Why growth counts

Going for Growth 2006: Economic Policy Reforms
OECD Observer

OECD governments have been more effective at bringing in reforms to raise labour productivity than at helping increase the number of people in work, according to this progress report on action taken over the past year to enhance economic growth in each of the 30 OECD member countries.

The OECD’s second Going for Growth report assesses the extent to which governments have followed the policy recommendations it published a year ago (see below). By using a number of benchmark indicators ranging from labour costs and levels of educational attainment to obstacles against business start-ups and foreign direct investment, the first report, issued in 2005, identified areas of weakness and outlined policy priorities for each country.

The 2006 edition of Going for Growth shows mixed results. To raise labour productivity, many governments have recently introduced, or initiated, laws to ease restrictions on business activity and boost competition. In the EU, for instance, a draft directive to allow businesses to sell their services in any other EU country, though controversial, is currently under negotiation. In Japan, the competition law has been reinforced. In Germany, nation-wide educational standards have been agreed in some fields, while most other countries identified as needing to strengthen some aspect of their education system are taking relevant measures.

But there has been less progress in increasing the number of people in the workforce, identified in the last report as a priority for many OECD countries. Reforms to remove tax incentives for retiring early have been limited, while legislators have shown little enthusiasm for easing employment protection in those countries where it is seen to hamper job creation. However, the report notes greater progress in reforming sickness and disability benefits in Australia, Britain, Denmark, Hungary, Netherlands, Norway, Sweden and Switzerland.

The new Going for Growth report extends the scope of its surveillance of government policy by introducing benchmark indicators in the area of innovation, considered by the OECD to be one of the main engines of long-term economic growth. The indicators allow comparisons in areas such as the intensity of research and development with the more advanced economies, like the US. Where specific weaknesses are identified in a country, the report recommends what steps the government should take.

In a separate chapter the report also investigates whether GDP per head is an effective measure of well-being, a question which has previously been touched on in this magazine and which has stimulated considerable debate in the media.

ISBN 92-64-03591-5 (2006 edition).

ISBN 92-64-00836-5 (2005 edition).

©OECD Observer No 254, March 2006




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