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United States 2016 OECD Economic Survey unleashing productivity and expanding opportunity
The document is the 2016 OECD Economic Survey of the United States. It finds that while the US recovery has strengthened and unemployment has returned to pre-crisis levels, productivity growth and business dynamism have slowed. It notes rising inequality and recommends boosting infrastructure investment, strengthening competition policies, and expanding programs to help displaced workers and reduce social disparities to make economic growth more inclusive and sustainable.
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United States 2016 OECD Economic Survey unleashing productivity and expanding opportunity
- 1. 2016 OECD ECONOMICSURVEY OF THE UNITED STATES Unleashing productivity and expanding opportunity Washington DC, 16 June 2016 www.oecd.org/eco/surveys/economic-survey-united-states.htm @OECD @OECDeconomy
- 2. Source: OECD EconomicOutlook 99 Database A stronger recovery in the US 0 2 4 6 8 10 Japan Euro Area United States GDP growth since pre-crisis peak Per cent, 2008Q1-2016Q1 2
- 3. U.S. unemployment backto pre-crisis level 0 2 4 6 8 10 12 0 2 4 6 8 10 12 2008Q1 09 10 11 12 13 14 15 16Q1 USA Japan OECD Euro Area % % Source: OECD Labour Force statistics. 3
- 4. Overall well-being iscomparatively high 0 1 2 3 4 5 6 7 8 9 10 Income and wealth Jobs and earnings Housing Work and life balance Health status Education and skillsSocial connections Civic engagement and governance Environmental quality Personal security Subjective well-being USA OECD Source: OECD Better Life Index, 2016. 4
- 5. The gender wagegap has narrowed 0 5 10 15 20 25 30 35 40 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 % Gender wage gap 5
- 6. Labour market outcomeslag behind for some Source: Bureau of Labor Statistics 50 52 54 56 58 60 62 64 66 68 70 50 52 54 56 58 60 62 64 66 68 70 Black or African American Asian White Hispanic or Latino ethnicity % of civilian non institutional population % of civilian non institutional population Unemployed Employed 6
- 7. Productivity has slowed 0% 1% 2% 3% 0% 1% 2% 3% 1995-20052005-2015 1995-2005 2005-2015 United States OECD average Average annual % change Average annual % change Source: OECD, Analytical database and OECD calculations. 7
- 8. Inflation is low •Raise policy interest rates at a pace that gradually tightens financial conditions so as not to jeopardise the recovery and to promote a return of inflation to the Fed’s target. Source: OECD, Economic Outlook database; US Department of Commerce, Bureau of Economic Analysis and the US Bureau of Labor Statistics. -2 -1 0 1 2 3 4 5 6 -2 -1 0 1 2 3 4 5 6 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Core PCE price index Personal consumption deflator CPI 2% inflation target Y-o-Y % changes Y-o-Y % changes 8
- 9. Financial sector vulnerabilityhas diminished • Continue Dodd Frank and Basel III requirements Note: Range of leverage and capital ratios for large and complex banks in 2015. Sources: SNL Financial, FDIC Global Capital Index (Hoenig Report) 0 1 2 3 4 5 6 7 8 9 USA Europe Asia 0 2 4 6 8 10 12 14 16 18 20 22 USA Europe Asia Basel III leverage ratio Tier 1 risk-based capital ratio %% Minimum ratio (3%) Minimum ratio (4.5%) plus capital consumption buffer (2.5%) 9
- 10. Public infrastructure growthhas fallen off Source: Bureau of Economic Analysis • Boost investment in, and maintenance of, infrastructure; in particular, promote mass transit. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 General government capital stock (excluding defense) Y-o-Y % changes Y-o-Y % changes 10
- 11. Business dynamism isslowing Source: Census Bureau • Ensure personal bankruptcy procedures do not undermine incentives for entrepreneurship. • Make R&D tax credits refundable for new firms. 8 10 12 14 16 18 8 10 12 14 16 18 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 % Entry rate new establishments Exit rate of existing establishments % 11
- 12. Patenting delays areshortening, but still long Source: Bureau of Economic Analysis • Continue to speed up patenting decisions in line with targets without compromising patent quality 0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 35 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Time to final decision Months Months 12
- 13. Market concentration isincreasing in many industries • Adapt antitrust policy to the new digital economy and winner-take-all outcomes. • Continue to strengthen pro-competitive policies, including in telecoms. Source: Census Bureau 50.0 52.5 55.0 57.5 60.0 50.0 52.5 55.0 57.5 60.0 2002-2007 2007-2012 % industries with increased share of sales by eight largest firms 13
- 14. Income inequality iswidening Source: OECD Income distribution and poverty dataset. • Expand the Earned Income Tax Credit. • Raise the minimum wage. • Max tax expenditures less regressive. 0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.30 0.32 0.34 0.36 0.38 0.40 0.42 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Gini index, OECD definition 14
- 15. Gains in educationperformance have slowed Source: National Assessment of Educational Progress (NAEP) • Use federal funding for targeted programmes to reduce disparities in student opportunities . • Encourage States to be ambitious in lifting educational attainment. 200 225 250 275 300 200 225 250 275 300 1990 92 94 96 98 2000 02 04 06 08 10 12 14 National average Evolution of math scores in National Assessment of Educational Progress (NAEP) Score Score 15
- 16. Female labour forceparticipation is falling Source: OECD Labour Force statistics • Require paid parental leave and improve access to quality childcare to help reduce wage gaps and improve career prospects. 60 65 70 75 80 85 60 65 70 75 80 85 1990 93 96 99 2002 05 08 11 14 Germany Japan United States OECD Prime age female participation rates % % 16
- 17. Spending on activelabour market programmes is low • Develop reskilling programmes with established effectiveness in helping people back to work. Source: OECD Public expenditure and participant stocks on labour market programmes dataset 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 MEX CHL USA JPN ISR SVK AUS CAN EST GBR NZL KOR CZE SVN ITA POL NOR PRT CHE ESP LUX DEU BEL AUT HUN NLD FRA IRL FIN SWE DNK % of GDP % of GDP 17
- 18. Ex convicts facedismal employment opportunities • Reduce pre-screening for criminal records on employment applications 0 10 20 30 40 50 60 70 All labour force re-entries unemployed a year later Young men unemployed a year after prison release Unemployment* % 0 5 10 15 20 25 30 No record Criminal record Chance of callback for job interview% 18 *Early 2000s Source: Bureau of Labor Statistics, National Institute of Justice, Hall and Schulhofer-Whol (2015)
- 19. The Affordable CareAct has broadened access to healthcare Source: Centres for Disease Control and Prevention, National Health Interview Survey • Continue to roll out the Affordable Care Act 0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 % of population without health insurance coverage % 19
- 20. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Within 30 minutesWithin 30 to 60 minutes Jobs are difficult to access Note: in the 46 largest Metropolitan Statistical Areas Source: OECD calculations using estimates by Owen and Levinson (2014). • Boost investment in, and maintenance of infrastructure; in particular, promote mass transit. Per cent of jobs accessible by walking or public transit 20
- 21. • Rebalancing thepolicy mix – Weak global growth and fiscal consolidation are weighing on prospects – Monetary policy is overburdened – Systemic financial risks remain • Strengthening productivity growth – Poor state of infrastructure is holding back productivity – Business dynamism and entrepreneurship have weakened. – Incumbents have acquired more market power • Making growth more inclusive and sustainable – Children from poor families lack the opportunity to do better than their parents – Women’s opportunities will improve further, but the pace could be faster – Reduce social and racial inequalities – Helping displaced workers is gaining importance – Meeting COP21 carbon emission goals Policy challenges 21
- 22. • Rebalancing thepolicy mix – Boost public investment spending – Raise policy interest rates gradually – Continue to implement Dodd Frank • Strengthening productivity growth – Ensure personal bankruptcy procedures do not undermine entrepreneurship – Adapt antitrust policy to the modern economy – Continue to strengthen pro-competitive policies, including in telecoms – Remove unnecessary occupational licensing requirements • Making growth more inclusive and sustainable – Reduce disparities in student opportunities – Require paid parental leave and improve access to quality childcare – Develop reskilling programmes, reduce pre-screening – Put a price on carbon Key recommendations 22
- 23. More Information… OECD OECD Economics Disclaimers: Thestatistical 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. 23 www.oecd.org/eco/surveys/economic-survey-united-states.htm