US and European Economies in Comparative Perspective
Berkeley 12/13 September
The EU Labour Market Challenge
Background Charts & Tables
Karl Pichelmann
DG ECFIN
The European Challenge
mobilise labour supply AND
increase productivity growth
• Very Unsatisfactory Performance
• Demographic Change
• Globalisation
• Will Systems Competition Help ?
2
DG ECFIN
EU GDP per capita in PPS (US=100)
3
DG ECFIN
EU GDP per capita in PPS (US=100)
4
DG ECFIN
Total Employment Rates
5
DG ECFIN
Employment Rates: Females
6
DG ECFIN
Employment Rates: Older workers
7
DG ECFIN
Long-term Unemployment Rate
8
DG ECFIN
Trend Growth Labour Productivity Per Hour
6
Annual % Change
5
4
EU
3
US
2
1
0
1966
1971
1976
1981
1986
1991
1996
2001
9
DG ECFIN
Decomposition of Labour Productivity Trends
Capital Deepening
2
Annual % Change
TFP
2
Annual % Change
Rest of World
1,5
1,5
US
Rest of World
US
1
EU
1
EU
0,5
0,5
0
0
1991
1994
1997
2000
2003
1991
1994
1997
2000
2003
10
DG ECFIN
Cumulated euro area employment shock
0,06
0,05
Employment
0,04
0,03
0,02
Productivity
0,01
0
-0,01
1995Q1
1996Q2
1997Q3
1998Q4
2000Q1
2001Q2
2002Q3
2003Q4
11
DG ECFIN
Cumulated euro area productivity shock
0.01
Employment
0
-0.01
Productivity
-0.02
-0.03
-0.04
-0.05
1995Q1
1996Q2
1997Q3
1998Q4
2000Q1
2001Q2
2002Q3
2003Q4
12
DG ECFIN
A flip-side of poor productivity growth
Job-content of growth
(Employment growth/GDP growth)
1.0
2005-06
Forecasts
0.8
0.6
0.4
0.2
0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-0.2
Euro area
EU-25
New MS-10
13
DG ECFIN
Old-age dependency ratios in the EU-15
2000
0
%
65
2050
60
55
50
45
40
35
30
25
20
15
10
5
0
B
DK
D
GR
E
F
IRL
I
L
NL
A
P
FIN
S
UK
EU15
14
DG ECFIN
Projections of age related public expenditures
Pensions
Health
Long term care
35
30
2000
2040
25
20
15
10
5
0
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK
15
DG ECFIN
The Impact of Ageing
• Ageing may reduce GDP by 20 % relative to
baseline, and public expenditure on pensions as a
share of GDP may increase by about 7 pp
• Parametric reforms can go quite some way to
offset these effects and stabilise PAYG systems
• Increasing the effective retirement age is the
single most potent reform option
• Impact on TFP growth ?
16
DG ECFIN
Globalisation: Threat to job and wages ?
17
DG ECFIN
Export Market Shares
18
% Share of World Exports
% Share of World Exports
EU15
16
Americas
(excl. US)
10,4
South East Asia
14
8,4
12
6,4
EU Neighbours
US
10
China
4,4
Japan
EU10
8
2,4
India
6
1992
1994
1996
1998
2000
2002
0,4
1992
1994
1996
1998
2000
2002
18
DG ECFIN
Terms of Trade for Non-Oil Goods and Services
120
1995 = 100
115
US
110
105
100
EU15
Rest of the
World
95
90
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
19
DG ECFIN
Extra-EU15 Trade Balances
% of GDP
0,6
US
0,4
Americas
(Excl US)
0,2
EU
EU10
Neighbours
0
India
-0,2
South East Asia
(Excl China)
-0,4
China
Japan
-0,6
B92-97
B98-03
20
DG ECFIN
Geographical Direction of Extra-EU15 Exports
35
% Share of Extra EU15 exports
% Share of Extra EU15 exports
EU
Neighbours
30
10,4
25
20
8,4
US
15
10
EU10
12,4
Americas (excl
USA)
6,4
South East Asia
China
4,4
Japan
5
2,4
0
1992
1994
1996
1998
2000
2002
India
0,4
1992
1994
1996
1998
2000
2002
21
DG ECFIN
Extra-EU15 Trade: Skill and Factor Intensity
Skill Intensity
25
Factor Intensity
% Share of W orld Export Markets
25
% Share of W orld Export Markets
Difficult to Imitate
Research Goods
Medium High
Tech
20
20
Medium
Low Tech
Capital Intensiv e
Low Tech
15
15
Labour Intensiv e
Easy to Imitate
Research Goods
ICT
High Tech
10
10
Raw Material Intensiv e
5
5
1992
1994
1996
1998
2000
2002
1992
1994
1996
1998
2000
2002
22
DG ECFIN
Top 6 Contributors to Non-Fuel World Export Growth
Semiconductors
50
Passenger Cars
% Share of W orld Export Markets
30
South East Asia
% Share of W orld Export Markets
25
40
Japan
20
30
US
15
EU15
20
Japan
10
EU15
US
10
South East Asia
5
China
0
1992
1994
1996
1998
2000
2002
0
1992
1994
1996
1998
2000
2002
23
DG ECFIN
Top 6 Contributors to Non-Fuel World Export Growth
Telecommunications
30
Computers
% Share of W orld Export Markets
30
% Share of W orld Export Markets
South East Asia
South East Asia
25
20
EU15
South East Asia
25
20
US
15
15
Japan
US
Japan
10
10
EU15
China
5
5
China
0
1992
1994
1996
1998
2000
2002
0
1992
1994
1996
1998
2000
2002
24
DG ECFIN
Top 6 Contributors to Non-Fuel World Export Growth
Computer Parts
40
Pharmaceuticals
% Share of W orld Export Markets
40
% Share of W orld Export Markets
EU15
South East Asia
35
35
30
30
25
25
US
20
20
15
15
Japan
EU15
10
5
US
10
South East Asia
5
China
Japan
0
1992
1994
1996
1998
2000
2002
China
0
1992
1994
1996
1998
2000
2002
25
DG ECFIN
EU15 RCA’s for Specific Product Groupings
% of GDP
20
Cars
10
Specialised
Equipment
Paper and
Pharma
Paperboard
Car
Parts
0
Electrical
Machinery
-10
Semiconductors
Clothing
Computer
Parts
Computers
-20
1992-1997
1998-2003
26
DG ECFIN
Unemployment and Trade Openess
Rate of unemployment (avg 2001-05)
12
EL
10
ES
FR
IT
8
FI
DE
BE
CA
6
US
JP
4
AU
PT
UKNZ
SE
DK
AT
NO
CH
IE
NL
IS
2
0
0
20
40
60
80
Openness (trade in g+s relative to GDP, avg 2001-05)
100
27
DG ECFIN
Displacement Rates by Industry
14 EU countries
1994-2001
USA
1979-99
Manufacturing
3.7
4.6
- High international
competition
3.7
5.9
- Medium
international
competition
4.4
6.2
- Low international
competition
3.5
4.3
Services (and utilities
for USA)
3.2
1.7
Total employment
2.8
2.2
28
Source: OECD Employment Outlook (2005)
DG ECFIN
Labour Market Prospects of Displaced Workers
EU 1994-2001
High C.
Manuf.
USA 1979-99
Services
High C.
Manuf.
Services
Share re-employed two
years later
52
57
57
63
65
69
Share with no earnings
loss or earnings more
44
46
50
36
35
41
Share with earnings
losses greater than
30%
5
7
8
25
25
21
Notes: Columns are manufacturing with high international competition, total manufacturing and services (and utilities for USA)
Sources: OECD Employment Outlook (2005) for EU-15 (excl SE) on the basis of ECHP data and Kletzer (2001, “Job Loss
from Imports: Measuring the Loss”, Institute for International Economics, Washington, DC) for USA on the basis of biannual Displaced Worker Surveys.
29
DG ECFIN
Systems Competition of Labour Compacts
• Despite quite widespread perceptions, only little
evidence for “ a race to the bottom” (tax system ?)
• Leader-follower behaviour in order to maintain
relative positions (wage setting ?)
• Regression towards the mean, “race to the top” ?
• (Open Method of) Co-ordination largely ineffective
• Heterogeneity of “Social Europe” likely to persist
30