Council 21 November 2014 Room Document No. 2
THE ECONOMIC, FINANCIAL AND SOCIAL SITUATION:
LATEST DEVELOPMENTS
I. THE GLOBAL OUTLOOK AND POLICY CONSIDERATIONS 1. Recent developments and near-term prospects
Global growth is anticipated to strengthen but will remain modest by past standards. There are important differences across countries: the US recovery looks more robust, but the euro area faces an increasing risk of stagnation and Japan’s escape from deflation is not yet assured. Growth in emerging economies will remain stronger, but also reveals important differences: GDP will slow in China, but pick-up in India and remain sluggish in Brazil and Russia.
Oil prices have weakened significantly over recent months. While this will support demand in many countries, it is itself reflective of weaker growth prospects. The developments will contribute to weakening headline inflation.
In the United States, there is a sustained impetus to private spending from solid increases in employment, favourable financial conditions and monetary policy support, and the slowing pace of fiscal consolidation. Unemployment continues to fall, but pockets of labour market slack remain, and price pressures remain weak.
In Japan, the economy contracted again in the third quarter, albeit much less sharply than in the second quarter immediately after the consumption tax hike. The third-quarter outturn was significantly weaker than anticipated, including the modest gains in consumption. Expansion is projected to return by the end of the year, but at a slow pace, supported by improving labour market conditions, further monetary easing and export growth reflecting the weaker yen.
In the euro area, growth has remained slow, as weakness in Germany, France and Italy has offset improvements in the periphery, and inflation has continued to drift down. The planned slowdown in the pace of fiscal consolidation, stronger financial conditions (related in part to progress on the banking union) and further monetary stimulus should support the recovery. Absent this additional macroeconomic support, the growth performance of the euro area would be very weak. Demand will remain below potential, unemployment will stay high and inflation will remain below target.
Among the emerging economies, growth in China has slowed modestly as the property cycle has turned, leading to weaker activity in construction-related activities and contributing to slower consumption growth. The economy is rebalancing towards a more service-sector based growth model, helping to create new jobs. Mini-stimulus packages should help to smooth the transition to slower growth in the coming years.
In India, the pick-up in growth after the sharp slowdown in 2012-13 will continue despite the tight monetary and fiscal stance. Investment will be the main growth engine. Growth in Brazil will resume after the brief recession experienced in the first half of 2014, but will remain sluggish, with growing economic slack helping inflation to ease. Growth will also remain very weak in Russia, reflecting lower oil prices and depressed trade flows.
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There are substantial downside risks to the outlook. Risks of financial instability remain high, while volatility may increase, notably for emerging markets, as monetary policy and economic activity differ across the major economies. Because the growth of potential output has slowed in major economies since the crisis, future trend growth may be weaker than anticipated.
Debt levels remain high by historical standards. Household and government debt levels are high in many advanced economies, despite post-crisis private-sector deleveraging in the United States. In many emerging economies, debt levels have increased rapidly since the crisis, fuelled by capital inflows. In China, there has been a significant build-up in credit, with growth in lending by non-bank entities to the nonfinancial private sector.
The necessary increase in US interest rates likely will lead to renewed volatility in emerging markets, as reflected in exchange rates and capital flows, as already experienced in May 2013 when the Federal Reserve first announced its intention to start tapering. Despite weak real investment and high uncertainty, market valuations and risk appetite for financial assets have been high over the past year. While recent price declines and exchange rate adjustments are consistent with some re- assessment of risks, rapid changes in sentiment could raise volatility, which would jolt the global growth recovery process.
The growth rate of potential output has been trending downward, but decelerating further in the post-crisis period as productivity growth stalls. Shortfalls in potential output are especially large in economies experiencing deep banking crises. In emerging economies, potential growth also has been slowing. In some countries, potential growth is increasingly limited by structural obstacles to higher investment and labour market participation. In the absence of reforms to remove bottlenecks, some emerging economies face the risk of falling into a middle-income trap. There is a risk that weakness in demand will be more damaging to potential output than assumed or that structural obstacles to growth are more severe. This would lead to further reductions in global growth.
The euro area is at risk of a prolonged period of stagnation with low employment and investment.
This would be aggravated if it led to further declines in inflation expectations and further weakness in consumption. Japan has experienced prolonged deflation and challenges remain for Japan to meet the inflation target, slow down the growth of government debt, and implement reforms to boost productivity and boost the size of its workforce.
2. Policy requirements
It is essential that macroeconomic and structural policies support growth. Monetary policy needs to remain accommodative in most countries. Fiscal consolidation has progressed significantly, leaving room in many economies to slow the pace of adjustment. With dangerous downside risks to global economic activity and confidence, all room to engage fiscal policy must be exploited. Modest global growth and the slowdown in potential growth call for ambitious structural reforms to boost investment, trade and job creation.
Monetary policy needs to support demand in most big economies, but will need to be more differentiated than in recent years given the divergence in countries’ position in the cycle, as well as differing risks to financial stability.
Given the very weak economy and the risk of deflation, the ECB should expand its monetary support beyond currently announced measures, building on the positive effects to date. This should include a commitment to sizeable asset purchases (“quantitative easing”) until inflation is back on track.
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Further asset purchases could include lower-rated asset-backed securities, corporate bonds and government bonds.
In the United States, the Federal Reserve’s large-scale asset-purchase programme ended in October.
Policy rates should remain at their current low level through mid-2015.
In Japan, the Bank of Japan's recently expanded "quantitative and qualitative monetary easing”
should continue until the inflation target has been sustainably achieved.
In Brazil, ensuring a convergence of inflation towards target and keeping inflation expectations anchored may require a continuation of the monetary tightening cycle next year, while in India still- high inflation expectations call for a continuation of the tight monetary policy stance.
In China, selective measures have been used to ease monetary conditions since the start of 2014 in an effort to balance support for activity while bringing about an orderly slowdown in credit growth.
Significant progress has been made in strengthening the fiscal position in many advanced economies and the pace of fiscal consolidation is set to slow sharply in the coming years, helping to support recovery. The major exception is Japan, where the debt-to-GDP ratio is set to exceed 230% of GDP.
In the euro area, easing the pace of consolidation would help to support demand and help already- agreed structural reforms. All available room under the EU fiscal rules should be used to avoid pro- cyclical fiscal contraction and allow the automatic stabilisers to operate fully.
In Japan, a detailed and credible fiscal consolidation plan to achieve the target of a primary budget surplus by FY 2020 remains a top priority.
In the United States, past improvements warrant a slower pace of fiscal adjustment and the priority should be to make public spending more favourable to growth. In addition, a medium-term fiscal programme needs to address long-term structural pressures.
Over the past two years, the pace of structural reform in advanced economies has slowed overall, while emerging economies, have begun to pick up their pace of reforms.
Important obstacles to growth globally remain to be addressed including: Removing regulatory distortions on domestic and foreign firms, improving educational provision and incentives for innovation, strengthening active labour market programmes and implementing reforms to benefit systems and labour market regulations. These are key to enhance resilience and inclusiveness, strengthen both potential output and job growth, and ease long-term fiscal burdens. Of course, the specific priorities differ for each economy.
The comprehensive national growth strategies developed by the G-20 as part of the Brisbane summit are a key contribution to raising the level of ambition on structural reform, leading to higher productivity, more jobs, and 2.1% higher GDP by 2018 (USD1.6 trillion). The nearly 1000 structural reform commitments made by G-20 members mean in particular that reform efforts are no longer isolated individual steps, but increasingly part of a global strategy to achieve stronger, more sustainable and balanced growth.
4 II. FINANCIAL MARKETS
The ending of QE in the USA and the potential for a normalisation of monetary policy (higher rates) in the US and the UK in 2015, occurs at a time when Japan is implementing a second phase of QE (on a large scale) and the ECB is also about to start some form of QE (the extent of which remains to be seen).
These divergent paths will generate exchange rate pressures and most likely a much more significant dollar rally—particularly versus the yen. The yen has really begun to move down versus the dollar, and is helping yen assets to rise. But for the dollar block EME’s this has a negative competitiveness effect. The issue is now on the table as to whether the Chinese and other governments in Asia will begin to intervene to push down their currencies. The risk of currency war is high in this sense.
Demand shifting policies only work for a single country, not if all countries try to do it. There is no
“Painless path to recovery” (Rajan 2014). If EMEs respond to their own pressures by exchange rate policies to follow the yen and the euro down (equivalent to monetary expansion), the eventual volatility will be much higher and any crisis will be much greater. The superhighway into high yield and EME debt is not a dual carriageway. It will be harder to get out without volatile price moves.
More generally, the shift into higher risk assets in search of better yields for investors, including into new and illiquid assets in high-yield corporate and EME debt, as well as into structured equity products (levered beta), passive funds and ETFs that use derivatives will be strongly affected by future volatility. Equity markets and bond markets are overvalued in some markets—not yet extreme, but at risk of becoming so.
These developments occur at a time when banks have been more heavily regulated, including liquidity regulations (liquidity coverage ratio and margin rules), which may lead to unexpected pressures as volatility accompanies policy normalisation. The market is being told that monetary policy normalisation can’t be delayed any longer in the USA (end of QE, reverse repo exercises, and Fed guidance)—no more one way bets—but markets love one-way bets, yet regulatory reform reduces the ability of banks to be providers of liquidity.
As banks are more regulated, the role of non-banks and asset markets in the transmission of monetary policy rises. But these markets have to function well. Yet there are impediments to this arising from policy itself. The presence of QE policies means that markets don’t clear on their own, but are distorted by monetary policy. At the same time, macro-prudential policy is directly aimed at impeding the functioning of markets. Capital controls and the reduction of openness is a direct case in point, as are all forms of transaction taxes. A major concern is that banks’ role in liquidity provision is being reduced by regulatory reform, and this is being accompanied by a trend to macro- prudential policies that interfere with the functioning of markets which need to replace banks in credit, underwriting, origination, and the funding of infrastructure and long-term pension liabilities.
Europe’s Asset Quality Review and stress test was an improvement over its predecessors but still insufficient. It was based on a constant total assets amount (€22tn), a minimum Basel CET-1 ratio of 5.5% and a stress test that did not reflect deflation concerns. Capital is lost (€263bn), and a handful of second tier banks need to raise capital (€24.6bn), most of which has already raised since the period of the test (December 2013), so that now only €9.5bn needs to be raised. The problem is that the test, unlike the highly credible US test during the crisis, did not include a minimum leverage ratio: not even the weak Basel III 3% leverage ratio, let alone the new USA levels of 5% and 6% on a GAAP basis, which convert to 3.9% and 4.6% on an IFRS basis. The OECD Secretariat has calculated much higher sums, which involve most to the larger European universal banks if the leverage ratio is included (between €120bn and €300bn depending on whether the 3% or the 3.9% is used. This is why polls since the publication show no improvement in trust with respect to European banks.
Emerging markets are not going to be a major source of growth for the OECD—the trajectory of private investment in these economies is not consistent with more optimistic GDP forecasts.
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Investment in emerging markets is characterised now with excess borrowing, in an environment where returns on equity are falling due to the presence of capital controls, competition with SOEs on unequal terms, ownership restrictions, local content requirements and the like. Borrowing for investments that don’t pay a sufficiently high return in relation to the cost of equity has often been a precursor to crises and financial stability issues. The risk of an emerging market crisis is high, particularly if it is to be exacerbated by strong dollar moves.
III. LATEST LABOUR MARKET AND WAGE DEVELOPMENTS
1. The labour market recovery continues to be very uneven across countries, with the OECD unemployment rate still well above its pre-crisis level
o After having remained essentially unchanged near 8% for nearly three years, the OECD harmonised unemployment rate has been falling gradually since late last year, reaching 7.2%
in September 2014 (see Table 1). This is down 1.3 percentage points from its post-war high of 8.5% in October 2009, but still significantly higher than its level prior to the crisis. More than 44 million persons are currently unemployed in the OECD area, which is 11.6 million more than immediately preceding the crisis.
o Even during the extended period when the OECD average remained near 8%, this apparent stasis reflected the offsetting impacts of gradually declining unemployment in a number of countries, including Japan and the United States, and further increases in a number of Euro area countries (see Figure 1). Unemployment in the Euro area topped at 12% in the middle of 2013 and has since eased slightly to 11.5%.
o Recent labour market trends in the Euro area reflect very different developments in different countries (see Figure 2). Recent reductions in unemployment in Greece, Portugal and Spain, albeit still at a very high levels, help to explain why the Euro area average rate has eased slightly during the past year. By contrast, unemployment is still on an increasing path in Italy and largely stable in France.
o The highest unemployment rates in September were in Greece (26.4%, July 2014), Spain (24.0%), Portugal (13.6%), the Slovak Republic (13.0%), Italy (12.6%), Ireland (11.2%), France (10.5%), Turkey (10.4%, August 2014) and Slovenia (8.9%). The lowest rates were recorded in Korea (3.5%), Japan (3.6%), Norway (3.7%, August 2014), Switzerland (4.4%, Q2 2014), Iceland (4.8%,), Mexico (4.8%), Germany (5.0%), Austria (5.1%), New Zealand (5.4%, Q3 2014), United States (5.8%, October 2014), the United Kingdom (6.0%, August 2014), Australia (6.1%), and Chile (6.4%, August 2014).
o The unemployment rate in the United States fell to 5.8% in October, its lowest level since July 2008. Although being somewhat weaker than in the previous six months, job growth remained robust in October with US payroll employment rising by 214 thousand. Despite these largely favorable developments, the US labour market recovery still has a long way to go. The civilian labour force participation and employment rates were, respectively, 62.8% and 59.2% in October, increasing slightly from the previous month.1 Whereas the unemployment rate is now 1.4 percentage points lower than in October 2013, the employment-population ratio rose by 1 percentage point over the past year and the labour force participation rate was unchanged. The employment and participation rates remain well below their pre-crisis levels and only a part of this decline can be explained by population ageing.
1 Following US practice, these participation and employment rates refer to the population ages 16 and over.
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o The Canadian unemployment rate fell to 6.5% in October 2014, 0.2 percentage points lower than the previous month, and down 0.5 percentage points from one year earlier. Employment increased by 43.1 thousand in October (+0.2%) driven by gains among women and was up 181.8 thousand over the previous 12 months (+1%).
2. Youth have been among the hardest hit groups and may experience long-term scarring
o Youth have been one of the population groups whose employment has fallen most in recent years and this fall has been associated with a large rise in unemployment (see Figure 3). The rise in youth unemployment is of great concern, particularly in those OECD countries where youth unemployment has risen to dramatic levels: 50.7% in Greece (July 2014), 53.7% in Spain, 42.9% in Italy, 35.2% in Portugal and 28.5% in the Slovak Republic. The persistence of such high unemployment rates among youth risks compromising their long-term career prospects.
o Several countries have seen marked decreases in youth unemployment since the crisis peak, most notably Ireland where there has been a 6.3 percentage point decline. While this is encouraging, youth unemployment is still above the pre-crisis level in the large majority of countries (3 percentage points higher on average across the OECD area).
3. While the rise in unemployment since the start of the crisis remains largely cyclical its structural component has also increased
o The prolonged period of high unemployment and the rise in long-term unemployment has raised concerns that structural joblessness has increased, with stronger economic growth alone failing to drive unemployment back down to its pre-crisis levels. OECD Employment Outlook 2014 suggests that persistently high unemployment reflects a combination of cyclical and structural factors.
o Weak aggregate demand accounts for a significant part of the persistence of high unemployment. The continued importance of cyclical factors is illustrated by the fact that the ratio of job vacancies to the number of unemployed jobseekers remains depressed compared with the pre-crisis situation in most OECD countries for which suitable data are available (see Figure 4). Moreover, it is estimated that more than half of the decline in the job-finding prospects of the unemployed since the onset of the global financial crisis is associated with cyclical factors, i.e. a lower number of vacancies per unemployed jobseeker. In some countries, however, the ease with which jobseekers find jobs and fill job vacancies (“matching efficiency”) has deteriorated.
o The NAIRU (Non-accelerating inflation rate of unemployment) suggests that structural unemployment has increased, but also that the increase in structural unemployment remains small relative to the overall increase in unemployment since the start of the global financial crisis (see Figure 5). The NAIRU has increased significantly, by 3 percentage points or more, in Greece, Spain and Portugal, while it has increased moderately by between 1 and 3 percentage points in Hungary, Iceland, Ireland Italy, New Zealand and Slovenia. However, in none of the countries where the NAIRU is estimated to have increased does it account for more than half of the overall increase in unemployment, except Hungary.
o The rise in structural unemployment does not appear to reflect a misalignment or mismatch of job vacancies and unemployed jobseekers across sectors (see Figure 6). In both the European Union and the United States, sectoral mismatch increased sharply in the aftermath of the global financial crisis, reaching a peak in 2009, but then gradually declined to its pre-
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crisis level. While sectoral mismatch continued to decline in the United States, it started to increase again in Europe in 2012, as a result of increasing mismatch in a few countries such as Greece and Portugal. These patterns largely correspond to the course of the business cycle.
There is little indication so far that structural changes in the industry mix have given rise to a persistent misalignment of job vacancies and unemployed jobseekers across sectors and a substantial increase in structural unemployment.
4. Migrants have on average lower literacy proficiency than native-born persons
o Although migrants are over-represented among high-skilled persons in OECD countries, their labour market outcomes lag behind those of similar native-born individuals. The reason behind that may be lower skills of migrants, imperfect mastery of the host-country language and/or limited transferability of skills between origin and destination countries. In addition, in some OECD countries, migrants are also over-represented among low-skilled persons, which may explain their lower average labour market outcomes in comparison with natives.
Data from the OECD’s Survey of Adult Skills (PIAAC), which provides rich information on labour market outcomes as well as an unprecedented assessment of cognitive skills, shed new light on this issue.
o Foreign-born persons in the OECD countries participating in PIAAC have lower scores in literacy proficiency than the native-born (see Figure 7). The average difference is about 27 points, which corresponds to half a level in terms of literacy proficiency. The important differences that exist across countries reflect differences in the composition of the migrant groups in terms of educational attainment, age structure, reason for migration and country of origin.
o The differences in literacy proficiency between migrants and natives tend to be small in most English speaking countries. Some of these countries also use a point system to pre- select persons with high education and/or persons with good proficiency in English. In the Nordic countries (Sweden, Finland, Norway and Denmark), foreign-born persons have substantially lower literacy proficiency than native-born ones. This pattern is explained by limited language skills and the high shares of humanitarian migrants in these countries. An important literacy proficiency gap is also found in some central European countries (France, Belgium, Germany and the Netherlands), as well as in Korea and the United States
o Educational attainment is not perfectly correlated with literacy proficiency and this is especially true for migrants (see Figure 8). Controlling for the level of education qualification, the variance of literacy proficiency is higher among migrants than among natives, in particular for those with low- and medium-level qualifications. This suggests that using the highest qualification attained as a measure of employment-relevant skills may be particularly problematic for migrants, as it masks a wide distribution of literacy skills. This further implies that immigration policies that select people only on the basis of their educational attainment may not be successful in identifying and attracting the most skilled persons, as regards literacy proficiency.
5. The OECD High Level Forum on Migration -- Mobilising Migrants’ Skills for Economic Success.
o The OECD will host the second High-Level Policy Forum on Migration on 1-2 December, 2014.
The HLPF will give an opportunity to Ministers and senior officials from different Ministries to discuss a number of key policy issues and indicate areas of further work for the OECD. In particular, they will address a number of key policy issues, including: How to reconcile short- term and long term objectives associated to migration? How to build public confidence on
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migration issues? How best to engage with all stakeholders in an efficient and fair manner?
How to better use migrants’ skills for economic success? Despite the great diversity of situations across countries, these are key issues that all countries face and these questions will guide us in our discussions during this Forum today and tomorrow.
o For background, the remainder of this section provides some information on the level of migrants’ skills and their use in the host country.
5.1 Differences in literacy proficiency between migrants and natives reflect to a large extent differences in language skills
o Two thirds of migrants in the Survey of Adult Skills took the test in a language which is different from their own native language. As a result, for these migrants, literacy and numeracy assessments reflect a combination of their knowledge of the test language and their true literacy skills. Controlling for whether the migrant speaks the host-country language at home or learned it as a child or not accounts for about 33% of the differences in literacy proficiency between migrants and natives (see Figure 9). In Finland and Austria, language accounts for approximately two-thirds of the difference, while in Norway, it accounts for about 50%. In contrast, in Canada, a country which admits many migrants who already speak English, only 16% of the difference is accounted for by language.
o Differences in literacy proficiency between migrants and natives may also be driven by differences in the quality of the educational systems between the sending and receiving countries. Indeed, the country in which the highest qualification was acquired is an important determinant of literacy proficiency and accounts on average for 46% of the differences in literacy proficiency between foreign-born and native-born. Language together with foreign qualifications account for two thirds of the initial gap in literacy proficiency between similar foreign-born and native-born persons (un-weighted average of countries with available data).
o Literacy proficiency is higher for migrants who have stayed longer in the host country and have had the time to learn the language, as well as for those who arrived as young children and completed their education in the country.
5.2 Literacy proficiency is an important determinant of labour market outcomes, while education and experience acquired abroad are not fully rewarded
o On average in the OECD countries covered by PIAAC, migrants with a tertiary education are 13% more likely than similar natives to be employed in medium- or low-skilled occupations and hence to be overqualified for their jobs. However, important differences exist both between countries and migrant groups. In the majority of OECD countries in PIAAC, migrants who have acquired their qualifications in the host country have similar over-qualification rates as similar native-born persons. In contrast, those who completed their tertiary education abroad are on average 20% more likely than natives to be overqualified in their job.
o Differences in literacy (numeracy) proficiency between migrants and natives account for about 30% (26%) of the differences in the over-qualification rates between the two groups (see Figure 10). If host-country language and the origin of one’s qualifications are also taken into account, the difference in over qualification between migrants and natives is no longer statistically significant in the vast majority of countries.
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o There is a negative wage differential between migrants and natives, even after demographic factors and educational attainment have been taken into account. This is explained by low returns to education acquired abroad and no – or limited – returns to professional experience gained prior to migration. In addition, migrants with a foreign qualification derive a lower return to literacy proficiency than both natives and migrants with host-country qualifications.
This suggests that employers may have difficulty assessing foreign qualifications and skills acquired outside the country. Recognition of qualifications and short courses offering certification of skills could help employers better value the skills of migrants.
o Issues related to migrants’ access to life-long learning and skills development, and the inter- generational transmission of human capital between migrants and their children are being examined in ongoing work in the International Migration Division in ELS. The international transferability of skill, both within the OECD area and more widely, is also being analysed.
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Figure 1. The labour market impact of the crisis and recovery has been highly uneven across countries
Harmonised unemployment rate, percentage of the labour force
Source: OECDShort-Term Labour Market Statistics Database (Cut-off date: 6 November 2014).
Figure 2. Labour market conditions also vary within the Euro area
Harmonised unemployment rate, percentage of the labour force
Source: OECDShort-Term Labour Market Statistics Database (Cut-off date: 6 November 2014).
3 4 5 6 7 8 9 10 11 12 13%
United States
Japan Euro area
0 5 10 15 20 25 30%
Greece Spain
Portugal Italy
France Germany
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Figure 3. Youth unemployment has reached very high levels in some OECD countries Percentage of youth (aged 15-24) labour force, Q4 2007a- Q3 2014b
Note: Countries shown in ascending order of the youth unemployment rate at its peak.
a)Q2 2007 for Switzerland.
b) Q2 2014 for Estonia, Greece, Hungary, Norway, Switzerland, Turkey and the United Kingdom.
Source: OECD Short-Term Labour Market Statistics Database (http://dx.doi.org/10.1787/data-00046-en).
Figure 4. Weak employment prospects reflect weak aggregate demand and reduced matching efficiency Actual and predicted percentage-point change in the job-finding rate, Q4 2007 and Q4 2013a
a) The job finding rate is measured using the probability that an unemployed person leaves unemployment in a given quarter.
The change in the job-finding rate is decomposed into the change due to the business cycle and the change reflecting a shift in job matching efficiency. The cyclical component is estimated by applying the estimated impact of labour market tightness on the job-finding rate, using data from before the crisis, to the observed change in labour market tightness since the crisis. The difference between the actual and the cyclical change in the job-finding rate is interpreted as the change in matching efficiency.
Source: OECD estimates based on OECD Short-Term Labour Force Statistics (database), http://dx.doi.org/10.1787/data- 00046-en and national estimates of job vacancies.
0 10 20 30 40 50 60 70
%
Q4 2007 Peak Q3 2014
-10 -8 -6 -4 -2 0 2 4
%
Business cycle Matching efficiency Actual
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Figure 5. The rise in unemployment is largely cyclical but the structural component has increased
Percentage-points change in the NAIRU since the start of the global financial crisis, 2008-13
Note: NAIRU: Non-accelerating inflation rate of unemployment. The countries are shown by ascending order of the change in the unemployment rate.
a) Aggregate of 15 OECD countries of the euro area.
Source: OECD calculations based on OECD Economic Outlook (database), http://dx.doi.org/10.1787/data-00688-en.
Figure 6. Sectoral mismatch follows a cyclical pattern
Index of sectoral mismatch, 2005-13
European Uniona United States
..: not available.
a) Unweighted average of the 11 following European countries: the Czech Republic, Estonia, Finland, Germany, Greece, Hungary, the Netherlands, Portugal, the Slovak Republic, Slovenia and the United Kingdom.
Source: OECD estimates based on the Job Vacancy Database from Eurostat and the European Union Labour Force Survey (EU-LFS) for the European Union and the Job Openings and Labor Turnover Survey (JOLTS) and the Current Population Survey (CPS) for the United States.
-5 0 5 10 15 20
%
NAIRU Unemployment rate
0 ..
0.05 0.1 0.15 0.2 0.25 0.3
0 0.05 0.1 0.15 0.2 0.25 0.3
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Figure 7. Performance in literacy, by place of birth
Literacy score points
Note: The sample includes persons aged 16 to 65. 50 points in the literacy proficiency score correspond to about a level of literacy.
Source: Survey of Adult Skills (PIAAC) 2012.
200 220 240 260 280 300 320
Foreign-born Native-born
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Figure 8. Distribution of literacy scores, by education and place of birth
Literacy score points
A. Low-skilled B. Medium-skilled C. High-skilled
FB: Foreign-born; NB: Native-born.
Note: The sample includes persons aged 16 to 65. The lower end of the bar representes the 25th percentile, while the upper one the 75% percentile. The black dot in the middle is the mean. Low education corresponds to less than upper secondary, medium education to upper secondary and high education to tertiary education.
Source: Survey of Adult Skills (PIAAC) 2012.
150 170 190 210 230 250 270 290 310 330 350
NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB AUS AUT CAN DEU ESP FRA GBR IRL NOR SWE USA
150 170 190 210 230 250 270 290 310 330 350
NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB AUS AUT CAN DEU ESP FRA GBR IRL NOR SWE USA
150 170 190 210 230 250 270 290 310 330 350
NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB NB FB AUS AUT CAN DEU ESP FRA GBR IRL NOR SWE USA
Figure 9. Adjusted differences between migrants and natives in literacy proficiency
Score point difference
Note: The sample includes persons aged 16 to 65. The results in this figure are coefficients obtained from separate regressions with controls for level of education, age, gender and parental background. Parental educational background is defined as the highest educational level between the mother and the father. Specification 1 only contains these controls, while specification 2 also includes a dummy variable which takes the value one if the migrant speaks the host-country language at home or has learned the host-country language as a child and still understands and zero otherwise. Specification 3 contains the basic controls and a dummy variable which takes the value one if the respondent has received his/her qualification abroad.
Finally, specification 4 contains both the dummy for host-country language and that for foreign qualification. The striped dots and squares indicate coefficients which are not statistically significant (at 10% level).
Source: Survey of Adult Skills (PIAAC) 2012.
Figure 10. Differences in over-qualification rates between migrants and natives
Percentage points
Note: The sample includes tertiary-educated employed individuals aged 16-65. The estimated model is a linear probability model which includes controls for age, gender, years of schooling and an intercept. The white bars correspond to a model which only accounts for these variables and includes a dummy variable for foreign born. The blue bars correspond to the coefficient of a dummy of foreign-born in a model which in addition to the factors mentioned above also controls for literacy proficiency. The grey bars correspond to the foreign-born coefficient dummy in a model which controls in addition for whether the person speaks the host-country language and the origin of his qualification. The striped bars indicate coefficients which are not statistically significant (at 10% level).
Source: Survey of Adult Skills (PIAAC) 2012.
-60 -50 -40 -30 -20 -10 0
AUT BEL CAN DEU DNK ESP EST FIN FRA GBR IRL ITA NLD NOR SWE USA 1. Adjusted for demographics and education 3. Adjusted for foreign qualification
2. Adjusted for host-country language 4. Adjusted for language and foreign qualification
-10 -5 0 5 10 15 20 25 30 35
%
Foreign-born dummy
Foreign-born dummy (literacy skills)
Foreign-born dummy (literacy skills + host-country language+ foreign qualification)
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Table 1. Changes in harmonised unemployment since December 2007 Seasonally adjusted data
P: Provisional data as of 6 November 2014.
a) .July 2014 for Greece, Turkey and the United Kingdom; August 2014 for Chile, Estonia, Hungary and Norway; October 2014 for Canada and the United States;Q3 2014 for New Zealand; and Q2 2014 for Switzerland.
b) Information on data for Israel: http://dx.doi.org/10.1787/888932315602.In order to ensure a comparison between the results based on the Quarterly Labour Force Survey and the new Monthly Labour Force Survey introduced in January 2012, the series have been chained using the chaining coefficients provided by the national authorities (For further details see http://www1.cbs.gov.il/publications12/saka0412m/pdf/intro_f_e.pdf).
c) Harmonised unemployment data for New Zealand and Switzerland are not available on a monthly basis but for comparison purposes the quarterly averages are reported on a monthly basis.
Source: OECD calculations based on the OECD Short-Term Labour Market Statistics Database (http://dx.doi.org/10.1787/data- 00046-en).
September 2014a
December 2007
%-points
change % change September 2014a
December 2007
Absolute
change % change
OECDp 7.2 5.6 1.6 28.6 44 228 32 633 11,595 35.5
G7p 6.3 5.5 0.8 14.5 23 355 19 959 3,396 17.0
European Union 10.1 6.9 3.2 46.4 24 512 16 514 7,998 48.4
Euro Area 11.5 7.4 4.1 55.4 18 347 11 555 6,792 58.8
Australia 6.1 4.3 1.8 40.7 747 477 270 56.6
Austria 5.1 4.0 1.1 27.5 227 169 58 34.3
Belgium 8.5 7.3 1.2 16.4 425 346 79 22.8
Canada 6.5 6.0 0.5 8.3 1 259 1 081 178 16.5
Chile 6.4 7.8 -1.4 -17.9 545 555 -10 -1.7
Czech Republic 5.7 4.8 0.9 18.7 302 251 51 20.3
Denmark 6.6 3.3 3.3 100.0 194 96 98 102.1
Estonia 7.7 4.1 3.6 87.8 52 28 24 85.7
Finland 8.7 6.5 2.2 33.8 233 175 58 33.1
France 10.5 7.4 3.1 41.9 3 094 2 107 987 46.8
Germany 5.0 8.2 -3.2 -39.0 2 144 3 408 -1,264 -37.1
Greece 26.4 8.1 18.3 225.9 1 282 402 880 218.9
Hungary 7.6 8.0 -0.4 -5.0 339 337 2 0.6
Iceland 4.8 2.5 2.3 92.0 9 5 4 80.0
Ireland 11.2 5.0 6.2 124.0 243 112 131 117.0
Israelb 6.5 8.5 -2.0 -23.0 248 269 -21 -7.9
Italy 12.6 6.5 6.1 93.8 3 236 1 640 1,596 97.3
Japan 3.6 3.7 -0.1 -2.7 2 300 2 510 -210 -8.4
Korea 3.5 3.1 0.4 12.9 919 760 159 21.0
Luxembourg 6.1 4.2 1.9 45.2 16 9 7 77.8
Mexico 4.8 3.8 1.0 26.6 2 510 1 711 799 46.7
Netherlands 6.5 3.3 3.2 97.0 580 283 297 104.9
New Zealandc 5.4 3.5 1.9 54.3 134 78 56 71.8
Norway 3.7 2.4 1.3 54.2 102 61 41 67.2
Poland 8.7 8.2 0.5 6.1 1 500 1 351 149 11.0
Portugal 13.6 8.5 5.1 60.0 702 462 240 51.9
Slovak Republic 13.0 10.5 2.5 23.8 350 277 73 26.4
Slovenia 8.9 4.7 4.2 89.4 91 48 43 89.6
Spain 24.0 8.8 15.2 172.7 5 498 1 995 3,503 175.6
Sweden 7.7 6.0 1.7 28.3 402 291 111 38.1
Switzerlandc 4.4 3.7 0.8 20.8 209 156 52 33.5
Turkey 10.4 9.0 1.4 15.6 3 015 2 044 971 47.5
United Kingdom 6.0 5.1 0.9 17.6 1 951 1 568 383 24.4
United States 5.8 5.0 0.8 16.0 8 995 7 645 1,350 17.7
Number of unemployed Thousands Unemployment rate
Percentage of the labour force
