historical ties and influence can be found emerging in countries as far-flung as Australia, where more than 2 million people claim Irish descent, to Argentina, where the navy was founded by Admiral William Brown from County Mayo in

©Daniel Garcia/AFP

architects and quantity surveyors.

the west of Ireland. The largest–and arguably most celebrated community–is in North America, with 35 million in the US claiming some Irish heritage and 4.5 million in Canada, about 14% of the total population, though only 150 000 or so are Irish-born in the US. Meanwhile, there is an enormous Irish-born population in the UK of over 600 000, and a quarter claiming Irish heritage. A small yet strong Irish community also took hold in France when Catholic landowners and merchants fled with their wealth and titles from the clutches of Oliver Cromwell in the 17th century. Even if emigrants stay abroad, connecting with this vast diaspora makes sense in today’s networked world, and Ireland now has a minister of state for diaspora affairs, Jimmy Deenihan.

Ireland’s first official diaspora policy, Global Irish: Ireland’s Diaspora Policy, published in 2015, forms part of the evolving government drive to reach out, notably to graduates, with an alumni fund that aims to provide seed funding for collaborative initiatives.

In November 2015 the fourth Global Irish Economic Forum in Dublin brought together this global Irish network, made up of over 350 of the most influential and innovative Irish business people based in 40 countries. Such gatherings have become more numerous in recent years, for just as Ireland’s crisis had global causes, it would have global solutions.

Claire MacDonald Visit https://global.irish/ Government of Ireland (2015), “Global Irish: Ireland’s Diaspora Policy”, Department of Foreign Affairs, March; see www.dfa.ie/media/globalirish/global-irish-irelandsdiaspora-policy.pdf

OECD Observer No 305 Q1 2016

51

SPOTLIGHT

The capacity conundrum attracted some business interest but stirred up protest too, with groups like Save Our Seafront pushing the issue into the political arena. As OECD reports have pointed out, cruise ships can bring revenue but major economic and environmental costs, too.

Meanwhile, Ireland’s expanding multinational workforce has put pressure on office space and housing supply. As the giant tech companies expand, start-ups are finding it harder to pay the soaring rents for a spot in Silicon Docks. Rents are 12% higher than in 2007, making it one of the most expensive neighbourhoods in

New development must be balanced with environmental concerns

©David Rooney

the capital. Some are turning to appropriately innovative solutions, like young entrepreneur Graham Barker, who has started his own co-working space on a barge in the docks, right next to the giant tech firms; membership of Dospace.ie offices costs from as little as €50 a month, and in some cases free for non-profit technology start-ups.

A growing economy means increased need for office space, housing and infrastructure. Can Ireland meet that demand?

The Ireland of 2016 is much transformed in infrastructure terms compared with the Ireland of the 1990s. However, much of that transformation, in areas such as transport and telecommunications, was achieved before the crisis and with the economy growing again, bottlenecks are affecting some public services. These are not unusual during an economic recovery, but with public investment set to remain constrained, relieving the pressure will be a challenge.

Take the semi-state operator Dublin Bus, whose fleet and budget were cut to match the falling numbers of passengers under austerity measures. Now demand is rising again, but the bus services simply cannot grow quickly enough to meet it.

Passenger capacity is also an issue for Dublin Airport. Because Ireland is an island, its airports play a critical role in the economy, with the routes to London being among Europe’s busiest. Google cites the proximity of Dublin Airport to the city and the efficiency of the site as essential to its headquarters, for instance. According to a 2015 Dublin Airport Economic Impact Study, a second runway at Dublin Airport would enhance the connectivity of Ireland, and generate 31 200 jobs and €2.2 billion in gross value added by 2043. Keeping the costs down will be a concern for tax payers as well as airlines like Ryanair using the airport. Moreover, as local residents point out, airport development must be balanced with environmental concerns, such as land use, biodiversity, and air and noise pollution.

Similar worries surround plans to boost capacity at seaports to accommodate cruise-ship tourism, a sector that the eastern area of Ireland is eyeing with interest. In Dun Laoghaire harbour near Dublin, which used to be a passenger terminal for ferries to the UK, a project to build new capacity berth for cruise ships has

52

Policies to take the heat out of high rents could help, and in May 2014, Dublin City Council gave the go-ahead for a major development of the docklands area that will include new office space and more than 2 500 homes. Nevertheless, the Industrial Development Authority (IDA), which promotes inward investment, reiterated its warning that a lack of suitable office space could detract foreign multinationals from investing in Dublin, losing out on thousands of jobs.

Multinational company PayPal has no problem attracting people to Ireland, but has problems housing them. Its vice president of global operations, Louise Phelan, is asking staff to rent out rooms to new employees. She also points to other capacity issues, such as school places, healthcare and transport needs. “If we can’t deliver the aftercare, we can’t bring the jobs here,” she argues. Ms Phelan also believes that losing investment is a risk. The founders of Web Summit, which for several years has gathered the world’s leading IT geeks in Dublin, point to capacity constraints in their decision to relocate to Portugal in 2016.

Clearly, today’s knowledge-based businesses are footloose, as are its workers, and constantly kitting up in terms of communications, hospitality, convention centres, accommodation and other support services is essential. Policy makers must lay the ground for this to happen lest Ireland become a victim of its own success.

Claire MacDonald Visit www.saveourseafront.net/, www.dospace.ie/ and www.idaireland.com/ Clarke, Rory (2005), “Cruising ahead”, in OECD Observer No 250, July, see http://oe.cd/1eA Flanagan, Peter (2015), “PayPal asking its staff for spare rooms in rental crisis”, Independent.ie, 2 October, www.independent.ie/business/irish/paypal-asking-its-staff-forspare-rooms-in-rental-crisis-31575796.html InterVISTAS Consulting Ltd. (2015), Dublin Airport “Economic Impact Study”, April, www.daainternational.ie/wp-content/uploads/2015/06/Dublin-Airport-Economic-ImpactStudy-April-2015.pdf Patnaude, Art (2015), “Tech workers flock to Dublin’s Silicon Docks”, The Wall Street Journal, 28 May

AN INTERNATIONAL ARTS CENTRE FOR IRELAND

WWW.CENTRECULTURELIRLANDAIS.COM

The Centre Culturel Irlandais Paris is Ireland’s cultural foothold in Europe, a crossroads where Ireland can meet the rest of the world, with a rich and varied arts programme of visual arts and music, dance and theatre, debates and rencontres.

Housed in the historic Irish College on the rue des Irlandais on the Left Bank of Paris, the Centre Culturel Irlandais is just minutes from the Pantheon and Notre Dame cathedral.

Centre Cultural Irlandais 5 rue des Irlandais, 75005 Paris www.centreculturelirlandais.com Follow us on Facebook and Twitter @cc_irlandais

At the heart of business in Ireland

The KPMG name and logo are registered trademarks or trademarks of KPMG International

OECD.ORG

Recent speeches by Angel Gurría Rethinking fiduciary duty for a most sustainable planet

Mr Marten Kokk, Estonia

France, 10 December 2015

Mr Nicholas Bridge, United Kingdom

Leading the world towards a green economy

©OECD/Julien Daniel

Ambassadors

Speech delivered during an OECD-UNEP COP21 side event on governance of institutional investments, in Le Bourget,

Ms Berglind Ásgeirsdóttir, Iceland

Mr Michael Forbes, Ireland

Remarks delivered at the Inter-Parliamentary Union meeting in the French Senate, in Paris, France, 6 December 2015

Mr. Paul Dühr, Luxembourg

Globe COP21 Legislators Summit

Mr Dionisio Pérez-Jácome Friscione, Mexico

Speech at the National Assembly of France, in Paris, France, 4 December 2015

Ms Marlies Stubits-Weidinger, Austria

Mr Pavel Rozsypal, Czech Republic Mr Paulo Vizeu Pinheiro, Portugal

Mr Klavs A. Holm, Denmark

COP21 carbon pricing panel

For a complete list of the speeches and statements, including those in French and other languages, go to: http://www.oecd.org/about/ secretary-general/

Closing statement in Le Bourget, France, 30 November 2015 Mobilising climate finance for development action Statement at the COP21 session on multilateral development banks and climate finance, in Le Bourget, France, 30 November 2015

Mr Okko-Pekka Salmimies, Finland Mr Noé Van Hulst, Netherlands Mr Kazuo Kodama, Japan Mr Mithat Rende, Turkey Mr Iztok Jarc, Slovenia Ms Annika Markovic, Sweden Ms Claudia Serrano, Chile

2015 Enade conference

Mr Daniel Yohannes, United States

Remarks delivered in Santiago, Chile, 26 November 2015

Ms Elin Østebø Johansen, Norway

Tech and innovation: Shaping Latin America’s future

Beyond the crisis: New Approaches to current and future economic challenges

Mr Carmel Shama-Hacohen, Israel

Speech delivered during the World Economic Forum Annual Meeting in Davos, Switzerland, 21 January 2016

Speech during a NAEC seminar in Santiago, Chile, 25 November 2015 5th anniversary of Chile’s OECD membership

Policy Forum on the Future of Work Opening remarks in Paris, France, 14 January 2016 New year, new challenges, new approaches 7th New Approaches to Economic Challenges group meeting in Paris, France, 12 January 2016

Mr Zoltan Cséfalvay, Hungary Mr Gabriele Checchia, Italy Mr Pierre Duquesne, France

Ceremony for award of the Grand Cross of the Chilean order of Bernardo O’Higgins

Ms Michelle d’Auray, Canada

Remarks delivered in Santiago, Chile, 25 November 2015

Mr James Kember, New Zealand

Mr Brian Pontifex, Australia Mr George Krimpas, Greece Mr Matei Hoffmann, Germany

Beyond COP21: Boosting systems innovation for green growth

Presentation in Santiago, Chile, 25 November 2015

Opening remarks at the Green Growth and Sustainable Development Forum in Paris, France, 14 December 2015

Israel signing of Convention on mutual administrative assistance in tax matters

Introductory remarks at a high-level panel during COP21, in Le Bourget, France, 10 December 2015

Mr Jakub Wisniewski, Poland

Remarks at luncheon hosted by President Bachelet in Santiago, Chile, 25 November 2015

Launch of the Economic Survey of Chile 2015

Getting the most out of corporate climate change disclosure

Mr Ulrich Lehner, Switzerland

Speech delivered in Paris, France, 24 November 2015

Mr José Ignacio Wert Ortega, Spain Mr Jean-Joël Schittecatte, Belgium Mr Jong-Won Yoon, Korea —— Mr Juraj Tomáš, Slovak Republic Chargé d’Affaires a.i.

——

Launch of OECD Education at a Glance 2015

European Union

Presentation in Paris, France, 24 November 2015

Ms Maria Francesca Spatolisano

OECD Observer No 305 Q1 2016

55

OECD.ORG

Calendar highlights Please note that many of the OECD meetings mentioned are not open to the public or the media and are listed as a guide only. All meetings are in Paris unless otherwise stated. For a comprehensive list, see the OECD website at www.oecd.org/newsroom/upcomingevents

JANUARY 6

Launch of OECD Reviews of Health Systems: Mexico 2016

12

Launch of Trends Shaping Education 2016

14-15

Policy Forum on the Future of Work and OECD Employment and Labour Ministerial Meeting, Paris, France

15

Launch of The Korean Public Procurement Service

18

Launch of Trends Shaping Education 2016

18

Launch of OECD Economic Outlook, Interim Report

11-12

23-24 Global Women’s Forum Dubai 2016, Dubai, UAE

18-19 12th annual meeting of the OECD LEED Forum on Partnerships and Local Development, Venice, Italy

24

18-22

OECD Integrity Week 2016, Paris, France

19-20

Global Water Summit 2016, Abu Dhabi, UAE

20-21

Global Green Growth Forum 2016, Copenhagen, Denmark

26

Launch of Investing in Youth: Lithuania Launch of Economic Policy Reforms 2016: Going for Growth, Shanghai, China

MARCH 3-4

18-21 World Future Energy Summit 2016, Abu Dhabi, UAE

International Summit on the Teaching Profession

8

20-23 World Economic Forum Annual Meeting 2016, Davos-Klosters, Switzerland

Conference on improving women’s access to leadership, Paris, France

8

International Women’s Day

JUNE

28

9

Launch of OECD Tourism Trends and Policies 2016

8-9

OECD/UNHCR press conference on refugee crisis and integration, Paris, France

FEBRUARY 2-3

Aid and Development Africa Summit 2016, Addis Ababa, Ethiopia

3-5

4th OECD Parliamentary Days

8

Launch of quality of work database

15

Launch of OECD Economic Surveys: Costa Rica

World Strategic Forum, Miami, US

14-17

World Investment Forum 2016, Lima, Peru

16

OECD Anti-Bribery Ministerial Meeting, Paris, France

APRIL 6-9

Institute for New Economic Thinking (INET) Annual Meeting, Paris, France

7-8

OECD Ministerial Agriculture Meeting, Paris, France

MAY OECD Week: OECD Forum 31 May-1 June; OECD Ministerial Council Meeting 1-2 June

Global Forum on Responsible Business Conduct

NOVEMBER 7-18

UN Climate Change Conference (COP22), Marrakech, Morocco.

28 Nov- Global Forum on Competition 2 Dec

2016 OECD Integrity Forum

FIGHTING THE HIDDEN TARIFF: GLOBAL TRADE WITHOUT CORRUPTION 19-20 April 2016 – Paris, France

56

REVIEWS OECD iLibrary

Missing entrepreneurs Becoming an entrepreneur has become increasingly popular since the economic meltdown of 2008, not least in Europe.

Young people are particularly attracted to starting their own business: 45% of 15 to 24 year-olds say they would prefer to be self-employed than work as an employee. More generally, groups facing labour market exclusion account for the majority of self-employment activities. Of the 30.6 million self-employed people in the European Union in 2014, 24.5 million were women, young people, seniors and people who were born outside the EU or who had been unemployed in the previous year. However, despite high start-up rates, these new businesses tend to have low survival rates and low prospects for growth.

Three factors account for this, according to The Missing Entrepreneurs

2015: a lack of access to financing, structured professional networks and entrepreneurial skills. The report focuses on inclusive entrepreneurship policies, reviewing successful mainstream programmes that enable people from all backgrounds to start and run a business.

One effective approach in the finance area is the Innovative Youth Entrepreneurship programme in Greece, which provides grants of up to €10 000 for business start-ups to unemployed university graduates. Other projects target ethnic minorities, such as the peer-mentoring initiative for AfroCaribbean business owners in the West Midlands region of the UK. France’s Autonomie et Solidarité programme, targeting the unemployed, invests in new start-ups by previously unemployed people and has led to the creation of more than 2 000 jobs in the Nord-Pas-deCalais region.

business, coaching and mentoring projects have been set up in many OECD member countries. The Going for Growth project in Ireland recruits successful female entrepreneurs as volunteer mentors who lead monthly group sessions where women share their business experiences. Of the 60 women enrolled in the 2013 programme cycle, 50 created jobs the following year.

Business start-ups account for only 1.9% of active labour market policy expenditure across the EU, which the report recommends boosting, even if entrepreneurship is not suited to everybody and will not resolve all labour market challenges.

OECD/European Union (2015), The Missing Entrepreneurs 2015: Policies for Self-employment and Entrepreneurship, OECD Publishing, http://dx.doi.org/10.1787/9789264226418-en

As lack of confidence and poorly developed business networks are important barriers to a successful

Governing megacities The T ancient Roman scholar Marcus s Terentius Varro T once wrote, “Divine o Nature N gave the fields, fi human art built the cities.” The b adage is still very a relevant at the turn r of o the 21st century.

Nowadays, nearly N two-thirds of the population of the OECD area lives in cities. Ten years from now there are expected to be about 500 “megacities”, each one home to over 1 million inhabitants. How do cities govern themselves as they expand beyond their boundaries?

Governing the City attempts to analyse the challenges of the urban sprawl, focusing on two strategic issues: transport and spatial planning. If there is insufficient co-ordinated planning when cities grow

bigger, territorial imbalances and inequalities arise, whether in poor cities, such as Puebla-Tlaxcala, or large wealthy cities such as Greater Paris.

Socio-economic inequalities are also exacerbated by a lack of efficient transport governance: the Aix-Marseille metropolitan area is the third-largest in France in terms of population and contribution to national GDP, but around three-quarters of the population living outside the central city do not have easy access to a public transport system. This helps explain why Marseille is one of Europe’s most congested cities.

The report maps a series of local initiatives to offer guidance for cities: it recommends an integrated approach towards planning transport and land use, following the Korean example. The No Car Day campaign, which took place in Daejeon in 2012, rewarded participants

who did not drive one day per week with various tax benefits.

According to the report, the key to better management of metropolitan areas is inter-municipal collaboration in all sectors, from water governance–as seen in the Greater Bilbao Water Partnership supported by the central, regional and provincial governments–to cultural projects such as the cross-border Eurométropole of Lille-Kortrijk-Tournai straddling Belgium and France, where there are plans to create a shared cultural space for 2 million inhabitants, 147 municipalities and 3 regions.

OECD (2015), Governing the City, OECD Publishing, http://dx.doi.org/10.1787/9789264226500-en

OECD Observer No 305 Q1 2016

57

BOOKS OECD iLibrary

New publications Latin American Economic Outlook 2016: Towards a New Partnership with China The Latin American Economic Outlook 2016 is devoted to the evolving relationship between Latin America and China, as well as its prospects in the long term.

ISBN 978-92-64-24620-1 December 2015, 220 pages €65 $78 £52 ¥8 400

Ageing: Debate the Issues OECD Insights: Ageing discusses the problems, challenges, and opportunities that ageing brings to citizens and governments in developed and developing countries.

ISBN 978-92-64-20660-1 January 2016, 72 pages €15 $18 £12 ¥1 900

Income Inequality: The Gap between Rich and Poor

The Future of Productivity This book addresses the rising productivity gap between the global frontier and other firms, and identifies a number of structural impediments constraining business start-ups, knowledge diffusion and resource allocation (such as barriers to up-scaling and relatively high rates

OECD Insights This book explores income inequality across five main headings. It starts by explaining some key terms in the inequality debate.

It then examines recent trends and explains why income inequality varies between

of skill mismatch).

ISBN 978-92-64-24600-3 January 2016, 120 pages €15 $18 £12 ¥1 900

ISBN 978-92-64-24852-6 December 2015, 100 pages €24 $29 £19 ¥3 100

countries.

The State of Public Finances 2015: Strategies for Budgetary Consolidation and Reform in OECD Countries

The Missing Entrepreneurs 2015: Policies for Selfemployment and Entrepreneurship The report contains data on the scale and scope of entrepreneurship and self-employment activities across EU Member States by social target groups, as well as the barriers they face.

ISBN 978-92-64-22638-8 December 2015, 189 pages €70 $98 £63 ¥9 100

58

All publications are available to read and share at www.oecd-ilibrary.org

Previous OECD publications have tracked the fiscal policy responses adopted by OECD governments during the early years of the crisis (2007-2012). This book takes stock of how these responses have evolved in recent years, up to 2014/15.

ISBN 978-92-64-24424-5 December 2015, 220 pages €39 $47 £31 ¥5 000

Open Educational Resources: A Catalyst for Innovation Education is the key to economic, social and environmental progress, and governments around the world are looking to improve their education systems.

ISBN 978-92-64-24753-6 January 2016, 144 pages €30 $36 £24 ¥3 900

Economic Outlook for Southeast Asia, China and India 2016: Enhancing Regional Ties The annual Economic Outlook for Southeast Asia, China and India examines Asia’s regional economic growth, development and regional integration process.

ISBN 978-92-64-24378-1 December 2015, 340 pages €70 $84 £56 ¥9 100

National Accounts at a Glance 2015 National Accounts at a Glance presents information using an “indicator” approach, focusing on cross-country comparisons.

ISBN 978 978-92-64-24679-9 92 64 24679 9 January J 2016, 96 pages €24 $29 £19 ¥3 100

BOOKS OECD iLibrary

Most popular OECD Economic Outlook, Volume 2015 Issue 2 This OECD Economic Outlook analyses the current economic situation and examines the economic policies required to foster a sustained recovery in member countries. The present issue covers the outlook to end 2017 for both OECD countries and selected non-OECD economies.

ISBN 978-92-64-22030-0 December 2015, 295 pages €104 $151 £93 ¥12 500

Health at a Glance 2015: OECD Indicators This book presents the most recent comparable data on the performance of health systems in OECD and certain partner countries. It includes a dashboard of health indicators, a special focus chapter on the pharmaceutical sector, and indicators on health workforce migration and health care quality.

ISBN 978-92-64-23257-0 December 2015, 220 pages €35 $42 £28 ¥4 500

Pensions at a Glance 2015: OECD and G20 indicators The 10-year anniversary edition of Pensions at a Glance highlights the pension reforms undertaken by OECD and G20 countries over the last two years. Two special chapters provide deeper analysis of first-tier pension schemes and of the impact of shorter careers on pension entitlements.

ISBN 978-92-64-24063-6 December 2015, 375 pages €45 $54 £36 ¥5 800

All publications are available to read and share at www.oecd-ilibrary.org Starting Strong IV: Monitoring Quality in Early Childhood Education and Care This publication explores how countries can develop and use these systems to enhance service and staff quality for the benefit of child development.

ISBN 978-92-64-23349-2 November 2015, 244 pages €60 $72 £48 ¥7 800

Education at a Glance 2015: OECD Indicators Education at a Glance: OECD Indicators is the authoritative source for accurate and relevant information on the state of education around the world. It provides data on the structure, finances, and performance of education systems in the OECD’s 34 member countries, as well as a number of partner countries.

ISBN 978-92-64-24208-1 November 2015, 568 pages €98 $138 £89 ¥12 700

OECD Regulatory Policy Outlook 2015 Regulations are essential to promoting economic growth, social welfare and environmental protection. But they can also be costly and ineffective. Based on a unique survey of OECD members, this Outlook is the first evidence-based analysis of the progress made by countries to improve regulation.

ISBN 978-92-64-23876-3 November 2015, 224 pages €50 $60 £40 ¥6 500

World Energy Outlook 2015 This report presents updated projections for the evolution of the global energy system to 2040, based on the latest data and market development and it also gives detailed iinsights i h on severall topical i l issues. i ISBN 978-92-64-24365-1 November 2015, 600 pages €150 $180 £120 ¥19 500

Model Tax Convention on Income and on Capital 2014 (Full Version) This publication is the ninth edition of the full version of the OECD Model Tax Convention on Income and on Capital. This full version contains the full text as it read on 15 July 2014.

ISBN 978-92-64-24365-1 November 2015, 600 pages €150 $180 £120 ¥19 500

OECD/G20 Base Erosion and Profit Shifting Project (BEPS) Action 1-15 Addressing base erosion and profit shifting is a key priority of governments around the globe. In 2013, OECD and G20 countries, working together on an equal footing, adopted a 15-point Action Plan to address BEPS. This set includes the final 15 action plans which were delivered in 2015.

Set of 13 books, 15 actions: 232015411S1 Oct. 2015 €245 $294 £196 ¥31 800

All publications listed on these pages are available at www.oecd.org/bookshop and www.oecd-ilibrary.org A list of OECD publications distributors in various countries is available at www.oecd.org/about/publishing/ordering-oecd-publications.htm A list of institutions subscribing to the OECD iLibrary is available at www.oecd.org/publishing/oecdilibrarysubscribers

OECD Observer No 305 Q1 2016

59

REVIEWS OECD iLibrary

Data-driven innovation W With internet and ttechnology use constantly c expanding, data e abound. So many a data are collected d and stored every a day that we are d sseeing new jobs and entire sectors a emerging just to e deal with them all. Data-Driven Innovation explores the potential uses for and issues of this era of “big data”, providing a resource from which to see the big picture, with the promises and risks for well-being and productivity.

The potential uses for all this information are intriguing. Cities can regulate and improve traffic flows, monitor water resources, or manage a smart electricity grid, all with the information they need

readily available in the moment.

Such real-time big data can also be commanded to deal with global challenges, such as monitoring oceans and atmospheres for warnings of natural disasters. Carbon deposits in arctic ice, air pollution in urban areas, oil reserves– all these produce data worth analysing to help us deal with climate change and the environment.

Conversely, data are also easily manipulated. Parties with less-thanaltruistic intentions can take advantage of data for their own ends. Even a company like Volkswagen can manipulate emissions data to deceive the market, while the extent to which social media and online advertisers use personal data is a matter of some controversy. From governments to marketing firms, data can be used just as much against us as for us.

Regulation and policy will always be one

OECD Observer Crossword

step behind innovation when it comes to clever technology.

The OECD’s Chief Statistician, Martine Durand, has warned about the merits and considerations of big data in these pages, and an OECD global forum and ministerial meeting on the digital economy in June 2016 will be an opportunity to continue the discussion on these aspects of data and innovation, along with trust, openness and new skills in the technology sector.

Durand, Martine (2012), “Can big data deliver on its promise?”, OECD Observer No 293, Q4, OECD Publishing OECD (2015), Data-Driven Innovation: Big Data for Growth and Well-Being, OECD Publishing, http://dx.doi.org/10.1787/9789264229358-en

No 1, 2016 Across 1 Small plug-in hardware device to increase online functionality 4 Employment numbers depend on the increase or decrease of these 8 Band booking 10 An oral medicine 12 It’s the spark behind any innovation 13 Road surface 14 Type of economy also known as collaborative consumption 17 Once around the track 19 European Union country establishing itself as a hub for tech innovation 21 Future cars will be doing this 23 Wrist item 24 Avoid

© Myles Mellor/OECD Observer

For crossword soloutions do the OECD crossword online.

See www.oecdobserver.org/crossword

60

Down 1 It’s a massively growing section of the economy 2 Landlocked African country 3 Weight measurement 5 Commodity whose price has been crashing through 2015 6 Establish, as in policy 7 It’s better than a BA 9 Highest peak on Crete 11 Prevent 14 Schuss 15 Land named for Vespucci 16 Dream 18 Start-up’s project 20 Number 21 Observed 22 Dash, in Morse code

DATABANK

The ups and downs of information jobs

Employment growth in information industries Annual change in % and in thousands of persons, 1999-2013

4.0 2.0 0 -2.0 -4.0 -6.0

1999 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

’12 ’13

Source: OECD (2015), OECD Science, Technology and Industry Scoreboard 2015: Innovation for growth and society, OECD Publishing

http://dx.doi.org/10.1787/888933272849

changes in OECD information sector employment recorded over recent years.

the bursting of the dot-com bubble in 2000. The US now accounts for about 30% of OECD employment in the information industries, from a peak of about 34% in 2001, and has been a main driver of

Buying into e-commerce

See www.oecd.org/sti and www.oecd.org/ fr/sti/dep-ministerial-2016.htm

Diffusion of online purchases, 2007 and 2014 Individuals having ordered goods or services online as a % of all individuals, selected countries 2014

% 100 19

2007

18

15

18

6

5

8

1

12

80 % of individuals having ordered via a handled device, 2012

60 40 20

bia

ex ico M

m Co lo

e

ey rk Tu

Sl

Ch il

bli c

to nia

Re pu

CD

ov ak

Es

OE

US Be lgi um

d

ce an Fr

Sw

itz

er

ed

lan

en

ay

ar k m

UK

0 De n

A decade or so ago e-commerce was a buzzword, but today it has become a routine part of life. Or has it? About half of individuals in OECD countries bought products online in 2014, up from 31% in 2007. The increase in online purchases was particularly marked in Belgium, Estonia, France, the Slovak Republic and Switzerland. Today, more than three-quarters of adults order online in Denmark, Norway and the UK. However, only 10% of adults bought online in Chile and Turkey, and less than 5% in Colombia and Mexico.

’11

1 200 1 000 800 600 400 200 Thousands 0 of persons -200 -400 -600 -800 -1 000 -1 200

In 2013, the number of people working in the information sector grew by 244 000 in the US but rose by only 15 000 in the rest of the OECD.

Sw

For example, during the 2008-09 financial crisis, OECD information industry employment fell by 4%, compared with 2% for total employment, shedding over 800 000 jobs. This drop was the first since

% 6.0

No rw

Between 1995 and 2013 employment in the information industries grew by about 15% in OECD countries, marginally less than the growth in total employment during the same period. However, employment in the information sector has been susceptible to high volatility over the business cycle since 1995.

OECD employment growth (left-hand scale): total economy OECD employment growth (left-hand scale): information industries

Changes in employment in the information industries: OECD excluding US (right-hand scale)

Changes in employment in the information industries: US (right-hand scale)

Publishing, telecommunications, the audiovisual industry and broadcasting taken together are an important source of value-added growth in OECD countries despite accounting for less than 4% of total OECD employment. This “information sector” covers a wide range of activities, from computer and optical manufacturing to communications services.

According to OECD research, 19% of individuals purchasing online in the UK in 2012, followed closely by Denmark and Sweden, used their smartphones or other mobile devices to order products.

This surging trend has disrupted traditional distribution channels for some sectors, such as travel and holiday services–which account for almost 50% of online consumers–music, games, books

Source: OECD (2015), OECD Digital Economy Outlook 2015, OECD Publishing

and tickets for events. Food and grocery purchases online have also risen sharply in recent years.

Overall, however, consumers account for a small portion of e-commerce, with up to 90% of the value of online purchases coming from business-to-business transactions, among travel operators for

http://dx.doi.org/10.1787/888933224913

instance. In 2009 security was cited as the main reason for not buying online for over one-third of internet users across the EU who had not made any purchases online.

Privacy concerns were cited by 30% of internet users as the second reason.

See www.oecd.org/internet/ieconomy

OECD Observer No 305 Q1 2016

61

DATABANK

% change from:

62

previous period

previous year

level: current period

same period last year

Australia

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.9 0.5 -0.4 2.5 0.5

2.5 3.1 2.0 4.7 3.0 1.5

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q3-2015 Q2-2014 Q2-2014 Q3-2015

-14.8 -12.8 6.2 5.9 2.2 2.7

-12.9 -13.3 6.2 5.6 2.9 2.6

Austria

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.2 0.1 -0.9 0.5 -0.2 1.0

0.9 0.2 2.6 1.0 1.8

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q3-2015 Q2-2014 Q2-2014 Q3-2015

2.0 1.5 5.0 5.6 0.0 0.3

1.9 3.1 4.7 5.7 0.2

Belgium

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.2 0.1 0.6 0.4 -0.3 0.2

1.0 1.3 0.2 3.4 0.8 0.4

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-2.9 -0.2 8.8 8.5 0.0 0.3

-5.0 -1.3 8.6 8.4 0.2

Canada

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.8 0.6 0.8 1.5 0.4 1.3

2.5 1.2 -1.0 4.5 2.2 1.2

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-10.9 -14.2 7.0 0.7 1.2

-15.0 -8.4 7.0 7.1 1.2

Chile

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.4 0.2 -3.3 1.3 1.6 1.4

2.3 2.1 0.6 -1.5 4.8 5.1

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-2.0 0.3 6.2 0.0 3.9

-0.9 -3.1 6.4 5.9 0.0 5.0

Czech Republic

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.3 0.5 -0.4 0.2 -0.1 0.1

4.5 2.5 3.8 5.8 0.4 0.2

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-1.9 0.8 4.9 6.2 0.3 0.4

-0.7 -1.0 6.9 5.9 0.4 0.5

Denmark

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.1 0.2 0.6 -1.2 -0.2 0.4

0.9 1.1 0.8 0.9 0.6

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

4.4 5.3 6.4 6.1 -0.1 0.3

5.8 6.4 6.9 6.5 0.3

Estonia

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.5 1.1 3.3 -1.1 -0.8 0.3

2.9 1.1 -4.4 2.5 -0.5 0.0

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.1 0.3 5.9 7.5 0.0 0.3

0.0 0.1 8.3 7.8 0.2

Finland

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.5 0.2 0.6 0.5 -0.1 0.2

-0.2 -0.1 -0.4 -1.9 -0.3 0.9

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.4 0.2 8.6 9.5 0.0 0.3

-0.8 -0.5 8.8 8.1 0.2

France

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.0 0.3 -0.5 0.4 -0.3 0.4

0.1 1.2 -2.1 0.7 0.6 0.1

Current balance Unemployment rate Interest rate

Q1-2014 Q1-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-6.7 -1.3 10.8 10.2 0.0 0.3

-13.2 -10.1 10.3 10.4 0.2

Germany

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.2 0.3 -0.9 -0.5 0.2 0.1

1.3 1.7 0.7 1.5 0.1 1.1

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

68.6 68.4 5.0 4.5 0.0 0.3

68.6 65.0 5.0 5.3 0.2

Greece

Gross domestic product Industrial production Consumer price index

Q3-2015 Q1-2014 Q3-2015 Q2-2014 Q3-2015

-0.9..

2.4 1.9 -0.9 1.2

-1.1..

0.5 1.8 -1.8 -1.5

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q2-2015 Q2-2014 Q3-2015

0.0 0.4 25.0 27.1 0.0 0.3

-1.8 0.2 26.9 27.6 0.2

Hungary

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.8 0.5 -0.1 3.5 -0.3 0.2

2.4 3.7 10.3 5.8 -0.2 0.0

Current balance Unemployment rate Interest rate

Q4-2013 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

1.4 1.5 8.0 6.6 2.8 1.2

0.3 0.4 10.4 7.6 4.6 2.1

Iceland

Gross domestic product Industrial production Consumer price index

Q2-2015 Q2-2014 Q2-2014 Q2-2015 Q2-2014 Q3-2015

-1.2 3.3 -5.0 7.3 0.9 0.7

6.0 2.2 24.9 -1.7 2.0 2.3

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.0 0.2 4.3 5.1 6.2 6.1

0.0 0.1 4.7 6.1 6.2 6.1

Ireland

Gross domestic product Industrial production Consumer price index

Q2-2015 Q2-2014 Q1-2014 Q3-2015 Q2-2014 Q3-2015

1.9 1.5 3.8 3.4 0.8 0.1

6.5 7.3 17.7 2.8 -0.2 0.4

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

3.0 3.3 11.7 9.1 0.0 0.3

3.0 3.2 13.7 11.1 0.2

Israel

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.6 0.4 -3.9 -1.6 0.4 0.2

2.2 2.5 -0.6 -0.3 -0.4 0.8

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

2.6 2.2 5.2 6.1 0.7 0.1

3.5 1.7 6.2 6.7 0.4 1.5

Italy

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.2 0.2 -0.5 0.4 0.2 0.1

-0.2 0.8 -0.1 1.8 0.4 0.2

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

8.2 7.9 12.5 11.7 0.0 0.3

-0.1 8.9 12.9 12.2 0.2

Japan

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.2 -1.8 -3.6 -1.2 0.0 2.5

0.0 1.1 -0.4 2.4 0.2 3.6

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

23.8 6.3 3.6 3.4 0.2

18.7 4.8 4.0 3.6 0.2

Korea

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.5 1.3 -0.9 1.6 0.3 0.4

3.5 2.7 -0.4 1.2 0.7 1.6

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

26.8 23.6 3.6 3.7 2.7 1.6

20.7 19.4 3.5 3.1 2.5 2.7

Luxembourg

Gross domestic product Industrial production Consumer price index

Q2-2015 Q1-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.9 0.8 -0.6 -0.1 -0.2 0.5

3.8 3.1 -0.5 8.8 0.6 0.9

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.6 1.2 5.8 6.1 0.3 0.0

0.6 1.4 6.0 5.8 0.2

Mexico

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.8 1.0 0.8 0.9 -0.1 0.4

2.6 2.7 ..

3.6 2.6

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-8.1 -7.1 5.0 4.3 3.3 3.7

-5.7 -8.1 4.9 5.1 4.3 3.3

DATABANK

level:

% change from: previous period

previous year

current period

same period last year

Netherlands

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.7 0.1 -3.1 3.7 0.8 0.4

1.8 1.1 -8.5 -2.0 0.8 1.0

Current balance Unemployment rate Interest rate

Q4-2013 Q2-2015 Q3-2015 Q2-2014 Q3-2015 Q2-2014

24.7 19.2 7.0 6.8 0.0 0.3

25.6 25.5 6.6 7.2 0.2 0.2

New Zealand

Gross domestic product Industrial production Consumer price index

Q2-2015 Q2-2014 Q2-2014 Q2-2015 Q2-2014 Q3-2015

0.2 0.5 0.4 -1.1 0.3

3.3 2.7 2.7 1.3 0.4 1.6

Current balance Unemployment rate Interest rate

Q2-2015 Q4-2013 Q3-2015 Q2-2014 Q3-2015 Q2-2014

-0.7 -1.5 5.6 6.0 3.0 3.4

-1.8 -1.7 6.4 5.6 2.6 3.7

Norway

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.9 1.8 3.9 -1.1 0.3 0.7

1.8 3.1 0.2 2.7 2.0 1.8

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

12.4 10.4 3.3 4.5 1.8 1.2

14.3 11.7 3.5 3.6 1.8 1.7

Poland

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.6 0.9 -0.2 0.2 -0.5 0.0

3.3 3.7 4.0 3.4 -0.8 0.3

Current balance Unemployment rate Interest rate

Q2-2015 Q1-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

-0.8 0.9 9.2 7.2 2.7 1.7

-3.0 -3.9 10.5 8.7 2.9 2.5

Portugal

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.0 0.3 -0.6 1.6 -0.6 1.0

0.9 1.4 2.5 1.5 -0.3 0.8

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

-0.1 -0.2 14.4 12.3 0.0 0.3

1.0 0.5 16.9 13.7 0.2 0.2

Slovak Republic

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.6 0.9 -0.8 3.6 -0.3 0.2

3.6 2.4 4.9 6.2 -0.3 -0.1

Current balance Unemployment rate Interest rate

Q2-2015 Q1-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

-0.2 0.5 13.4 11.1 0.0 0.3

0.5 0.2 14.3 13.1 0.2 0.2

Slovenia

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.4 1.0 0.8 1.8 -0.6 1.5

2.8 2.1 4.8 3.8 -0.5 0.6

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

0.7 0.8 9.5 9.3 0.0 0.3

0.7 0.9 10.5 9.6 0.2 0.2

Spain

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.8 0.6 0.6 -0.9 1.0

3.4 1.2 3.9 2.3 -0.4 0.2

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

-5.6 3.6 24.7 21.8 0.0 0.3

1.3 0.2 26.2 24.2 0.2 0.2

Sweden

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.8 0.7 -0.1 -1.4 0.0 0.6

3.9 2.6 -0.6 4.2 -0.1 0.0

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q2-2014

7.5 8.1 8.0 7.2 -0.5 0.6

9.2 8.7 8.0 7.9 0.9 0.2

Switzerland

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q4-2013 Q3-2015 Q2-2014 Q3-2015

0.0 -1.0 -2.1 -0.6 0.5

0.6 1.1 -2.7 -1.2 -1.4 0.1

Current balance Unemployment rate Interest rate

Q2-2015 Q4-2013 Q2-2015 Q2-2014 Q3-2015 Q2-2014

14.3 18.7 4.4 4.2 -0.7 0.0

15.1 12.7 4.2 4.4 0.0 0.0

Turkey

Gross domestic product Industrial production Consumer price index

Q2-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.5 1.3 -0.9 -3.6 2.6 0.5

4.2 2.5 0.2 2.6 9.4 7.3

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q2-2015 Q1-2014

-9.3 -5.8 10.2 9.1 ..

-17.5 -11.0 8.5 9.6 .. ..

United Kingdom

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.9 0.5 0.3 0.1 0.7 0.1

2.3 3.2 2.1 1.2 0.0 1.7

Current balance Unemployment rate Interest rate

Q2-2015 Q1-2014 Q2-2015 Q2-2014 Q3-2015 Q2-2014

-30.6 -33.7 6.3 5.6 0.6 0.5

-27.3 -39.2 7.7 6.3 0.5 0.5

United States

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.5 1.1 0.6 1.3 0.3 1.2

2.6 2.2 4.2 1.1 0.1 2.1

Current balance Unemployment rate Interest rate

Q2-2015 Q2-2014 Q3-2015 Q2-2014 Q3-2015 Q4-2013

-109.7 -98.5 6.2 5.2 0.0 0.2

-106.1 -92.0 7.5 6.1 0.2 0.1

European Union

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.4 0.2 0.0 0.1 ..

1.9 1.2 1.8 1.3 0.0 0.7

Current balance Unemployment rate Interest rate

Q3-2015 Q2-2014

....

9.3 10.3 ..

.. ..

10.1 10.9 .. ..

Euro area

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

0.0 0.3 -0.1 0.1 ..

0.7 1.6 0.8 1.5 0.6 0.1

Current balance Unemployment rate Interest rate

Q2-2014 Q4-2012 Q3-2015 Q2-2014 Q3-2015 Q2-2014

85.1 51.7 10.8 11.6 0.0 0.3

80.6 17.2 11.6 12.0 0.2 0.2

1

Brazil

Gross domestic product Industrial production Consumer price index

Q2-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.6 -1.9 -3.2 -1.9 2.0 1.7

-0.8 -2.4 -4.2 -9.5 6.4 9.5

Current balance Unemployment rate Interest rate

Q2-2014 Q4-2014

-25.6 -19.6 .... ....

-19.9 -18.7 .. .. .. ..

1

China

Gross domestic product Industrial production Consumer price index

.. ..

2.2 1.7

Current balance Unemployment rate Interest rate

Q2-2013

Q2-2014 Q3-2015

.. ..

-0.4 0.6

54.2.. ....

4.6 5.2

58.1 .. .. ..

4.7 4.6

1

India

Gross domestic product Industrial production Consumer price index

Q3-2015 Q2-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

1.9 1.2 2.0 0.5 2.3 2.5

5.9 7.1 4.3 4.4 6.9 4.6

Current balance Unemployment rate Interest rate

1

Indonesia

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2015 Q2-2014 Q3-2015

1.2 ..

0.4 1.7

4.7 5.1 ..

7.1

Current balance Unemployment rate Interest rate

Russian Federation

Gross domestic product Industrial production Consumer price index

Q2-2015 Q1-2014 Q2-2014 Q3-2015 Q2-2014 Q3-2015

-0.3 -2.0 -0.2 0.9 2.6 1.5

-4.5 0.7 -3.8 1.6 15.7 7.6

Current balance Unemployment rate Interest rate

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2015

0.2 ..

2.0 1.3

1.2 1.1 ..

6.6 4.6

Current balance Unemployment rate Interest rate

Non-members

1

South Africa

Q2-2014 Q3-2015

Gross domestic product: Volume series; seasonally adjusted. Leading indicators: A composite indicator based on other indicators of economic activity, which signals cyclical movements in industrial production from six to nine months in advance. Consumer price index: Measures changes in average retail prices of a fixed basket of goods and services. Current balance: Billion US$; seasonally adjusted. Unemployment rate: % of civilian labour force, standardised unemployment rate; national definitions for Iceland, Mexico and Turkey; seasonally adjusted apart from Turkey. Interest rate: Three months.

Q1-2015 Q2-2014

.. .. ..

Q4-2013

-3.5.. ....

8.5 8.0

-7.3 .. .. ..

5.7 9.3

Q3-2015 Q2-2014

22.7.. ....

13.3 8.8

23.4 .. .. ..

7.4 8.8

Q3-2015 Q2-2014

.... ....

5.8 6.1

.. .. .. ..

5.1 6.0

Q3-2015 Q2-2014 Q2-2012

Current balance data are reported according to the BPM6 classification except Mexico and non-members.

.. .. ..

..=not available, 1 Key Partners.

Source: Main Economic Indicators, December 2015.

OECD Observer No 305 Q1 2016

63

DATABANK

Jobs are not just about how much money Earnings quality Gross hourly earnings in US$, adjusted for purchasing power parity, 2013 or latest year* Earnings quality

Earnings inequality (right axis)

Average earnings

$ PPPs 40

% 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0%

35 30 25 20 15 10 5 0

l

ae

va k Cz Rep ec ub h R lic ep u Po blic rtu ga Ko l re Gr a ee Slo ce ve nia Jap a Ne Sp n w ai Ze n ala nd UK US Ire lan d Ita Ca ly na d Fr a an c Fin e lan Au d str a Ice lia lan Au d str Ge ia rm a Be ny lgi De um nm No ark Sw rwa y it Lu zerl xe an m d Ne bou th rg er lan ds

ico rke y Ch Es ile to nia Po la Hu nd ng ar y

ex

Isr

Slo

Tu

M

When it comes to jobs and earnings, quality counts, too. Indeed, as has been argued before in these pages, good pay, labour market security and a decent working environment can go hand in hand with high employment. New OECD data on the quality of jobs in 45 countries support this view. The data focus on the outcomes for workers in three broad areas connected with well-being: first, earnings quality, which considers employment’s contribution to material living conditions and earnings distribution among the workforce; second, labour market security, which looks at the risks and costs of becoming unemployed; and third, the quality of the working environment.

*2012 for France, Italy, Poland, Spain and Switzerland; and 2010 for Estonia, Luxembourg, Netherlands, Slovenia and Turkey.

Source: OECD Job Quality database 2016

The database puts overall job quality as highest in Australia, Austria, Denmark, Finland, Germany, Luxemburg, Norway, and Switzerland–countries that perform relatively well on at least two of the three dimensions of job quality–and lowest in Estonia, Greece, Hungary, Italy, Poland, Portugal, the Slovak Republic, Spain and Turkey. For earnings quality (our chart), the best performances come from the Netherlands, Luxembourg and

Switzerland, and lowest in Mexico, Turkey and Chile, with countries such as Italy, Japan and the US hovering in the middle.

The data also show that young workers and the unskilled face lower earnings and more insecurity and job strain than other groups. Women suffer from substantially lower employment rates than men and face a wide pay gap, but are less likely

than men to experience job strain.

For more data and insights on job quality, visit www.oecd.org/employment/ job-quality.htm.

See also “More and better jobs for an inclusive recovery” by Martine Durand and Stefano Scarpetta in OECD Yearbook 2015.

OECD OBSERVER ORDER FORM – SUBSCRIBE TODAY! Yes, sign me up for 4 issues and my special OECD Forum edition.

€ 77 US$ 102 £ 60 ¥ 9 800

Yes, sign me up for 8 issues plus 2 OECD Forum specials and save 30%!

You can order either online at www.oecd.org/bookshop or by mail at one of the addresses below Name Telephone

Organisation Fax

Address

Position held E-mail Date

Postcode, City and Country

Subscription will start with the next available issue. You will receive the English language edition unless you select the French - tick here For customers in the US Turpin Distribution, The Bleachery, 143 West Street, New Milford, Connecticut 06776 USA Tel: (1) 860 350 0041 Fax: (1) 860 350 0039 Email: turpinna@turpin-distribution.com For customers in the rest of the world Turpin Distribution Ltd., Stratton Business Park, Pegasus Drive, Biggleswade, Bedfordshire SG18 8TQ, UK Tel: (44) 1767 604 800 Fax: (44) 1767 601 640 E-mail: custserv@turpin-distribution.com

64

Signature

Payment details Cheque/money order enclosed (payable to “OECD”) Please charge my VISA/MasterCard/American Express TOTAL amount due Card number

Expiry date

€ 107 US$ 146 £ 86 ¥ 14 300

The OECD Forum, held alongside the main, annual Ministerial Meeting provides a key opportunity to debate global policy issues with heads of government and international organisations, ministers, CEOs, academia, media and civil society leaders.

Some of the policy challenges to be discussed in 2016 will be: • Inclusive Growth : migration, youth employment, gender equality and active ageing • Innovation: investment in people, productivity, knowledge and skills • Sustainability : follow up to COP21 and the new Sustainable Development Goals

Join us at OECD Forum 2016 and collaborate in the debates aimed to shape and improve the economic and social well-being of people around the world www.oecd.org/forum

Founded in 1592 Ranked 1st in Ireland Over 400 industry partners Top 1% worldwide in 18 fields

Ranked in World’s Top 100 Universities

17,000 students from 122 countries 1st in Europe for producing entrepreneurs Network of over 100,000 alumni in 130 countries worldwide

www.facebook.com/tcdglobalrelations www.twitter.com/tcdglobal instagram.com/tcdglobal

find out why www.tcd.ie