OECD Economic Surveys: Luxembourg

Every 18 months
1999-0782 (online)
1995-3720 (print)
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OECD’s periodic surveys of Luxembourg’s economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Luxembourg 2017

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21 July 2017
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Luxembourg’s economic performance is robust thanks to its dynamic services sector, sound fiscal policies and openness to global talent. The pace of job creation is strong and benefits not only residents but also cross-border workers and immigrants. The large financial sector is well supervised, but to reduce reliance on the financial industry the government should further develop its long-term strategy focusing on new digital technologies and renewable energy.
Supplying the skills needed in these new sectors will require further improvements in the education system, with a focus on lifelong learning. Better alignment of skills with labour market needs would entail reorienting labour market policies from supporting job creating towards funding training programmes to facilitate the reallocation of labour. Luxembourg benefits from immigrants who play a successful role in the economy. Integration challenges remain, though, especially regarding people from non-EU countries, who suffer from high unemployment. As language proficiency is a key precondition for successful integration, public supply of language courses should be stepped up further. Education reforms seek to make schools more equitable, also for the children of immigrants, and equality between men and women is being promoted by easing access to childcare and making taxation more gender neutral.


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  • Basic statistics of Luxembourg, 2016

    This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Luxembourg were reviewed by the Committee on 2 May 2017. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 17 May 2017. The Secretariat’s draft report was prepared for the Committee by Jan Stráský and Álvaro Pina under the supervision of Pierre Beynet. Research assistance was provided by Corinne Chanteloup and editorial assistance was provided by Claude-Annie Manga-Collard.The previous Survey of Luxembourg was issued in March 2015.

  • Executive summary

    OECD National Accounts Statistics.

  • Assessment and recommendations

    Luxembourg is an advanced economy with the highest per capita income in the OECD, reflecting the dynamic services sector, notably in banking and other financial services. Foreign investment is attracted by the business-friendly regulations, predictable tax system and sound macroeconomic policies. Foreign workers are attracted by the abundance of jobs and many cross-border workers commute every day from neighbouring regions. More than 40% of total employment is filled by non-residents, while some 45% of residents are foreigners who do not hold Luxembourg citizenship. Because of the high share of cross-border workers the gross national income (GNI), which excludes factor income from domestic production that accrues to non-residents, is lower than gross domestic product (GDP) by about a third (OECD, 2015a).

  • Progress in structural reform

    This Annex reviews actions taken on recommendations from the previous Survey released in March 2015.

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    • Harnessing skills for more inclusive growth

      Digitalisation, automation and future technological changes are changing the world of work, affecting the skills needed to perform them. The future of jobs will not look like the present situation: increasingly, workers will have to adapt to fast technological change, accept more mobility during their career, and regularly upgrade their skills to remain employable. Luxembourg’s workforce is highly skilled, reflecting the concentration in the country of sophisticated firms in the financial sector and other top-end international services. However, some middle-skilled routine jobs – especially back office, custodian and legal services in the financial sector – may disappear as a result of automation. Workers with strong and adaptable skills will be well prepared to thrive in this new environment. While many individuals working in Luxembourg already possess such characteristics, many others do not, resulting in a relatively high level of skills mismatch. Further improvements in the education system are needed to address this challenge, provide the young with learning-to-learn as well as technical capabilities and avoid that large groups of people are left behind. As skill sets will need to be updated during working careers, the system of initial education must be complemented by a flexible system of lifelong learning, tailored to the special needs of individuals with limited education attainment and older workers.Better use of existing skills would entail reorienting labour market policies from supporting job creation towards high-quality training programmes with substantial on-the-job learning component and reflecting future labour market needs. The tax and benefit system needs to be adjusted to increase incentives to work for low-skilled youth, older workers and second earners. Fully individualised taxation would increase incentives to work of second earners and make the tax system more gender neutral, while an additional parental leave entitlement for fathers may result in more gender-balanced use of part-time work.

    • Reaping the benefits of a diverse society through better integration of immigrants

      Luxembourg’s large foreign-born population is a pillar of the country’s prosperity: they have brought skills and knowledge to many sectors of the economy. They also tend to successfully find jobs, with a higher employment rate than natives. However, not all immigrants have done well. The minority from non-EU origin (about 10% of the country’s population) suffers from high unemployment, large gender gaps in activity and below-average incomes. Refugees are particularly vulnerable. Other integration shortcomings go beyond disadvantaged minorities. Pervasive labour market segmentation is well illustrated by the marked under-representation of the foreign-born in public sector jobs. Political participation of immigrants at local level is modest. At school, their children are often put at a disadvantage by an education system which tends to perpetuate socio-economic inequality.The diversity of Luxembourg’s society contributed by immigrants should be seen as an asset for economic growth and well-being. Initiatives such as the diversity charter can help private and public organisations to reap the benefit of diversity through the inclusion of outsiders and the strengthening of social cohesion. Learning the languages of Luxembourg, developing social capital and having foreign qualifications validated are key preconditions for successful integration. Education requires both general equity-enhancing reforms, starting at early childhood, and targeted support to disadvantaged students, including upgraded vocational studies. Furthermore, job matching and social cohesion would benefit from greater immigrant participation in public sector employment and civic life. Avoiding that asylum seekers undergo protracted inactivity is also a concern.

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