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2017 OECD Economic Surveys: Luxembourg 2017

image of OECD Economic Surveys: Luxembourg 2017

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.

SPECIAL FEATURES: BOOSTING SKILLS; IMPROVING THE INTEGRATION OF IMMIGRANTS

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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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