OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Luxembourg: 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.

This Working Paper relates to the 2017 OECD Economic Survey of Luxembourg (www.oecd.org/eco/surveys/economic-survey-luxembourg.htm).


Keywords: vocational education and training, long-term unemployment, active labour market policies, labour markets, education system, lifelong learning
JEL: I25: Health, Education, and Welfare / Education and Research Institutions / Education and Economic Development; J24: Labor and Demographic Economics / Demand and Supply of Labor / Human Capital; Skills; Occupational Choice; Labor Productivity; I28: Health, Education, and Welfare / Education and Research Institutions / Education: Government Policy; I24: Health, Education, and Welfare / Education and Research Institutions / Education and Inequality; J48: Labor and Demographic Economics / Particular Labor Markets / Particular Labor Markets: Public Policy; J21: Labor and Demographic Economics / Demand and Supply of Labor / Labor Force and Employment, Size, and Structure; J22: Labor and Demographic Economics / Demand and Supply of Labor / Time Allocation and Labor Supply
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