OECD Observer
News Brief– Q2 2013

Education spending falters–; –as business startups are sluggish; Soundbites; Economy; Country roundup; Tax action launched; Trade aid; Plus ça change… 

©Christopher Furlong/Getty Images/AFP

Education spending falters–

A trend of rising investment in education since the 1990s came to a halt during the crisis, a report shows. Spending on education is considered vital for long-term growth and good protection against unemployment, but squeezed budgets and the cost of bailouts and high unemployment have not augured well for spending on services.     

In 2009-2010 public spending on educational institutions fell by 1% on average as a percentage of GDP across the OECD area. Drops of more than 2% were seen in Estonia, Hungary, Iceland, Italy and the Russian Federation. It decreased by 2% or less in Austria, Ireland, New Zealand, Norway, Portugal, Spain and the US. Education budget cuts took place in 2011 and 2012 in 15 OECD countries.   

The report, entitled Education at a Glance, shows that while unemployment has risen among people with tertiary qualifications, it remains well below the rate of those with secondary qualifications or less in most countries, particularly for 25-34 year-olds.    

See charts at: www.oecd.org/newsroom/value-of-education-rises-in-crisis-says-oecd.htmwww.oecd.org/oecdeconomicoutlook 

–as business startups are sluggish   

Business start-up rates remain below pre-crisis levels, as entrepreneurs continue to suffer from restrictive lending conditions, according to the latest issue of Entrepreneurship at a Glance.     

The data show start-up rates are particularly low in Spain, with tentative signs of a pick-up in Australia and the UK. In France they have been boosted by measures to ease bureaucracy and improve tax incentives for the self-employed.         

Nor has the number of business closures fallen back from rapid rises in the wake of the crisis, says the report. However, attitudes to business failures have become less stigmatised, with a growing public awareness of the role entrepreneurs can play and the value of giving a “second chance”, the report finds. www.oecd.org/std/business-stats/ entrepreneurshipataglance.htm    


Colombia's class
“We made it into the best university because we passed all our courses…Only the best [countries] are invited [to join the OECD] and Colombia is among them.”

Juan Manuel Santos, President of Colombia, in El Tiempo, 30 May 2013

Taxing times
Achieving international tax reform takes time. It could take the OECD up to three years to draft proposals to reduce tax avoidance. But it could take governments far longer, first to agree and then to implement any new international tax code.

Opinion, The Irish Times, 1 August 2013

Fragile recovery
If we start bashing growth again, who will invest? Who in our societies would back reform? We can do a lot without having to weaken the economy: on retirement, skills training, competition in services, making public sector services more efficient…

Jean Pisani-Ferry, Commissaire général à la stratégie et à la prospective, in Le Monde 19 August 2013

New media ain’t enough
“People will give up food and the roof over their head before they give up TV”

21st Century Fox chief, Chase Carey, in Financial Times, 8 August 2013  


Leading indicators released in August pointed to growth picking up in the US, Japan and the EU, but slowing in Brazil, China and Russia. For India the leading indicators suggested tentative improvements ahead. OECD composite leading indicators are based on the likes of order books, building permits and longterm interest rates, and help anticipate trends and turning points in economic activity.          

Meanwhile, quarterly GDP in the OECD area grew by 0.5% in the second quarter of 2013 (and 0.9% compared with a year earlier), compared with a quarterly rise of 0.3% in the first quarter. Most major G7 countries contributed, with growth of 0.7% in Germany, 0.6% in Japan and in the UK, 0.5% in France and 0.4% in the US. GDP contracted by 0.2% in Italy.           

OECD-wide inflation rose by 1.8% in the year to June 2013, compared with 1.5% in the year to May 2013. This slight increase reflects rises in energy prices by 3.4%, and in food price inflation which accelerated to 2.2% in June, compared with1.9% in May. Nevertheless, excluding food and energy, the OECD annual inflation rate eased to 1.4%, from 1.5% in May.          

Merchandise trade grew in the world’s major economies in the first quarter of 2013. Compared to the fourth quarter, the value of merchandise exports and imports for the G7 and BRICS countries increased by 1.3% and 2.8%, respectively.          

The OECD area’s unemployment rate eased to 8% in May 2013, unchanged for the third consecutive month, leaving 48.5 million people out of work. The unemployment rate increased by 0.1 percentage points to 7.6% in the US, stabilised in Japan at 4.1% , but reached new highs in the euro area of 12.2%. The OECD area youth jobless rate slipped 0.1 points to 16.3%, and was a full percentage point below the peak of October 2009.          

The OECD area employment rate, meanwhile, was stable compared with a year earlier, at 65.1% in the first quarter. It steadied in the US at 67.3% of working age people, and in Germany, at 73.1%, though rose by 0.3 percentage points to 71.2% in Japan.        

Click to enlarge

Country roundup       

An OECD report, Skills beyond School gave the United States high marks in postsecondary education but said the country should improve career and technical training provisions to help students make a smoother transition into work. The review of Austria praised the country’s vocational education and training systems while calling for more diversity. Meanwhile, Post-Secondary Vocational Education and Training in Germany says that despite advanced vocational training, compulsory standards in teaching and examination were needed.        

France, though the 4th largest aid donor in the OECD’s Development Assistance Committee, remained below its international commitment of 0.7% of gross national income. Currently at 0.46%, the OECD urged France to reach its target as soon as possible.       

Norway could do more to improve incentives and opportunities for people to stay working longer, according to Ageing and Employment Policies: Norway 2013, Working Better with Age.        

Portugal’s enforcement of its foreign bribery laws has been too weak, according to the OECD Working Group on Bribery’s “Phase 3 report” on implementing the OECD anti-bribery convention. Not a single prosecution has resulted from 15 allegations of Portuguese companies bribing foreign officials in high-risk countries. A similar report on Poland said the framework for fighting foreign bribery there remains inadequate for the country’s growing economy.        

The Russian Federation’s official statistics are compiled with a high degree of professionalism and now have a solid legal basis, but their scope, timeliness and international comparability needs to be improved, according to the OECD Assessment of the Statistical System and Key Statistics of the Russian Federation.       

Mexico, which regularly faces earthquakes, tropical storms and floods, should do more to avoid future losses and at the same time support sustainable economic development, according to the OECD Review of the Mexican National Civil Protection System. Nevertheless, the country has improved its institutional and operational preparedness to manage these disruptive events, the report says.


His Royal Highness Crown Prince Haakon of Norway gives
the opening speech at OECD Week, 28 May 2013
© OECD/Herve Cortinat

Visit www.oecd.org/newsroom  

Tax action launched

A two-pronged assault on tax avoidance was launched in July. First, OECD’s 15-point Action Plan on Base Erosion and Profit Shifting (BEPS) was issued, targeting gaps that multinationals use to artificially reduce their taxes. Produced at the request of the G20, the action plan aims to help governments prevent corporations from avoiding taxes, while giving businesses clarity too. The plan complements the second strand, to boost transparency and co-operation via a new automatic information exchange platform. www.oecd.org/tax

Upwardly mobile

Revenues from mobile data services are growing at double-digit rates in most OECD countries and, with a surge in broadband wireless subscriptions, drive growth among network operators. But policymakers and regulators might need to intervene to ensure there is enough supply to meet demand, Communications Outlook 2013 warns, in a call for more competition. 

Trade aid

“Aid for trade” could further help developing countries reduce trade costs, improve performance and plug into the global value chains, a report from OECD and the WTO argues. The report says that donors have disbursed over US$170 billion in aid for trade since 2006, and annual commitments reached $41.5 billion in 2011, 57% above the 2002-05 average. 

Plus ça change…

"The bulk of mathematics included in the traditional curriculum for primary and secondary school students dates from before 1760. And this is so despite the fact that in the intervening years (and particularly since 1900) there has been a revolution in mathematical thinking. The result is that the average secondary school graduate is 200 years behind the times."

Prof Howard Fehr, from “Mathematics teaching to meet tomorrow’s needs”, in Issue No 3, March 1963 

Education spending falters––as business startups are sluggishSoundbitesEconomyCountry roundupTax action launchedTrade aidPlus ça change…

©OECD Observer No 295, Q2 2013