Transcript The Swedish model: challenges and how to ensure inclusive growth?

WHAT ARE THE MAIN
CHALLENGES FOR THE
SWEDISH ECONOMY?
Christophe André
Sweden-Finland desk
OECD Economics Department
Seminar ”Ett utmanat Sverige”
Stockholm, 22 November 2016
The views expressed in this presentation are those of the author and not
of the OECD or of its member countries.
Overview
•
Sweden’s economic performances are among the best in the OECD.
•
But Sweden is facing global challenges:
 Slowdown in productivity growth.
 Skilled-biased technological change.
 Population ageing.
 Uncertainties about the future of globalisation.
 Climate change.
•
What should the economic policy priorities be?
 Raising education and skills (levels and equality).
 Labour market: ensuring flexibility, preventing exclusion and polarisation.
 Better integrating immigrants.
 Moving towards a more growth- and employment-friendly tax structure (lower
taxation on labour and increase indirect and property taxation).
 Reforming the housing system.
2
SWEDEN’S ECONOMIC
PERFORMANCES
The Swedish economy is performing well
Gross adjusted household disposable income per capita,
Thousand USD, PPP
50
45
40
35
30
25
20
15
10
USA
NOR
CHE
AUS
AUT
DEU
CAN
SWE
FRA
BEL
NLD
FIN
GBR
DNK
ISL
ITA
JPN
IRL
NZL
ESP
KOR
SVN
PRT
CZE
SVK
GRC
POL
EST
HUN
CHL
0
MEX
5
Source: OECD National Accounts.
4
The gap in GDP per capita and productivity
is small and narrowing
Gap to the upper half of OECD countries 1
Per cent
5
GDP per capita
GDP per hour worked
0
-5
-10
-15
-20
1991
1995
1999
2003
2007
2011
2015
1. Percentage gap with respect to the weighted average using population weights of the highest 17 OECD
countries in terms of GDP per capita and GDP per hour worked (in constant 2010 PPPs).
Source: OECD National Accounts.
5
Income inequality remains low
Gini coefficient for household disposable incomes
50
45
40
35
30
25
20
15
10
0
SVN
SVK
NOR
DNK
CZE
ISL
FIN
BEL
AUT
SWE
NLD
CHE
HUN
DEU
POL
LUX
KOR
IRL
FRA
CAN
ITA
NZL
ESP
JPN
AUS
PRT
EST
GRC
GBR
ISR
USA
TUR
MEX
CHL
5
Source: OECD Income Distribution Database.
6
The employment rate is high
% of working age
population
Employment rate
% of working age
population
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
GRC
TUR
ESP
ITA
HUN
SVK
POL
IRL
PRT
MEX
BEL
CHL
SVN
FRA
KOR
OECD
LUX
ISR
USA
CZE
EST
FIN
GBR
JPN
AUS
AUT
CAN
DNK
NZL
DEU
NLD
SWE
NOR
CHE
ISL
90
Source: OECD Labour Force Statistics.
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THE CHALLENGES
The global slowdown in productivity
growth also affects Sweden
Labour productivity growth
GDP per worker, annual percentage change
%
12
1990-2000
2000-07
2007-15
10
8
6
4
2
0
-2
Denmark Finland
Norway Sweden Euro Area Japan
USA
OECD
Brazil
India
China
Source: OECD Productivity Statistics.
9
Sweden is well placed to benefit
from the diffusion of innovations
“Spillover” from an increase in MFP growth
of the world’s most productive firms by 2% points
Global connections
Reallocation
Knowledge-Based Capital
Sweden
Notes: The chart shows how the sensitivity of MFP growth to changes in the frontier leader growth varies with
different levels of policy variables. The diamond refers to Sweden. The label “Minimum” (Maximum) indicates
the country with the lowest (highest) value for the given structural indicator in a given reference year.
Source: Saia, Andrews and Albrizio (2015).
Framework conditions are favorable,
but there is still room for improvement
Overall PMR
3.0
2.5
2.0
Implicit barriers to trade and investment
State involvement in business operations
1.5
1.0
0.5
0.0
Regulatory protection of incumbents
Complexity of regulatory procedures
Administrative burdens
on start-ups
Sweden
OECD
Other Nordics
Best performer
Source: OECD (2013), Product Market Regulation Database.
11
Income inequality is increasing
Source: Statistics Sweden.
12
Lower educational results
translate into lower adult skills
Difference to average,
normalised
PISA and PIAAC scores for the same cohorts
1.2
PIAAC
PISA Age 24
2003
1.0
0.8
0.6
PISA
2000
PIAAC
Age 27
PISA
2006
PIAAC
Age 21
0.4
0.2
0.0
PISA PIAAC
2009 Age 18
-0.2
-0.4
Source: OECD Survey of Adult Skills (2012) and PISA Databases (2009 and 2012).
13
Few jobs for the low-skilled
Low-skilled employment among foreign- and native-born workers
Percentage of total employment, 15-64 year olds, 2012-13
Women
Native-born
Foreign-born
Men
Greece
Spain
Italy
Belgium
Slovenia
Germany
Austria
EU total (28)
France
Denmark
Portugal
Iceland
OECD total (29)
Estonia
Luxembourg
Netherlands
Turkey
Finland
Ireland
United Kingdom
Norway
Switzerland
Sweden
Hungary
Czech Republic
Slovak Republic
New Zealand
Poland
Canada
Australia
50
40
30
20
10
0
Source: OECD Indicators of Immigrant Integration 2015.
0
10
20
30
40
50
14
Labour market integration of immigrants
is a challenge
Employment gap between foreign and native born
Observed gap and adjusted for differences in education and socioeconomic characteristics, percentage points
Men
Adjusted difference
Women
Observed difference
15
10
Foreign-born men have higher chances to be in
employment than native-born men
15
5
0
0
-5
-5
-10
-10
-20
Foreign-born men have lower chances to be in
employment than native-born men
Observed difference
10
5
-15
Adjusted difference
-15
-20
Source: OECD Migration Outlook 2015.
15
Large skills differences
between young immigrants and natives
Literacy score among young adults by education level
and immigrant status
PIAAC score
PIAAC level
3
225
2
175
1
Lower than upper
secondary
Source: OECD Survey of Adult Skills (2012).
Upper secondary
Native-born
Foreign-born
275
Native-born
4
Foreign-born
325
Native-born
5
Foreign-born
375
Tertiary
16
The low-skilled struggle
to find employment
Employment and wage by skill level
Mean hourly wages, PPP adjusted USD
20
Level 4 and 5
Sweden
Sweden
PIAAC average
Level 4 and 5
18
Level 3
Level 2
16
Level 1 and below
Level 3
14
Level 2
12
Level 1 and below
10
50
60
70
80
90
100
Employment rate.
rate, %
Source: OECD Survey of Adult Skills (2012).
17
The tax wedge on labour is high
% of labour compensation
50
45
Social security contributions
Taxes and transfers
% of labour compensation
50
45
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
-5
-5
CHL
NZL
CHE
IRL
ISR
MEX
KOR
LUX
AUS
CAN
USA
GBR
ISL
JPN
SVN
NLD
DNK
POL
CZE
SVK
NOR
PRT
EST
ESP
TUR
SWE
HUN
FIN
DEU
AUT
ITA
FRA
GRC
BEL
40
Note: Average tax wedge for a couple with two children and average earnings. Social security
contributions include both employee and employer contributions. Taxes include personal income tax
and any payroll tax.
Source: OECD, Taxing Wages database.
18
Housing construction lags
behind population growth
Source: Statistics Sweden.
Shortages of rental housing
are acute in some places
Source: Stockholm Housing Agency.
Conclusions
•
Sweden’s economy is performing well, but facing challenges related to global
developments and some domestic weaknesses.
•
Policies can contribute to fostering inclusive growth. In particular:

Regulations will need to adapt to changes in technology and the global business
environment to avoid hampering innovation, while protecting citizens/
consumers and ensuring a level playing field for businesses.

Investments in education and skills, combined with enhanced labour market
flexibility and changes in the tax structure can increase employment and
prevent excessive polarisation of the labour market.

Success in integrating immigrants will enhance Sweden’s economic growth
potential and social cohesion.

A more efficient housing system would bring benefits in terms of affordability,
labour mobility, well-being, equality and macroeconomic stability.
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THANK YOU !