Switzerland 2017 OECD economic survey Boosting productivity and meeting skills needs

2017 OECD ECONOMIC
SURVEY OF SWITZERLAND
Boosting productivity and meeting skills needs
Bern, 14 November 2017
http://www.oecd.org/eco/surveys/economic-survey-switzerland.htm

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Living standards are high
OECD Better Life Index, 2017
Index scale, 0 (lowest) to 10 (best)
Switzerland

Income and wealth
10
Subjective well-being

8

Jobs and earnings


OECD

6
Personal security

4

Housing

2
0
Environmental quality

Work and life balance

Social connections

Health status
Education and skills


Note: For each dimension indicators are normalised and averaged.
Source: OECD, Better Life Index.

2

The economy is growing but only slowly
GDP growth
% y-o-y
6
4
2

0
-2
-4
2006

2008


2010

2012

2014

2016

Source: SECO.
3

Employment is high
Employment-to-population ratio
%
85

Switzerland

OECD


80
75
70
65
60
55

50
2010

2011

2012

2013

2014

2015


2016

2017

Source: OECD, Labour Force Statistics database.
4

Productivity has stalled
Trend labour productivity growth
%
2.0
Switzerland

OECD

1.5

1.0

0.5


0.0

2000

2002

2004

2006

2008

2010

2012

2014

2016


Source: OECD, OECD Economic Outlook 102 database, preliminary version.
5

The demand for skilled workers has been
strong
Contributions to changes in total employment growth over 2000-16
% pts
50
40

High skill

Middle skill

Low skill

30

20

10
0
-10

-30

GRC
FIN
SVK
NLD
LVA
CZE
DNK
HUN
ITA
EST
ESP
BEL
DEU
EU15

SVN
IRL
POL
PRT
AUT
GBR
FRA
NOR
CHE
SWE
ISL
LUX

-20

Note: Countries are ordered by the contribution of high-skill employment
Source: Eurostat.

6


Entrenching the expansion

7

Fiscal policy is sound and public debt low
Gross general government debt, % of GDP
120

Switzerland

OECD

100
80
60

40
20
0


1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Note: The shaded area denotes the 25th to 75th percentile range for OECD countries. OECD is an
unweighted average of data for available countries.
Source: OECD, OECD Economic Outlook 102 database, preliminary version.

8

Unconventional monetary policy has
supported growth
SNB’s foreign exchange reserves

Interest rates
%
4

% of imports
225
SNB target range

3

3-month, CHF LIBOR

2

200
175
150
125

1

100

0

75

50

-1

CHF/EUR
ceiling

25
-2

2006

2008

2010

2012

2014

2016

0

2006

2008

2010

2012

2014

Source: Swiss National Bank; Thomson Reuters Datastream; OECD, OECD
Economic Outlook 102 database, preliminary version.

2016

9

Low interest rates increase risks
House prices, 2010 = 100
130
120
110

100
Ratio to consumer prices
90
Ratio to average household income
80

2006

2008

2010

2012

2014

2016

Source: OECD, House Price database.
10

Household credit is high
Household credit, % of GDP, 2017 Q1
140
120
100
80

60
40

0

MEX
TUR
HUN
CZE
POL
ISR
ITA
CHL
IRL
AUT
DEU
JPN
FRA
BEL
LUX
GRC
ESP
FIN
PRT
USA
SWE
GBR
KOR
NZL
CAN
NOR
NLD
DNK
AUS
CHE

20

Source: OECD, Vulnerability Indicators database.
11

Age-related public spending will become
a fiscal burden
25
20

Long-term projections for age-related spending, % of GDP
By type of spending
By level of government
Long-term care

Health care

Pensions (AHV/IV)

Education

25

15

10

10

5

5

0

0

2030

Cantons
Confederation

20

15

2013

Communes
Social security

2045

9
10
11
12
13
14
15

2013

2030

Source: Federal Department of Finance (2016), Report on the Long-term
Sustainability of Public Finances in Switzerland.

2045

12

The current account surplus is large

CHE

NLD

DEU

DNK

ISL

KOR

HUN

SVN

NOR

LUX

SWE

JPN

ISR

IRL

ITA

ESP

EST

AUT

LVA

PRT

% of GDP
10
9
8
7
6
5
4
3
2
1
0

CZE

Current account balance in OECD countries with a surplus, 2016

Source: OECD, OECD Economic Outlook 102 database, preliminary version.
13

High household saving is contributing to
the large current account surplus
Net saving and investment balances in selected countries with a current account surplus
% of GDP

DEU

NLD

Net investment

Net investment

SWE

Net saving

Corporations

Net saving

Net investment

Net saving

Net investment

Net investment

DNK

General government

Net saving

Households

Net saving

16
14
12
10
8
6
4
2
0
-2

CHE

Source: OECD, Annual National Accounts database; Federal Statistical Office;
OECD calculations.

14

Key fiscal and financial recommendations
 To support growth:
 Avoid persistent budget underspending through better
co-ordinating procedures at federal and sub-national
levels.
 Reduce agricultural subsidies and pursue efficiency
gains in public spending to free up funds for
measures that enhance growth and inclusiveness.

 To reduce risks:
 Eliminate remaining explicit cantonal government
guarantees to their public banks.
 Establish a formal framework for setting mortgage
lending limits that takes affordability into account and
is enforced on a comply-or-explain basis.
15

Key fiscal and financial recommendations
(cont.)
 To address ageing-related challenges:
 Fix the retirement age at 65 for both sexes, and
thereafter link it to life expectancy.
 Increase financial incentives to work longer before
retirement.
 Promote programmes to lengthen healthy working
lives, including preventative health programmes.
 Promote lifelong training, career planning and tailored
job-search assistance to enhance workers’ resilience
to change.

16

Boosting productivity for
long-term growth

17

Productivity is high, but sluggish
Average annual rate of trend labour productivity growth over 2006-16
%
3.5
3.0
2.5

2.0
1.5
1.0

0.5

3
4
5
6
7
8
9
10
11
12
13
14
15

0.0

-1.0

GRC
ITA
LUX
FIN
AUT
CHE
MEX
DEU
GBR
JPN
BEL
NLD
NZL
DNK
FRA
ESP
CAN
ISR
PRT
ISL
NOR
SWE
HUN
AUS
USA
SVN
CZE
EST
IRL
KOR
SVK
TUR
POL
CHL

-0.5

Source: OECD, OECD Economic Outlook 102 database, preliminary version.

18

Switzerland is a leader in R&D and
innovation
Innovation performance indicator
EU average level in 2010 = 100
180
160

Moderate innovators

Strong innovators

Innovation leaders

140
120
100
80
60

40
0

POL
LVA
TUR
HUN
GRC
SVK
ITA
ESP
EST
PRT
CZE
SVN
EU28
FRA
ISR
IRL
NOR
BEL
LUX
AUT
ISL
DEU
GBR
NLD
FIN
DNK
SWE
CHE

20

Source: European Commission (2017), European Innovation Scoreboard 2017.
19

The productivity of frontier firms has
diverged from the rest
Labour productivity, 2002 = 100
250
Most productive 1% of firms

Other firms

200
150

100
50
0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Note: Markers denote survey years. Labour productivity is calculated as value added per employee.
Source: OECD calculations based on KOF, Swiss Innovation Survey.

20

The administrative burden is heavy
Share of firms that discontinued their business citing bureaucracy as the
main cause, %
60
50
40

30
20
10
0

KOR NLD AUS NOR DEU PRT ESP GBR ISR BEL FIN USA CAN SWE ITA CHE

Source: Global Entrepreneurship Monitor 2015/2016, Report on Switzerland.
21

Regulatory barriers to competition are
high
Product market regulation indicator
3.5
Least restrictive countries¹

Euro area

Switzerland

3.0

Restrictiveness

2.5

2.0
1.5
1.0
0.5
0.0

Professional
services

Retail
distribution

Transport

Network sectors Communication
overall²

Energy

1. ”Least restrictive countries” is the average of the three countries with the lowest score in each sector. Scores range from 0
to 6 and increase with restrictiveness.
2. Network sectors overall is the unweighted average of transport, communication and energy.

Source: OECD, Product Market Regulation database.

22

Barriers to trade inhibit competition and
productivity
Services Trade Restrictiveness Index, for sectors with largest gaps
0.50
Switzerland

OECD

0.30
0.20

Courier

Broadcasting

Computer

Construction

Commercial banking

Motion pictures

Engineering

Logistics freight
forwarding

0.00

Sound recording

0.10

Logistics storage and
warehouse

Restrictiveness

0.40

Source: OECD, Services Trade Restrictiveness Index database.
23

Most women work part-time
Part-time employment as a share of total
%
80

70

Men

Women

60
50
40
30
20

0

HUN
SVK
CZE
POL
LVA
GRC
PRT
SVN
EST
TUR
FIN
ESP
USA
CAN
CHL
FRA
SWE
ISR
ITA
MEX
ISL
NZL
IRL
LUX
DNK
JPN
NOR
BEL
GBR
AUS
DEU
AUT
CHE
NLD

10

Source: OECD, Labour Force Statistics database.
24

Key recommendations to boost
productivity
 To improve framework conditions:
 Increase private ownership and remove barriers to
entry in energy, telecommunications and transport.
 Remove representatives of economic associations
from the competition authority’s board.
 Lower restrictions on trade in both goods and
services, notably in agricultural products.
 Complete the negotiations for free-trade agreements
that are underway.
 Finalise the virtual one-stop shop for administrative
matters.
 Establish cantonal physical contact points to improve
delivery of advisory services and public financing
programmes.
25

Key recommendations to boost
productivity (cont.)
 To better use skills of women and immigrants:
 Increase childcare affordability.
 Shift income taxation to individual rather than
household incomes, or implement equivalent
measures.
 Facilitate high-skilled immigration from non-EU
countries to meet labour market needs.

26

Ensuring a dynamic skills
training and life-long
learning system

27

The education and training system is
successful
Youth not in employment, education or training
% of 18-24 year-olds
35
30

25
20
15
10

0

ISL
NLD
DNK
LUX
CHE
NOR
DEU
SWE
SVN
AUS
EST
AUT
LTU
BEL
NZL
CAN
GBR
USA
SVK
OECD
HUN
LVA
FIN
ISR
POL
PRT
IRL
FRA
CHL
MEX
ESP
GRC
ITA
TUR

5

Source: OECD (2017), Education at a Glance 2017.
28

Immigration has helped to meet the rising
demand for skilled workers
Contribution to working-age population growth by education and nationality, % points
12

Swiss citizens

10

Other nationalities
1997-2007

8

2007-2017

6
4
2
0
-2
-4

Lower
secondary

Upper
secondary

Tertiary

Lower
secondary

Upper
secondary

Tertiary

Source: Federal Statistical Office.
29

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

1.

Trade and repair of
motor vehicles
Real estate & scientific
services
Manufacturing of
computers & watches

Finance & insurance

IT & communications
IT & other information
services¹

Year to 2017Q2

Manufacture of other
specialised machinery

High-skill vacancy rates are rising

Manufacture of metal
products

Sectors with above-average vacancy rates, %

Accommodation & food
services
Average since 2009

IT and Other Information Services is a subsector of IT and Communications.

Source: Federal Statistical Office.

Total economy

30

Tertiary education should further expand
Entry rates for bachelor’s degree or equivalent¹
%

80
70
60
50
40
30

20
0

LUX
HUN
AUT
MEX
ITA
SWE
PRT
ESP
DEU
ISR
FIN
SVK
CZE
GBR
TUR
CHE
NLD
NZL
EST
CHL
ISL
NOR
BEL
DNK
SVN
IRL
AUS

10

1. First-time entry rates, excluding international students. First-time entry rates indicate the share of young adults
expected to enter that type of tertiary education programme during their lifetime.

Source: OECD (2017), Education at a Glance 2017.

31

Participation in life-long learning is high
25-64 year-olds participating in education and training in the preceding four weeks, 2016
%
35
30
25

20
15
10

0

SVK
POL
GRC
TUR
HUN
IRL
LVA
BEL
ITA
DEU
CZE
ESP
PRT
EU28
EA
SVN
GBR
EST
AUT
LUX
NLD
FRA
NOR
ISL
FIN
DNK
SWE
CHE

5

Source: Eurostat, Labour Force Survey 2016.
32

Participation in life-long learning is not
broad-based
Difference in participation rates of those with high and low levels of education, 20161
% pts
35
30

25
20
15
10

0
1.

GRC
IRL
POL
BEL
HUN
LVA
DEU
TUR
NOR
ESP
CZE
EU28
GBR
EA
DNK
PRT
ITA
NLD
EST
LUX
SVN
ISL
SWE
FIN
AUT
FRA
CHE

5

25-64 year-olds participating in education and training in the preceding four weeks. Difference in
participation rate of those with tertiary education and less than upper secondary school.

Source: Eurostat, Labour Force Survey 2016.

33

Key recommendations for a dynamic skills
training and life-long learning system
 Collect more detailed data on skills to facilitate adjustments to
education in response to changing labour market needs.
 Enhance the effectiveness of pathways between vocational
and general streams by increasing the academic component
of the vocational curriculum and vice-versa.
 Encourage small firms to participate more in apprenticeships
by promoting sharing of apprenticeship places between firms
and training centres that undertake part of the training.
 Strengthen linkages between the vocational education and
training system and employer associations in school-based
vocational training.
 Use subsidies to encourage participation in continuing
education and training for groups with low participation rates.

34

For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of
the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.

http://www.oecd.org/eco/surveys/economic-survey-switzerland.htm

@OECDeconomy
@OECD

35