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

Labour market reforms in OECD countries

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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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

Source: Going for Growth (2012).

A. Protection for regular employment

B. Protection for temporary employment

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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Reduce coverage rates of collective agreements

Source: Going for Growth (2012).

A. Coverage rates of collective bargaining agreements

B. Trade union density rates

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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Reform the pension system to boost labour supply

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10

20

30

40

50

60

70

80

90TUR

SVN

HUNITA

POL

BEL

LUX

AUT

GRC

FRA

SVK

CZEESP

EU15PRT

MEX IRL

OECD

NLD

GBR FIN

CHL

CANDNK

AUS

KORISR

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.

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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Ease regulation of professional services

Source: Going for Growth (2012).

Index scale of 0-6 from least to most restrictive

Labour market reforms in OECD countries

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Reduce state control of business operation

Source: Going for Growth (2012).

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

Labour market reforms in OECD countries

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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

Labour market reforms in OECD countries

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Thank you for your attention!