OECD Economic Surveys : Luxembourg 2017

Table of contents
Basic statistics of Luxembourg, 2016
Executive summary
	Economic growth is strong
		Financial sector is the backbone of the economy
	A better skills strategy is needed to make growth more inclusive
		Skills mismatch is high
	Improving integration of immigrants would boost well-being
		Non-EU immigrants face higher unemployment
Assessment and recommendations
	Figure 1. Life is good in Luxembourg
	Macroeconomic developments
		Economic growth is projected to stay strong
			Table 1. Macroeconomic indicators and projections
			Figure 2. Macroeconomic developments are healthy
			Figure 3. Evolution of macro-financial vulnerabilities since 2007
			Box 1. Medium-term vulnerabilities of the Luxembourg’s economy
		Risks facing the financial sector need to be addressed
			Figure 4. Financial services contribute strongly to GDP growth
			Figure 5. Assets under management are at a record high
			Table 2. Implementation of OECD recommendations on the financial sector
			Figure 6. Tax revenues from the financial sector are volatile
		The constrained supply of housing is fuelling strong price growth
			Figure 7. Real house prices are growing strongly
			Figure 8. Increasing price to rent ratio points to overvaluation
			Figure 9. Household indebtedness is increasing
		The short-term fiscal space is being used for a tax reform
			Figure 10. There is ample fiscal space
			Figure 11. Public debt is low and sustainable
			Figure 12. Tax revenues rely on corporate income taxes
		Further reforms are needed to contain age-related spending
			Figure 13. Ageing costs are projected to rise
			Figure 14. Net pension replacement rates are high
			Table 3. Implementation of OECD recommendations on fiscal and tax policies and on age-related spending
			Figure 15. Average effective age of labour-market exit is low
	Green growth requires further investment
		Figure 16. Green growth indicators
		Investment into renewable energy needs to be stepped up
			Table 4. Comparison of installed capacity for renewable energy generation
		Better public transport infrastructure is needed for inclusive and sustainable growth
			Figure 17. Congestion times are among the highest in Europe
			Table 5. Implementation of OECD recommendations on green growth
	Better skills for more inclusive growth
		The importance of skills for inclusive growth
			Figure 18. Labour market polarisation is changing the demand for skills
			Box 2. Third industrial revolution is taking off in Luxembourg
			Figure 19. Some measures of skill mismatch are high
			Figure 20. Unemployment rates are higher for low-skilled workers
		Analysing and anticipating changing skill needs
		Improvements in the education system
			Figure 21. Grade repetition rate is among the highest in the OECD
		Improving lifelong learning
			Figure 22. Better educated adults participate more in lifelong learning
		Developing entrepreneurial skills for innovation
			Figure 23. The number of start-ups is lagging the best EU performers
			Figure 24. Obstacles to doing business still exist in some areas
			Figure 25. Insolvency costs are high
			Figure 26. Gender gap in perception on access to entrepreneurial training is pronounced
	Making better use of existing skills
		Improving the job matching
			Figure 27. Share of training in active labour market policy spending is low
			Figure 28. Young workers often work on temporary contracts
			Figure 29. Employment protection for permanent workers is above the OECD average
		Increasing incentives to work
			Figure 30. Most part-time workers are women
	Improving the labour market and social integration of immigrants
		Luxembourg has benefited a lot from immigrants, but their integration could improve
			Figure 31. The large immigrant population has a high employment rate
			Figure 32. Luxembourg has long attracted immigrants
			Figure 33. Non-EU immigrants face higher unemployment
			Figure 34. Children of immigrants underperform by a wide margin
		Policies for better labour market and social integration
		Improving the educational outcomes of the children of immigrants
			Figure 35. Performance and immigrant background of students differ by secondary education tracks
			Table 6. Implementation of OECD recommendations on education system
	Bibliography
Annex.
Progress in structural reform
	Macroeconomic policies
	Financial sector
	Raising human capital and enhancing resource allocation
Thematic chapters
	Chapter 1.
Harnessing skills for more inclusive growth
		The importance of skills and main challenges
			Figure 1.1. High labour productivity reflects high level of skills
			Figure 1.2. Language and computer skills are above average
			Figure 1.3. Labour market polarisation is changing the demand for skills
			Box 1.1. The restructuring of Luxembourg’s steel industry, 1975-1987
			Figure 1.4. Some measures of skill mismatch are high
			Figure 1.5. The overall PISA results show a persistent gap
			Figure 1.6. There is room for further improvement of skills
			Figure 1.7. Upskilling of the labour force is lagging behind the best performers
			Figure 1.8. Participation rates are low for the youngest and the oldest
			Figure 1.9. Female unemployment rate exceeds male
		Policies ensuring flexible and continuously improving supply of skills
			Analysing and anticipating changing skill needs
			Addressing future skill shortages through improvements in the education and training system
				Figure 1.10. Successful completion rates in secondary education are low
				Figure 1.11. Enrolment in Vocational Education and Training is high
				Figure 1.12. Perceived vocational education and training image and quality are modest
				Figure 1.13. The share of tertiary-educated population is high
				Figure 1.14. Students are not interested in science and engineering careers
				Figure 1.15. Career guidance is widespread
			Improvements in life-long learning
				Figure 1.16. For older workers studying is more costly than workplace training
			Developing entrepreneurial skills and innovation
		Policies ensuring better use of existing skills
			Improving the job matching
				Figure 1.17. Young workers often work on temporary contracts
			Improving the incentives for labour market participation
				Figure 1.18. High marginal tax rates create an inactivity trap
				Figure 1.19. High participation tax rates create an unemployment trap
				Figure 1.20. Work disincentives for second earners are high
				Recommendations to improve skills for more inclusive growth
		Bibliography
	Chapter 2.
Reaping the benefits of a diverse society through better integration of immigrants
		Luxembourg benefits a lot from the large immigrant population, but integration could improve
			Figure 2.1. Migration flows have long been substantial, leading to a large foreign-born population
			Figure 2.2. Immigrants have mainly come from Europe
			Figure 2.3. Immigrants have a high overall employment rate
			Figure 2.4. Immigrants have a higher proportion of prime-age workers
			Figure 2.5. Non-EU prime-age immigrants have an employment rate disadvantage
			Figure 2.6. The risk of poverty is high among non-EU immigrants
		Policies for better labour market and social integration
			Foundations for successful integration: social capital, languages and recognition of skills
				Box 2.1. Luxembourg’s diversity charter
			Fostering civic and public sector participation
				Figure 2.7. Immigrants are strongly under-represented in public sector jobs
				Figure 2.8. Very few immigrants take Luxembourgish citizenship
				Figure 2.9. Citizenship indicators, 2016
			Migration and asylum policies: attracting talent and removing barriers to employment
				Figure 2.10. The processing time for immigration of highly-skilled workers is high
		Improving the educational outcomes of the children of immigrants
			Figure 2.11. Children of immigrants underperform by a wide margin
			Figure 2.12. Socio-economic status has a large impact on student performance
			The place to start: more and better early childhood education and care
			Tackling early tracking and grade repetition
				Figure 2.13. Performance and immigrant background of students differ by secondary education tracks
				Figure 2.14. Grade repetition is high, especially among immigrant students
			Improving the performance of disadvantaged schools and students
				Figure 2.15. Disadvantaged schools face greater shortages of educational resources
				Recommendations to improve the integration of immigrants
		Bibliography