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How do Asia/Pacific countries compare?

Raymond Torres, OECD

2

Asia/Pacific countries do relatively well

Source: OECD (2005), OECD Employment Outlook , OECD, Paris.

Proportion of persons of working age (15-64) who don't have a job

%

0

10

20

30

40

50

60

OECD average EU-19 average

3

Ageing is a common challenge to all A. Labour force growth will slow dramatically …

Annualised percentage changes

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Australia Canada Japan Korea New Zealand United States European Union OECD

4

Asia/Pacific economies grow fast (except Japan)

av. 1992-2002 2003 2004

Canada 3.6 2.0 2.8Mexico 2.7 1.4 4.4United States 3.2 3.0 4.4Japan 1 1.5 2.6Korea 5.6 3.1 4.6Australia 3.9 3.6 2.9New Zealand 3.7 3.3 4.4

EU-19a 2.3 1.1 2.2

OECDa 2.7 2.1 3.4

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Key issue in the JS reassessment: are welfare benefits and regulations bad for jobs?

Welfare benefits may inhibit work incentives

Labour regulations (minimum wages, dismissal regulations, etc.) may:

make employers reluctant to hire (lower labour demand); and

slow down allocation of resources (lower labour productivity

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Point 1: If well designed, welfare benefits may promote labour supply

The “mutual obligations” approach

Governments offer good re-employment services, financial incentives to work, non-financial services like child-care – the “rights”

Beneficiaries should take active steps to find work – the “obligations”

This may require a minimum wage set at right level

= > This can be very effective to bring disadvantaged groups into employment

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Absent from work owing to sickness and related reasonsb Education participation ratec

Benefit dependency rate

Other

Chart 1. In some countries, most non-employed adults receive a benefitPercentages of working-age population,a 1999

Employment rates, net of absence from work owing to

sickness and related reasonsd

%

0

10

20

30

40

50

60

70

80

8

Source: OECD (2004), Benefits and wages , Paris.

The OECD summary measure is defined as the average of the gross unemployment benefit replacement rates for two earnings levels, three family situations and three durations of unemployment.

Benefit entitlements are less than OECD average

%

0

10

20

30

40

50

60

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Asia/Pacific spending on ALMP is less than average

Source: OECD Database on Labour Market Programmes.

Expenditure on active labour market programmes Percentage of GDP

%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

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Point 2: Employment regulations can be made consistent with employment

Overly rigid dismissal regulations can be big problem

It can inhibit job creation, Contribute to labour market duality and Reduce mobility

But some degree of regulation can help

This will force firms to internalise cost of dismissal decisions: see Austrian reform, experience rating in the US

Helps find better job match (productivity)

=> Wage flexibility and/or training needed

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a) Countries are ranked from left to right in ascending order of the overall summary index.

Source: OECD (2004), Employment Outlook , Chart 2.1, Paris.

US, Canada, NZ, Australia have low EPL, Japan and Korea average, Mexico high

Protection of regular employment against individual dismissal, 2003 (Scale 0-6)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Regulation of temporary forms of employment, 2003 (Scale 0-6)

Regular work total

-1.5

0.5

2.5

0.0 0.5 1.0 1.5 2.0 2.5

Regular work individual

EPL overall including collective dismissal (version 2), 2003 (Scale 0-6)

0.0

1.0

2.0

3.0

4.0

5.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

EPL overall excluding collective dismissals (version 1), 2003 (Scale 0-6)

Regular work total

-2.5

2.5

0.0 0.5 1.0 1.5 2.0 2.5

Temporary work

Regular work individual

0.0

2.0

0.0 0.2 0.4 0.6 0.8 1.0 1.2

Temporary work

Regular individual

-2.5

2.5

0.0 0.5 1.0 1.5 2.0 2.5

Temporary

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2003(Scale 0-6)

Regulation on temporary forms of employment

Specific requirements for collective dismissal

Protection of regular workers against (individual) dismissal

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Union density and collective bargaining coverage in Asia-Pacific are low (except

Australia)23456789

1011121314151617

Percentage of wage and salary earners

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

FinlandFrance

Germany

Hungary

Italy

Japan

Korea

Luxembourg

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

United Kingdom

United States

0

10

20

30

40

50

60

70

80

90

100

0 10 20 30 40 50 60 70 80 90 100Trade union density (%)

Col

lect

ive

barg

aini

ng c

over

age

(%)

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Big shift away from low-educated employment…

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Training reduces the risk of unemployment Low-estimate of the probability change High-estimate of the probability change

13141516171819202122232425262728-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

Austria Belgium Denmark Finland France Germany Greece Ireland ITALY Netherlands Portugal Spain

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Pros and cons of different strategies

First option: not doing anything…

“deregulation” approach (low benefits, low EPL) :

enhances work incentives and labour demand

cheap for public purse

But not enough in certain cases (lone parents) ...

... And does not help improve career prospects and may lead to labour market insecurity

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Flexicurity (adequate benefits, strong activation, low EPL) - anglo-saxon countries moving in this direction?

Promotes participation

Reduces demand-side barriers

But it is costly and complex vis-à-vis deregulation…

… And it implies workers accepting low EPL

=> Ok if evaluation in place, social consensus and training providing by government

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Internal flexibility (high EPL for regular workers, wage flexibility, firm-training)

Promotes adjustment within firms through wage flexibility (Japan, Korea -- Mexico?)

Maintains employment security

But at the cost of duality (rising incidence of non-regular jobs) …

=> Requires innovative ways to provide EPL

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Thank you