Ljubljana, 17/09/2012 Effects of labour market reforms in OECD countries – implications for...

Ljubljana, 17/09/2012

Effects of labour market reforms in OECD countries – implications for Slovenia

International Conference organized by the Ministry of Labour, Family and Social Affairs –

Labour Market Reform: New Opportunities for a Better Tomorrow

17 September 2012, LjubljanaRafal Kierzenkowski

OECD, Economics Department, Head of Slovenia desk

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Large income gap driven by productivity shortfall

Source: Going for Growth (2012).

Gap relative to the upper half of OECD countries, 2010

Labour market reforms in OECD countries

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Breakdown of labour resource utilisation


Gap relative to the upper half of OECD countries, 2010

Source: OECD (2011), OECD National Accounts Statistics and OECD Economic Outlook: Statistics and Projections (databases); and OECD Productivity Database, December.

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Increase in the unemployment rate...

Source: Going for Growth (2012).Labour market reforms in OECD countries

Per cent

Source: OECD (2012), “Employment - by economic activity: Short-Term Labour Market Statistics”, OECD Employment and Labour Market Statistics (database), September.

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...and outflows of labour supply since the crisis

Source: Going for Growth (2012).Labour market reforms in OECD countries

Change in labour force participation rates, percentage points, 2008Q1-2012Q1

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Reform packages can induce short-term benefits

Source: Cacciatore, M., R. Duval and G. Fiori (2012), “Short-term Pain or Gain? A DSGE Model-based Analysis of the Short-term Effects of Structural Reforms in Labour and Product Markets”, OECD Economics Department Working Papers, forthcoming.

A package combining a decline in entry barriers, a reduction in unemployment benefit replacement rate and a relaxation of job protection in a “rigid” economy


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Reductions in unemployment replacement rates

Note: ** represents statistical significance at the 5% level. The simulation is based on the median-sized reform observed in theestimation sample. The impact of the reform is estimated controlling for initial unemployment benefit replacement rate.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in aggregate employment following a reduction in the initial unemployment benefit replacement rate


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Reductions in unemployment benefit duration

Note: *** and ** represent statistical significance at the 1 and 5% levels, respectively. The simulation is based on the median-sizedreform observed in the estimation sample. The impact of the reform is estimated controlling for initial unemployment benefitreplacement rate.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in youth unemployment following a reduction in unemployment benefit duration


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Boost spending on active labour market policies

Note: Active labour market policies cover programs dealing with PES and administration, training, job rotation and job sharing, employment incentives, supported employment and rehabilitation, direct job creation and start-up incentives.Source: OECD, Labour Market Programmes and OECD Economic Outlook databases

Spending on active labour market policies, 2009, in thousand USD PPPs


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Active labour market policies

Note: *** and ** represent statistical significance at the 1 and 5% levels, respectively. The simulation is based on the median-sized reform observed in the estimation sample.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in aggregate employment following a “typical” increase in public spending on ALMP employment incentives


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Tackle labour market dualism Employment protection legislation, index of 0-6 from least to most restrictive


A. Protection for regular employment

B. Protection for temporary employment


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Reforms of job protection: regular contracts

Note: *** and ** represent statistical significance at the 1 and 5% levels, respectively. The simulation is based on the median-sized reform observed in the estimation sample.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in female unemployment following a “typical” reduction in job protection on regular contracts


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Reforms of job protection: temporary contracts

Note: *** and * represent statistical significance at the 1 and 10% levels, respectively. The simulation is based on the median-sized reform observed in the estimation sample.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in aggregate employment following a “typical” reduction in job protection on temporary contracts


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Reduce coverage rates of collective agreements


A. Coverage rates of collective bargaining agreements

B. Trade union density rates


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Administrative extensions of collective agreements

Note: ** and * represent statistical significance at the 5 and 10% levels, respectively. The simulation is based on the median-sized reform observed in the estimation sample.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in female unemployment following a decline in excess bargaining coverage


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Refrain from further increasing the minimum wage

Note: Median earnings are for full-time employees and mean earnings for full-time workers.Source: OECD (2012), “Earnings: Minimum wages relative to median wages”, OECD Employment and Labour Market Statistics (database), June.

Minimum wages, per cent, 2010


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Reform the pension system to boost labour supply

0

10

20

30

40

50

60

70

80

90TU

RSVN

HUN ITA

POL

BEL

LUX

AUT

GRC

FRA

SVK

CZE

ESP

EU15 PRT

MEX IRL

OECD NLD

GBR FIN

CHL

CAN

DNK

AUS

KOR ISR

DEU

USA

EST

JPN

NOR

CHE

SWE

NZL

ISL

Labour force participation rates of 55-64, 2011

Source: OECD (2012), OECD Employment and Labour Market Statistics (database), June.


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Product market reforms

Note: ** represents statistical significance at the 5% level. The simulation is based on the median-sized reform observed in the estimation sample.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in aggregate labour force participation following a “typical” easing of product market regulation


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Ease regulation of professional services


Index scale of 0-6 from least to most restrictive


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Reduce state control of business operation


Index scale of 0-6 from least to most restrictive Extent of public ownership


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The cycle is important

Note: The lower line corresponds to the impact of the reform during “bad” times, while the upper line represents the impact during “good” times, corresponding to the minimum and maximum levels of the unemployment gap, respectively, as observed across the sample (i.e. across all countries and time). The central broken line represents the impact of the reform when the unemployment gap equals its median value.Source: Bouis, R. et al. (2012), “The Short-term Effects of Structural Reforms: an Empirical Analysis”, OECD Economics Department Working Papers.

Change in aggregate employment following a “typical” reduction in initial unemployment benefit replacement rate


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