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Policy Discussion 
Joint EC/OECD Seminar, Brussels, 27-28 November 2014 
Hans-Peter Klös, Cologne Institute for Economic Research
Stylized „employment production function“ 
Employment regulation Wage regulation 
Taxes and Social 
security contributions Labour market policy 
Social security law 
Labor Law 
Management and 
worker representatives 
Human Resources 
Management 
Vocational Education 
Compensation 
policy 
Demography 
policy 
Government Company 
Employment 
by quantity and quality 
Employers' / 
Trade associations 
Trade unions 
Wage bargaining Demography 
Tariff 
parties 
parties 
wage agreements 
Alliances for work 
Coverage 
of collective 
agreements 
and Training 
Source: Cologne Institute for Economic Research 
Brussels, November 27-28, 2014 2
Major challenge GDP-Performance, … 
Change in real GDP, year-to-year, in percent 
-0,7 
2012 2013 2014 2015 
-0,4 
-0,4 
1,2 
1,7 
4,5 
4 
3,5 
3 
2,5 
2 
1,5 
1 
0,5 
0 
-0,5 
-1 
Euro Area EU World 
Source: EU, European Economic Forecast, Spring 2014 
3,2 
0,1 
2,9 
1,6 
3,5 
2,0 
3,8 
Brussels, November 27-28, 2014 3
… unemployment rate … 
Unemployment as percent of labour force, 2013 
30 
25 
20 
15 
10 
5 
0 
* Source: ILOSTAT, 2014 
Brussels, November 27-28, 2014 4
… or job quality? 
Relationship between job quality and job quantity 
Source: OECD Employment Outlook 2014 
Brussels, November 27-28, 2014 5
It depends – because … 
 … priorities are path-depending and changing. 
 … various transmission channels are influencing 
labour market outcomes. 
 … each country has idiosyncratic strenghts and 
weaknesses. 
 … institutional settings are the main driver of 
difference in labor market-KPI‘s, both in terms of 
quantity and quality. 
 … different „paradigms“ pose different challenges. 
Brussels, November 27-28, 2014 6
„Paradigm I“: OECD-Framework for 
structural reforms 
Country groCuopunitnriegs s Main challenges Strengths 
Group 1 ESP, GRC, ITA, PRT, SVN High structural unemployment, low 
competitiveness 
Productivity levels close to average 
Group 2 CZE, EST, HUN, IRL, ISR, 
POL, SVK 
Significant productivity gap, high long-term 
unemployment, low internal mobility 
an participation of certain groups 
Flexible wage adjustments, high 
percentage of population with at least 
secondary education 
Group 3 DNK, NOR, NLD, SWE Low average hours worked and 
overheated housing market 
Good productivity level, above average 
shares of population with tertiary 
education 
Group 4 AUT, BEL, FIN, FRA, LUX Low participation of older workers and 
persistently high unemployment 
Good productivity level, relatively high 
and broadly-based business R&D 
intensity 
Group 5 AUS, CAN, CHE, GBR, 
NZL, USA 
Low productivity growth, high variance in 
education outcomes and healthcare costs 
High investment in knowledge-based 
capital and good quality tertiary education 
Group 6 DEU, JPN, KOR Fast population ageing, low participation 
of woman, relatively weak productivity in 
services 
High overall employment rates, strong 
export base, including of capital goods 
Group 7 BRA, CHN, CHL, IDN, IND, 
MEX, RUS, TUR, ZAF 
Widespread informality, uneven access to 
quality education, infrastructure 
bottlenecks 
Strong potential for productivity catching-up, 
fast-growing labour force 
Source: OECD, Economic Policy Reforms 2014 - Going for Growth Interim Report 
Brussels, November 27-28, 2014 7
„Paradigm II“: OECD-Framework for job quality 
Broad outcome measures of job quality and their subcomponents 
Dimensions Aggregate outcome 
measure of job 
quality 
Subcomponents (at the individual level) Main labour market and 
social policies that affect 
job quality 
Earnings 
quality 
Earnings index taking 
into account both 
earnings level and its 
distribution 
(inequality). 
Level of earnings. Wage setting systems. 
In-work benefits schemes. 
Minimum wage. 
Labour 
market 
security 
Expected earnings 
loss associated with 
unemployment. 
Unemployment risk: 
- Risk of becoming unemployed. 
- Expected duration of unemployment. 
Insurance against unemployment risk: 
- Eligibility to unemployment benefits. 
- Generosity of benefits (replacement rates.) 
Employment protection 
legislation. 
Tax and benefit systems. 
Active labour market 
policies. 
Quality of the 
working 
environment 
Proportion of workers 
experiencing job strain 
(i. e. imbalance 
between work 
stressors and 
workplace resources). 
Work-related stress factors: 
- Time pressure at work. 
- Exposure to physical health risk factors. 
- Workplace intimidation. 
Support and resources to accomplish job duties: 
- Work autonomy and learning opportunities. 
- Good management practices. 
- Good workplace relationships. 
Working-time regulations. 
Health-related labour laws. 
Sickness insurance 
schemes. 
Occupational health care 
services. 
Labour inspection bodies. 
Vocational training. 
Source: OECD, Employment Outlook 2014 
Brussels, November 27-28, 2014 8
Synthesis: competing or complementary? 
 Regaining more growth and employment requires 
balanced and targeted structural reforms. 
 Structural reforms could adress quality issues as 
well. 
 Labor market participation is a stepping stone for 
well-being. 
 Trade-offs between quantity and quality can only 
partially be offset. 
 Improving educational outcomes seems to be a high 
road for matching quantity with quality. 
Brussels, November 27-28, 2014 9

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“Job Quality, Labour Market Performance and Well-Being”_Klos

  • 1. Policy Discussion Joint EC/OECD Seminar, Brussels, 27-28 November 2014 Hans-Peter Klös, Cologne Institute for Economic Research
  • 2. Stylized „employment production function“ Employment regulation Wage regulation Taxes and Social security contributions Labour market policy Social security law Labor Law Management and worker representatives Human Resources Management Vocational Education Compensation policy Demography policy Government Company Employment by quantity and quality Employers' / Trade associations Trade unions Wage bargaining Demography Tariff parties parties wage agreements Alliances for work Coverage of collective agreements and Training Source: Cologne Institute for Economic Research Brussels, November 27-28, 2014 2
  • 3. Major challenge GDP-Performance, … Change in real GDP, year-to-year, in percent -0,7 2012 2013 2014 2015 -0,4 -0,4 1,2 1,7 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 -0,5 -1 Euro Area EU World Source: EU, European Economic Forecast, Spring 2014 3,2 0,1 2,9 1,6 3,5 2,0 3,8 Brussels, November 27-28, 2014 3
  • 4. … unemployment rate … Unemployment as percent of labour force, 2013 30 25 20 15 10 5 0 * Source: ILOSTAT, 2014 Brussels, November 27-28, 2014 4
  • 5. … or job quality? Relationship between job quality and job quantity Source: OECD Employment Outlook 2014 Brussels, November 27-28, 2014 5
  • 6. It depends – because …  … priorities are path-depending and changing.  … various transmission channels are influencing labour market outcomes.  … each country has idiosyncratic strenghts and weaknesses.  … institutional settings are the main driver of difference in labor market-KPI‘s, both in terms of quantity and quality.  … different „paradigms“ pose different challenges. Brussels, November 27-28, 2014 6
  • 7. „Paradigm I“: OECD-Framework for structural reforms Country groCuopunitnriegs s Main challenges Strengths Group 1 ESP, GRC, ITA, PRT, SVN High structural unemployment, low competitiveness Productivity levels close to average Group 2 CZE, EST, HUN, IRL, ISR, POL, SVK Significant productivity gap, high long-term unemployment, low internal mobility an participation of certain groups Flexible wage adjustments, high percentage of population with at least secondary education Group 3 DNK, NOR, NLD, SWE Low average hours worked and overheated housing market Good productivity level, above average shares of population with tertiary education Group 4 AUT, BEL, FIN, FRA, LUX Low participation of older workers and persistently high unemployment Good productivity level, relatively high and broadly-based business R&D intensity Group 5 AUS, CAN, CHE, GBR, NZL, USA Low productivity growth, high variance in education outcomes and healthcare costs High investment in knowledge-based capital and good quality tertiary education Group 6 DEU, JPN, KOR Fast population ageing, low participation of woman, relatively weak productivity in services High overall employment rates, strong export base, including of capital goods Group 7 BRA, CHN, CHL, IDN, IND, MEX, RUS, TUR, ZAF Widespread informality, uneven access to quality education, infrastructure bottlenecks Strong potential for productivity catching-up, fast-growing labour force Source: OECD, Economic Policy Reforms 2014 - Going for Growth Interim Report Brussels, November 27-28, 2014 7
  • 8. „Paradigm II“: OECD-Framework for job quality Broad outcome measures of job quality and their subcomponents Dimensions Aggregate outcome measure of job quality Subcomponents (at the individual level) Main labour market and social policies that affect job quality Earnings quality Earnings index taking into account both earnings level and its distribution (inequality). Level of earnings. Wage setting systems. In-work benefits schemes. Minimum wage. Labour market security Expected earnings loss associated with unemployment. Unemployment risk: - Risk of becoming unemployed. - Expected duration of unemployment. Insurance against unemployment risk: - Eligibility to unemployment benefits. - Generosity of benefits (replacement rates.) Employment protection legislation. Tax and benefit systems. Active labour market policies. Quality of the working environment Proportion of workers experiencing job strain (i. e. imbalance between work stressors and workplace resources). Work-related stress factors: - Time pressure at work. - Exposure to physical health risk factors. - Workplace intimidation. Support and resources to accomplish job duties: - Work autonomy and learning opportunities. - Good management practices. - Good workplace relationships. Working-time regulations. Health-related labour laws. Sickness insurance schemes. Occupational health care services. Labour inspection bodies. Vocational training. Source: OECD, Employment Outlook 2014 Brussels, November 27-28, 2014 8
  • 9. Synthesis: competing or complementary?  Regaining more growth and employment requires balanced and targeted structural reforms.  Structural reforms could adress quality issues as well.  Labor market participation is a stepping stone for well-being.  Trade-offs between quantity and quality can only partially be offset.  Improving educational outcomes seems to be a high road for matching quantity with quality. Brussels, November 27-28, 2014 9