1. Key insights and recommendations for Luxembourg

Skills are vital for enabling individuals and countries to thrive in an increasingly complex, interconnected and rapidly changing world. Countries in which people develop strong skills, learn throughout their lives and use their skills fully and effectively at work and in society are more productive and innovative. They also enjoy higher levels of trust, better health outcomes and a higher quality of life (OECD, 2019[1]; 2012[2]). Moreover, as new technologies and megatrends increasingly shape our societies and economies, getting skills policies right becomes even more critical for ensuring societal well-being and promoting inclusive and sustainable growth.

In recent years, Luxembourg’s economic performance has been strong. Between 2007 and 2021, annual gross domestic product (GDP) growth, on average, has been higher in Luxembourg than in the European Union (EU). As in other countries, the COVID-19 crisis led to a drop in Luxembourg’s GDP growth, although the decline was comparatively mild: GDP contracted by 1.8% in 2020 but recovered quickly and grew by 6.9% in 2021 (OECD, 2022[3]). The recovery of Luxembourg’s labour market from the COVID-19 crisis has been strong. As of March 2022, Luxembourg’s unemployment rate (4.7%) was at its lowest in 13 years (ADEM, 2022[4]). Compared to March 2021, the number of job seekers declined by 22%. While the pandemic has unsurprisingly slowed down Luxembourg’s employment growth, the number of new hires in Luxembourg surpassed pre-pandemic levels already in Q3 2020 (STATEC, 2021[5]).1 During March 2022, employers declared record numbers of vacancies to Luxembourg’s public employment agency (Agence pour le développement de l’emploi, ADEM), resulting in a 35% increase in comparison to March 2021. For the first time in Luxembourg’s history, the total number of workers in Luxembourg’s labour market surpassed 500 000 in 2022, increasing by 3.7% compared to 2021 (ADEM, 2022[4]).

However, other persistent and future challenges exist. While productivity levels in Luxembourg are high in international comparison, productivity growth has stagnated (National Productivity Council, 2021[6]) GDP growth is expected to decelerate to around 2.9% in 2022 and to slow further in 2023 due to various factors, such as flagging consumer sentiment, supply constraints and their effects on the export of goods, and the rising volatility of financial and business services. Furthermore, the Russian Federation’s (hereafter “Russia”) invasion of Ukraine poses a significant risk to Luxembourg’s economic recovery. While high volatility in the stock markets, a surge in commodity prices and a rise in energy prices are disrupting the production of goods and services, Luxembourg has relatively little direct exposure to Russia, which accounts only for 1.7% of total trade. Nonetheless, the war has exacerbated rising inflation, which is set to increase to 8% in 2022 (OECD, 2022[3]). Furthermore, higher inflation and bottlenecks in the labour market are leading to rising wage pressures, with the total wage rate rising to 5.4% in 2021 following a wage indexation scheme.2 This may further exacerbate prevalent skills shortages in Luxembourg’s economy. In 2021, 40% of Luxembourg’s chief executive officers (CEOs) identified the unavailability of key skills as a potential threat to their organisations’ growth prospects, ranking it among the top-five most frequently cited potential threats (PwC, 2021[7]). Furthermore, with evidence in growth sectors (such as advanced manufacturing, construction, the health, creative, digital and green sectors) already highlighting recruitment difficulties in middle- and high-skilled jobs – which are expected to grow in the future due to rapid growth and an ageing workforce – reskilling, upskilling and lifelong learning within the existing workforce as well as sourcing international, cross-border workers (OECD, 2021[8]) become critical.

For Luxembourg, implementing a strategic approach to skills policies is essential to support its efforts to boost economic growth and to build a resilient and adaptable skills system. Luxembourg currently has a unique opportunity to set the right skills policy directions for the next decade and beyond.

In Luxembourg, as in other OECD countries, megatrends such as digitalisation, globalisation, demographic change and climate change are transforming jobs and how society functions and people interact. To thrive in the world of tomorrow, people will need a stronger and better-rounded set of skills. These include foundational, cognitive and meta-cognitive, social and emotional, and professional, technical and specialised knowledge and skills. Luxembourg will also need to make better use of people’s skills in the labour market and individual workplaces.

Prior to the COVID-19 pandemic, Luxembourg’s labour market and society were being reshaped by digital transformation. Between September 2018 and September 2019, 68% of online job vacancies published in Luxembourg required basic digital skills (e.g. use of a computer, Internet, etc.), and 59% required more advanced digital skills (e.g. data analysis, programming language, etc.) (Hauret and Martin, 2020[9]; Bourgeon et al., 2020[10]). Moreover, certain jobs (especially in the financial sector) had begun to disappear in Luxembourg, driven by the desire of certain employers to cut costs and invest in technological transformation, leading to redundancies (Huberty, 2018[11]).

Luxembourg’s integration into international trade and global value chains (GVCs) continues to influence the structure and competitiveness of its economic sectors, which in turn has an ongoing impact on skills supply and demand in the labour market. New technologies and trade liberalisation have led to a more globalised world characterised by expanding supply chains and outsourcing certain forms of work. Luxembourg is well integrated in GVCs (Di Filippo, 2018[12]). It is more open to international trade in services than OECD countries are on average, as shown by the OECD’s Services Trade Restrictiveness Indicators (STRIs) (OECD, 2021[13]).

Demographic change importantly affects Luxembourg’s socio-economic outlook. While people aged 65 and up made up 13.9% of Luxembourg’s total population in 2012, the figure stood at 14.7% in January 2022 (STATEC, 2022[14]). However, Luxembourg is ageing slower in comparison to neighbouring countries (LISER, 2011[15]), primarily due to a large number of foreigners in the country: 53% of Luxembourg’s residents are of other than Luxembourgish nationality (STATEC, 2022[16]) (see Chapter 4). Moreover, on average, these foreign residents tend to be younger than their Luxembourgish counterparts (LISER, 2011[15]). However, Luxembourg is considerably affected by demographic shifts in the Greater Region,3 where the 65 and over population increased by 20% between 2000 and 2016 (Durand, 2019[17]). Demographic projections further predict an increase of almost 40% in the Greater Region population aged 65 and over by 2050 (i.e. more than 900 000 additional people). By 2050, the Greater Region will have approximately 3.2 million people over 65, representing more than one-quarter of the Region’s total population (Durand, 2019[17]). Given that Luxembourg sources 46% of its workers from the Greater Region (STATEC, 2021[5]),4 population ageing in the Greater Region will have significant implications for the type and quantity of skills that Luxembourg can expect to count on in the future. Creating high-quality and accessible opportunities for reskilling/upskilling for Luxembourg’s residents and workers across the life course (see Chapter 2), as well as guiding and incentivising them to participate in reskilling/upskilling opportunities (see Chapter 3), is therefore paramount.

Environmental challenges – air quality, water pollution, heat waves, waste management and biodiversity loss – have implications for skills. These challenges are associated with a rise in respiratory and cardiovascular diseases, impaired cognitive development and acuity, school absences and poor performance in high-stakes tests, which together lead to long-term cognitive skills depreciation (Horvath and Borgonovi, 2022[18]). Furthermore, as a result of the green transition, some new “green jobs” will be created, leading to a change in skills needs, while some existing jobs could be eliminated or transformed in terms of their day-to-day tasks and methods (ILO, 2017[19]; Martinez-Fernandez, Hinojosa and Miranda, 2010[20]). Sectoral studies developed by Luxembourg’s ADEM5 count environmental trends among the key underlying forces shaping Luxembourg’s labour market and its various sectors (ADEM, 2022[21]). For example, while retrofitting to increase the energy efficiency of buildings is becoming of increasing importance in Luxembourg’s construction sector (ADEM, 2022[22]), the transition to green and sustainable finance (among others) is shaping skills needs in the financial sector (ADEM, 2022[23]). The long-term challenge for policy makers will be to help their economies move towards sustainable, highly skilled, high-productivity activities, including by designing effective upskilling/reskilling pathways for workers who might find their jobs significantly impacted by the green transition.

Against this backdrop, people will increasingly need to upgrade their skills to perform new tasks in their existing jobs or acquire skills for new jobs. Strong foundational, digital, social and emotional skills, such as critical thinking, communication and adaptability, will become essential for people to be resilient in the face of changing skills demands and to succeed in both work and life. In addition, with aspirations to grow jobs in areas such as advanced manufacturing and the health, creative, digital, and green sectors to exploit future opportunities dealing with megatrends, the need for technical, high-skilled workers will be accentuated. Roles in areas such as professional, scientific activities, information and communication technology, finance and insurance (OECD, 2021[8]), as well as middle-skilled roles, such as in skilled trades, technicians and associate professionals, will be expanded.

Luxembourg’s first case of COVID-19 was confirmed in February 2020 (Medical Press, 2020[24]). In March 2020, the Government of Luxembourg imposed a lockdown (including school closures), followed by curfews in October and December 2020 and another round of school closures in February 2021 in response to the deterioration of the sanitary situation (Luxembourg Wort, n.d.[25]; STATEC, 2022[26]). As of the end of April 2022, COVID-19 infections in Luxembourg were decreasing (Reuters, 2022[27]), and Luxembourg’s complete vaccination6 rate stood at 78.7% of the eligible population (i.e. the five and over population) (Government of Luxembourg, 2022[28]). Several factors have helped Luxembourg weather the impacts of the pandemic better than most countries. The share of jobs in Luxembourg compatible with teleworking was high in international comparison (although less so for Luxembourg’s low-qualified workers) (LISER, 2021[29]), while the share of workers on temporary contracts in Luxembourg was also smaller than in other countries. In addition, support measures, such as short-time working schemes, helped keep people employed (STATEC, 2022[26]). To support the economy, the government also implemented a large and multi-pronged policy package in 2020, followed by a more targeted stimulus package in 2021 (IMF, 2021[30]).

Nonetheless, the impact of the COVID-19 crisis on Luxembourg’s economy and society should not be underestimated. The well-being of workers during the lockdown suffered in multiple ways (Beine et al., 2020[31]). The share of workers in Luxembourg with a high risk of depression increased from 11% in 2020 to 15% in 2021, while the share of those whose emotional well-being had deteriorated and who presented a moderate risk of depression increased from 21% to 25% in the same period (CSL, 2021[32]). The pandemic also exacerbated Luxembourg’s gender inequalities. Women’s employment was affected more than men’s during the lockdown, while the increase in childcare responsibilities during school closures fell disproportionately on women’s shoulders (LISER, 2022[33]). The economy’s recovery has been uneven, and targeted policy support may still be needed for those firms exposed to tourism and global supply disruptions (OECD, 2021[34]).

The COVID-19 crisis has exacerbated Luxembourg’s skills imbalances (i.e. skills shortages, surpluses and mismatches). Already before the pandemic, the share of employers in Luxembourg finding it very or fairly difficult to find employees with the required skills (78%) was significantly higher than other countries, such as Denmark (57%) or Lithuania (65%) (Eurofound, 2019[35]). In 2021, 40% of Luxembourgish CEOs identified the “(in)availability of key skills” as a potential threat to their organisation’s growth prospects, ranking this among the five most pressing business, economic, policy, social and environmental threats (PwC, 2021[7]). ADEM’s sectoral studies show that between 2015 and 2020, the occupations with the greatest shortages in Luxembourg were those traditionally requiring higher-level skills (i.e. occupations in International Classification of Occupations [ISCO] groups 1-3), such as computer engineers and legal experts 7 (ADEM, 2022[21]). With the COVID-19 crisis inducing firms around the world to restructure in ways that accelerate digitalisation (OECD, 2021[36]) equipping Luxembourg’s labour force with the skills needed in an increasingly digitalised world will be essential to sustain Luxembourg’s economic performance in the years to come.

The megatrends mentioned above and COVID-19 reinforce the need for Luxembourg to design forward-looking, dynamic skills policies. Strong foundational skills will make people more adaptable and resilient to changing skills demands. Digital, transversal, social and emotional, and job-specific skills (Box 1.1) will become increasingly essential for individuals to succeed in learning, work and life. High-quality learning across the life course should be accessible for everyone to enable full participation in society and to successfully manage transitions in the labour market. Adults will need greater opportunities to upskill and reskill, while learning providers will need to create more flexible and blended forms of learning. Firms will have to adopt more creative and productive ways of using their employees’ skills. Finally, robust governance structures will be needed to ensure that reforms are sustainable.

The importance of skills for Luxembourg is also reflected in the European Skills (European Commission, 2022[37]), which seeks to: strengthen sustainable competitiveness as set out in the European Green Deal (European Commission, 2022[38]); implement the first principle of the European Pillar of Social Rights (access to education, training and lifelong learning for everybody in the European Union) (European Commission, 2022[39]); and build resilience to react to crises (learning from the COVID-19 pandemic). In line with these goals, the European Commission has recommended that Luxembourg improve the quality and efficiency of skills development. While Luxembourg has made substantial progress in reducing achievement gaps among students and early school leaving, more remains to be done to support skill development for adults (European Commission, 2020[40]) so as to put skills at the top of the agenda to tackle the challenges facing the country and seize the opportunities of the future. This Skills Strategy seeks to support Luxembourg in achieving these aims.

OECD Skills Strategies provide a strategic and comprehensive approach to assessing countries’ skills challenges and opportunities and building more effective skills systems. The OECD collaborates with countries to develop policy responses tailored to each country’s specific skills challenges and needs. The foundation of this approach is the OECD Skills Strategy Framework (Figure 1.1), the components of which are:

  • Developing relevant skills over the life course: To ensure that countries can adapt and thrive in a rapidly changing world, all people need access to opportunities to develop and maintain strong proficiency in a broad set of skills. This process is lifelong, starting in childhood and youth and continuing throughout adulthood. It is also “life-wide”, occurring both formally in schools and higher education, and non-formally and informally in the home, community and workplaces.

  • Using skills effectively in work and society: Developing a strong and broad set of skills is just the first step. To ensure that countries and people gain the full economic and social value from investments in developing skills, people also need opportunities, encouragement and incentives to use their skills fully and effectively at work and in society.

  • Strengthening the governance of skills systems: Success in developing and using relevant skills requires strong governance arrangements to promote co-ordination, co-operation and collaboration across the whole of government; engage stakeholders throughout the policy cycle; build integrated information systems; and align and co-ordinate financing arrangements. The OECD Skills Strategy for Luxembourg adopted this approach by forming an interdepartmental project team to support the whole-of-government approach to skills policies and engaging a wide variety of stakeholders.

The OECD held a virtual skills seminar in June 2021 to kick off the Skills Strategy, an assessment workshop in October 2021 to identify challenges and opportunities, and a recommendation workshop in April 2022 to develop tailored policy recommendations. Each workshop was attended by more than 120 government and stakeholder representatives. In addition, the OECD held more than 60 bilateral meetings with a wide range of government officials and stakeholders. The consultations during the workshops and bilateral meetings sought not only to enrich the analysis with local insights but also to develop a constructive dialogue and cultivate a shared understanding of skills challenges and opportunities as a basis for taking collective action to improve the skills performance of Luxembourg. Overall, more than 160 participants, who represented ministries and agencies, municipalities, education providers, employers, workers, researchers, and other sectors, were engaged in the context of the OECD Skills Strategy for Luxembourg.

The report was prepared after the initial outbreak of the COVID-19 pandemic and makes recommendations that could facilitate Luxembourg’s post-pandemic growth, as well as recommendations to build the performance and resilience of Luxembourg’s skills system to further unforeseen challenges in the longer term.

Luxembourg is among the strongest performers in school enrolment from the pre-primary to secondary levels. In 2019, gross enrolment rates at the pre-primary level were higher in Luxembourg (91%) than the OECD average (82%), as well as at the primary level, where enrolment rates were also higher in Luxembourg (105%)8 than the OECD average (102%) (World Bank, 2022[43]). On the other hand, gross enrolment rates at the secondary level in Luxembourg (105%) are close to the OECD average (106%) for the same year (World Bank, 2022[43]).

However, despite widespread access to schooling, there remain opportunities for the country to improve the skill outcomes of its youth and improve the inclusivity of skills development initiatives for young people. In the latest OECD Programme for International Student Assessment (PISA) round in 2018, Luxembourg performed below the OECD average. Students in Luxembourg scored below the OECD average in key skill areas such as reading, mathematics and science. Low scores among socially disadvantaged students largely account for this underperformance. The link between socio-economic status and performance in PISA is stronger in Luxembourg than in any other participating country. For instance, in reading tasks, advantaged students in Luxembourg performed better than disadvantaged students by 122 score points – significantly higher than the OECD average difference of 89 score points (OECD, 2019[44]).9

Tertiary education has been expanding in the last few decades, and Luxembourg has performed relatively well compared to other OECD countries in terms of its provision of tertiary education to young adults, especially women. In 2020, 64% of 25–34-year-old women in Luxembourg had a tertiary qualification in comparison to 53% of males, and the country performed better than the OECD average for both genders (52% for young women and 39% for young men) (OECD, 2021[45]). Furthermore, international student mobility at the tertiary level has risen steadily, and international students represented 49% of tertiary students in Luxembourg in 2019. However, as with other levels of education, more could be done to improve inclusivity and outcomes for disadvantaged students. For instance, students from low- and lower-middle-income countries represented only 13% of Luxembourg’s international student base, as opposed to 29% in OECD countries (OECD, 2021[45]).

Luxembourg has a relatively strong adult learning culture compared to other OECD countries. According to the latest Labour Force Survey data (2020), participation in adult learning is higher in Luxembourg (16%) than in the European Union (9%) and the Greater Region average (8%) and surpasses neighbouring countries such as France (12%), Germany (7%) and Belgium (4%). Furthermore, employees in Luxembourg have higher participation rates in continued vocational training than most other countries across the OECD.

However, many challenges remain in Luxembourg’s adult learning system, such as implementing quality assurance measures and ensuring that existing training offers are relevant to labour market needs. For example, insights from the latest EU Company Survey in 2019 found that 27% of employers in Luxembourg had concerns that the training provided to their employees was of low value in terms of addressing their employees’ skills needs, compared with 25% of employers in the European Union and 22% of those in France. Furthermore, participation in adult learning also differs significantly across socio-economic backgrounds. Groups with lower participation rates in Luxembourg include those who are low-qualified, in lower-skilled jobs, older workers above 55 years old, cross-border workers, males and those in smaller businesses and low training sectors. For these groups, several practical barriers make it difficult to access adult learning, such as scheduling conflicts, health reasons, lack of guidance and costs, among others.

Luxembourg’s strong economic performance has led to rapid job growth over the past decade. The country’s unemployment rate has been declining steadily since 2015 and was one of the lowest across the OECD in 2021 at 5.7%. While its small population size limits the domestic supply of labour, the large numbers of cross-border workers in Luxembourg’s labour market have alleviated labour pressures and have helped keep the economy dynamic and fast-growing. Around 47% of the workforce is composed of cross-border workers. Only 26% of the workforce is made up of resident workers with Luxembourgish nationality. Some 22% of the workforce are residents with an EU nationality (other than Luxembourgish), and a small (5%) yet rapidly increasing share of the workforce consists of resident workers with a non-EU nationality. Luxembourg’s reliance on foreign talent manifests itself across most sectors. With the exception of public administration, most employees in each of Luxembourg’s ten largest sectors (in terms of the number of active employees) are made up of non-Luxembourgish residents or cross-border workers (see Chapter 4).

Luxembourg has several opportunities to further improve its attraction of foreign talent. The efficiency of Luxembourg’s admission procedures could be improved, as international evidence on work permits shows that the maximum processing time in Luxembourg is higher than statutory times in most OECD countries for which data are available. There is also room for making migration policy more responsive to labour market needs. Currently, only high-skilled foreign talent is exempted from the “labour market test” (an assessment of whether a particular job could be performed by a jobseeker in the national labour market before allowing the existing vacancy to be filled by a foreign worker), despite Luxembourg’s talent shortages across skill levels. Affordability of living in Luxembourg (not only) for foreign talent should be improved (including by expanding the supply of affordable housing and evaluating and potentially strengthening the financial incentives for attracting foreign talent) and providing information for foreign talent and Luxembourg’s employers strengthened.

Furthermore, the retention of foreign talent is just as important as talent attraction, and Luxembourg could better facilitate the integration of foreign workers and their spouses into society and the labour market. For example, the employment rate of foreign spouses in Luxembourg is 16 percentage points lower than the employment rate of the principal migrant whom they accompany (see Figure 4.11 in Chapter 4). Furthermore, comprehensive programmes offering systematic support to foreign workers’ spouses in the social and labour market integration process are not available. Finally, while the share of international students in Luxembourg’s higher education system (49%) is the highest in the OECD (OECD, 2021[45]), data collected via an employment study conducted by the University of Luxembourg show that there is still space for better facilitating the study-employment transitions of international students into Luxembourg’s labour market.

While Luxembourg has developed a relatively strong workforce stemming from high tertiary education attendance and has attracted a sizeable stock of foreign talent, ongoing improvements are required to maintain this position and broaden opportunities for all over time. For example, more could be done to ensure the relevance of education and training offers to the labour market’s needs. Employees do not always have the skills required for their jobs. The share of employers in Luxembourg (78%) who find it very or fairly difficult to find workers with the right set of skills is significantly higher than in other countries, such as Denmark (57%) or Lithuania (65%) (Eurofound, 2019[35]). Furthermore, 40% of CEOs in Luxembourg find that insufficient access to the skills they need potentially threatens their organisations’ growth (PwC, 2021[7]). These are evident in meta-skills and evolving middle and higher technical skills. Addressing these challenges requires improving ongoing relevance and accessibility to high-quality provision and extending the reach to help individuals progress, especially those from under-represented groups, such as low-skilled workers and those with low qualifications. There will also be a crucial role for Luxembourg’s guidance services to inspire individual engagement in learning within growth areas.

Compared to other OECD countries, Luxembourg has a higher proportion of “middle” performing businesses adopting people-centred high-performance work practices (HPWPs), which promote active skills use. As such, there is greater scope to increase investment in high-performing, high-investment businesses to reach the levels of international leaders (Eurofound, 2019[35]). Furthermore, smaller firms often lag in adopting HPWPs, and there is a relatively high share of zombie firms in Luxembourg, which have low productivity and would normally exit in a competitive market. Increasing productivity and strengthening competitiveness requires strengthening management and working practices. Moreover, Luxembourg could do more to increase the adoption of digital technologies and innovation, as only 1.3% of its GDP is allocated to research and development (R&D) activities, owing to a decline in business R&D over the past decade. This is far below the OECD average and does not meet its 2020 national target of 2.3% to 2.6% of GDP (OECD, 2019[46]).

Luxembourg has strong foundations in place to strengthen inter-ministerial co-ordination for adult learning. This includes the provision of guidance services at different stages of education and working life through governance bodies, such as the Maison de l’orientation (MO), which brings together ministries with skills-relevant mandates and serves as a guidance co-ordination hub (MO, 2022[47]). In addition to horizontal co-operation across ministries, a whole-of-government approach in Luxembourg can also be observed through the strong role that local municipalities play in providing adult learning opportunities for residents and offering their own adult learning centres.

Nonetheless, across OECD countries, major skills challenges are rooted in inadequate co-ordination and the lack of adequate information on skills and learning outcomes, with Luxembourg being no exception (OECD, 2020[48]). Since roles and responsibilities for skills governance are distributed across many different ministries and departments in the country, there is room to strengthen co-ordination mechanisms across the whole of government. For instance, addressing Luxembourg’s barriers to attracting and retaining foreign talent would require designing a comprehensive strategy involving many ministries that have roles in integrating cross-border workers into society and the labour market. In recognition of this need, Luxembourg created an inter-ministerial working group to design a Roadmap for the development of a National Talent Attraction, Development and Retention Strategy in partnership with stakeholders outside the government.

In Luxembourg, diverse stakeholders, such as chambers representing employers and employees across sectors, play a key role in skills policies through their involvement in skills policies as well as their direct provision of education and training. Co-ordinating effectively with these stakeholders enables policy makers to benefit from their expertise and ensure that policies acquire a higher level of legitimacy and accountability (OECD, 2020[49]). The engagement of stakeholders occurs in Luxembourg through formal bodies, such as the Tripartite Coordination Committee (Comité de Coordination Tripartite), which seeks to foster consensus among government, employer and employee representatives on economic and social issues, as well as more informal bodies, such as the Skillsdësch, which brings together different ministries and stakeholders to discuss skills policies. ADEM and the Association of Luxembourg Companies (UEL) have also been working together since 2015 in the context of the Companies, Partners for Employment Partnership (Entreprises, partenaires pour l’emploi) to raise awareness of the services offered by ADEM among employers, organise recruitment days in various sectors and set up tailor-made training for job seekers.

The development of the country’s key skills-related strategies and policies, such as the Lifelong Learning Strategy (2012), has involved the participation of a wide variety of stakeholders, such as employer and employee representatives, among many others. However, since the labour market context, in particular during COVID-19, has significantly changed, an updated and forward-looking adult learning strategy would be needed to further facilitate co-ordination between the government and stakeholders in achieving the ambitions set out in the Recovery and Resilience Plan 2021-2026 (European Commission, 2021[50]) as well as the goals in the EU Skills Agenda 2025 (European Commission, 2022[37]).

Given Luxembourg’s complex workforce structure, having timely and reliable data on current and future skilling needs is central to aligning skills supply and demand. However, the country’s skills data governance could be strengthened on several fronts. There is room to improve the quality of Luxembourg’s skills data collection in terms of accuracy, coverage and granularity. Moreover, there is space to better facilitate skills data co-ordination and exchanges both within the government and with relevant stakeholders in Luxembourg. With its labour market extending beyond national borders, Luxembourg could equally benefit from building stronger synergies with international data sources, especially to better understand the changing skills supply and demand in the Greater Region.

Luxembourg has already developed a range of strategies and reforms (see Table 2.1 in Chapter 2 for a comprehensive overview) to help the country overcome the challenges of its skills system and seize the opportunity to leverage its investments in skills to advance its economic and societal ambitions. Relevant priorities and goals from these strategies are summarised at the beginning of each chapter to highlight their connection with the OECD’s assessment and recommendations.

Furthermore, as detailed in subsequent chapters, Luxembourg has embarked on a range of skills policy reforms in recent years. These include introducing several strategies that have given adult learning and lifelong learning a high priority on the country’s political agenda. For instance, the Lifelong Learning Strategy (2012) was developed in collaboration with various actors to support the skills development of Luxembourg’s workforce. The strategy introduced, among others, measures to ensure the quality of adult learning, a single information portal on lifelong learning, the professionalisation of guidance services and a consultative body on lifelong learning. Since then, several other strategies and initiatives supporting lifelong learning and adult learning have been put in place to directly address the effects of global megatrends on the country’s workforce, such as the Digital Skills and Jobs Coalition (2017) and the Recovery and Resilience Plan of Luxembourg (2021), which both identify concrete measures to raise digital skills in the country. Similarly, the more recent Artificial Intelligence: A Strategic Vision for Luxembourg (2020) provides recommendations on how the country could best meet future needs for artificial intelligence-related skills.

Luxembourg has also taken concrete steps to improve the resilience and inclusivity of its skills system by taking a strategic, co-ordinated approach to foreign talent attraction and retention efforts and addressing the needs of cross-border workers and vulnerable and under-represented groups. As mentioned above, a Roadmap for the development of National Talent Attraction, Development and Retention Strategy was developed by several governmental and non-governmental stakeholders. In turn, the National Action Plan for Integration (2018) focuses on improving the integration of all non-Luxembourgers into society and labour markets by supporting adult learning opportunities, language training, integration courses and active labour market programmes.

Based on the OECD’s initial assessment of the performance of Luxembourg’s skills system and discussions with the Luxembourgish National Project Team, four priority areas were identified for this Skills Strategy. Over the course of developing the Skills Strategy, the OECD identified opportunities for improvement and developed recommendations in each priority area based on in-depth desk analysis and consultations with the Government of Luxembourg and stakeholder representatives. The four priority areas are:

  1. 1. Providing labour-market-relevant adult learning opportunities in Luxembourg

  2. 2. Guiding and incentivising skills choices in Luxembourg

  3. 3. Attracting and retaining foreign talent to fill skills shortages in Luxembourg

  4. 4. Strengthening the governance of skills data in Luxembourg.

The development of youth’s skills was not selected as a priority area, as there are already many ongoing policy reforms in this area, and their impact would have to be assessed before considering further reforms. Furthermore, the youth who leave Luxembourg’s education system represent only around half of Luxembourg’s labour market workers. For these reasons, this project has concentrated on the skills challenges and opportunities in Luxembourg once individuals have left their initial education.

The summaries below highlight the key findings and recommendations for each priority area, while subsequent chapters provide a fuller description of these.

It is critical for Luxembourg’s adult learning system to be coherent in order to be effective. While both public and private sector actors in Luxembourg are active in providing adult learning opportunities, they could work more closely together, learn from each other and be guided by an overarching strategy to co-ordinate their respective efforts and avoid unnecessary overlaps, contradictions and gaps. As Luxembourg is economically closely integrated into the Greater Region, more co-ordination with actors in the Greater Region could improve the coherence of provided adult learning opportunities. It is also important to support all adults, regardless of their socio-economic background, to access upskilling and reskilling programmes so they are well-equipped to thrive in an evolving labour market. Access is a challenge when prospective adult learners do not have the necessary prerequisites for adult learning programmes or when the adult learning programmes are not flexible enough to accommodate their schedules or are not tailored enough to their specific needs. Opportunity 1 describes how Luxembourg can improve the coherence and accessibility of adult learning opportunities (Table 1.1).

Luxembourg’s adult learning system needs to become more responsive to the evolving needs of the labour market. Around 27% of employers in Luxembourg had concerns that the training provided to their employees was of low value in terms of addressing their employees’ skills needs. The long-term unemployed (51% of unemployed) and individuals needing reskilling due to health reasons (19% of unemployed) in Luxembourg also require labour-market-relevant adult learning opportunities to improve their employment and career prospects. Besides relevance, which is about providing adult learning opportunities that meet labour market needs, the quality of adult learning programmes, which is about meeting clearly defined quality standards, also matters. Due to the lack of a rigorous accreditation process in Luxembourg, there has been a proliferation of training providers with limited oversight. Around 78% of training providers are private, and around 73% of training providers are comprised of a single trainer or between one to four employees. Currently, there are no common quality standards on how to develop and implement the curricula of adult learning programmes. Similarly, there is no national certification procedure to become an adult learning teaching staff nor a regular professional development requirement for such staff. Opportunity 2 describes how Luxembourg can increase relevance and ensure the quality of adult learning opportunities (Table 1.2).

Career guidance services are growing in importance in skills systems to help individuals successfully navigate a constantly evolving labour market and skills landscape at different stages of their lives, with an increasingly complex set of potential options and pathways available to them. New research has started to quantify that change (OECD, 2021[51]) highlighting a rising demand for career guidance among adults and young people – indeed, four out of ten adults recently reported that they had spoken to a guidance advisor in the previous five years. The increasing importance of guidance services is clearly recognised in Luxembourg, with action being taken to better co-ordinate guidance services for individuals of all ages through the establishment of the MO. The importance of career guidance is particularly underlined during turbulent labour market conditions, such as those generated by the COVID-19 pandemic, which intensified industrial restructuring and increased the risk of job displacement (CEDEFOP, 2020[52]). Through such advice, individuals need a range of support to make the best skills choices in a complex ecosystem: assess their interests, build individual resilience, and respond to changing employment and skills requirements. As Luxembourg’s skills system evolves, this inevitably calls for a change too in guidance services to ensure that they are working sufficiently for adults as well as young people. They also need to draw consistently on the latest labour market evidence and industry insight to ensure timely and high-quality advice. Opportunity 1 describes how Luxembourg can improve guidance and counselling on adult learning (Table 1.3).

In Luxembourg, lower levels of adult learning participation can be observed among those low-qualified, in lower-skilled jobs, older workers, cross-border workers, males and those in smaller businesses and low training sectors. If adult learning participation is to be raised, it is important to address the market failures that have led to employers and individuals under-investing in adult learning and limiting economic and social prospects. Across OECD countries, various financial incentives exist in the “potential” policy toolkit to overcome barriers and incentivise greater investment in adult learning to enhance individual and business opportunities and prosperity. However, for individuals in Luxembourg, the cost of participation in adult learning is among the three most commonly reported barriers hindering participation. Furthermore, access to employer-financed training in Luxembourg is below the EU average. Therefore, to increase participation in adult learning, it will be important to strengthen existing financial incentives for individuals to participate in learning as well as the incentives for employers to provide adult learning opportunities. The overriding aim of efforts in these areas would be to improve the uptake of adult learning and the skills mix of the workforce moving forward, creating greater opportunities for all in the Luxembourg economy, thus fulfilling a key strategic aspiration of the Luxembourg skills system. Opportunity 2 describes how Luxembourg can improve financial incentives for adult learning (Table 1.4).

The large number of foreign-born workers in Luxembourg’s labour market suggests that Luxembourg is already an attractive destination for foreign talent. Many “pull factors” help Luxembourg attract foreign talent, including high quality of life, a safe living environment and attractive incomes. Nonetheless, assessing Luxembourg’s attractiveness internationally, an opportunity for improvement remains, especially in the context of a dynamic future labour market and the ongoing need to ensure a steady supply of highly technical middle and higher skills in response to industrial restructuring and growth areas in advanced manufacturing, and the creative, digital and green sectors. Access to Luxembourg and its labour market could be better facilitated. There is room to increase the efficiency of admission procedures, better reflect labour market needs in migration policy, and improve cross-border mobility. The cost of living in Luxembourg poses further obstacles to attracting foreign talent. While incomes in Luxembourg are high, so is the cost of living. Housing prices, in particular, have been increasing rapidly since the start of 2019 for both new and existing dwellings. On average, housing prices have risen by 9.7% per annum over the last five years, almost double the EU average of 4.9% (OECD, 2022[53]). In addition, recruiting foreign talent could be better facilitated by strengthening the provision of information to foreign talent and Luxembourg’s employers. Stakeholders have agreed that Luxembourg lacks an internationally recognisable “nation brand”, and employers and foreign talent could benefit from improved, accessible and regularly updated information on international hiring processes and opportunities. Opportunity 1 describes how Luxembourg can improve in facilitating the recruitment of foreign talent in line with Luxembourg’s labour market needs (Table 1.5).

While Luxembourg could further improve its capacity to attract foreign talent, retention will be equally important to ensure that Luxembourg can benefit from the skills and talent it receives from abroad in the long term. Data from the Inspection générale de la sécurité sociale (IGSS) show that only around 44% of Luxembourg’s residents with an EU nationality (other than Luxembourgish) who started working and living in Luxembourg in 2015 were still living in Luxembourg in 2020, while the figure stands at 42% for non-EU nationals residing in Luxembourg during the same period. Evidence suggests that Luxembourg ranks among the top ten OECD performers in talent retention, yet space for improvement still exists. To support the retention of foreign talent, integration of said talent into society and the labour market is essential. While Luxembourg has developed targeted policy tools supporting the integration of foreign talent, their take-up could be improved. For example, Luxembourg’s language training for foreign talent could be further strengthened, and integration support for spouses of foreign talent could be more ambitious and systematic. Equally, there is space to better facilitate the transition of former international students into Luxembourg’s labour market. Opportunity 2 describes how Luxembourg can improve in facilitating the integration of foreign talent and their families into Luxembourg’s society and labour market (Table 1.6).

Luxembourg collects a wide variety of quantitative and qualitative data, which can inform the design of skills policies, including labour market data and education and training data. Labour market data are commonly used as proxies for analysing evolving skills needs because they allow for the observation of growth or decline in employment in specific occupations. To allow data users (both in and outside of the government) to unlock the full potential of Luxembourg’s labour market data, Luxembourg should work on addressing accuracy, coverage and granularity challenges of certain labour market data sources, including social security data and vacancy data. Education and training data (e.g. on attainment, participation, outcomes, expenditure, curricula, etc.) provide important information on the access, quality and relevance of the supply of education and training opportunities. Going forward, Luxembourg has opportunities to further expand its education and training data and strengthen its granularity. Opportunity 1 describes how Luxembourg can improve the quality of its skills data collection (Table 1.7).

A strategic and co-ordinated approach to collecting and managing public and even private data is important for taking full advantage of the social, scientific, economic and commercial potential of data resources. Stakeholders in Luxembourg have highlighted that Luxembourg lacks a co-ordinated approach to skills data collection and management. There is low awareness of all the existing skills data sources, as well as what they cover and how they can be accessed, which limits the extent to which they can be fully leveraged to inform the design and implementation of Luxembourg’s skills policies. In addition, efforts to improve Luxembourg’s skills data collection and use often occur in an uncoordinated fashion. Skills data exchanges between government institutions and stakeholders remain limited, not least because laws and technical infrastructure allowing for such exchanges must be further developed. Moreover, Luxembourg is not taking full advantage of international skills data sources, especially those of neighbouring countries. However, exploring synergies with international data sources is crucial for Luxembourg, given the cross-border nature of its labour market, and could help Luxembourg assess the potential skills supply and demand in the Greater Region. Opportunity 2 describes how Luxembourg can strengthen co-ordination of, and synergies between, skills data within and beyond Luxembourg (Table 1.8).


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← 1. The data do not distinguish between new job creations, jobs retirements and job replacements.

← 2. Luxembourg’s wage indexation scheme automatically increases all salaries and social benefits once the consumer price index rises by more than 2.5% over six successive months. In October 2021, wages increased by 2.5% due to the scheme, which contributed to the 5.4% total wage rise in 2021. On 1 April 2022, the automatic indexation was again set off, further increasing all salaries and social benefits by 2.5%, although a tripartite agreement was reached between government, business, and some trade unions to delay changes by at least one year. The government has increased transfers to poorer households to cover the financial support expected to come from the wage indexation scheme.

← 3. Greater Region refers to the territories of: 1) Lorraine, in the French region of Grand Est; 2) Wallonia, the Federation Wallonia-Brussels and Ostbelgien in Belgium; 3) Saarland and Rhineland-Palatinate in Germany; and 4) the Grand Duchy of Luxembourg (Grande Région, n.d.[55]). The Greater Region is characterised by a high degree of political co-operation and economic interdependence.

← 4. The so-called cross-border workers work in Luxembourg but live in the surrounding regions of Belgium, France and Germany.

← 5. The sectoral studies were developed on the basis of vacancies declared by employers to ADEM between 2015 and 2020. Despite an existing legal obligation to declare vacancies to ADEM, the declared vacancies cover only approximately 30% of actual job creations in Luxembourg (see Chapter 5 for more details).

← 6. A complete vaccination scheme consists of two doses of Moderna, BioNTech/Pfizer, AstraZeneca and Novovax vaccines, or one dose of the Johnson & Johnson vaccine.

← 7. ADEM’s sectoral studies showed that certain traditionally middle- and low-skilled occupations (i.e. occupations in ISCO groups 4-9), such as cooks, head waiters or craft workers, were also suffering from shortages because job seekers showed little interest in pursuing careers in these occupations even if the job-seekers could, in theory, be a suitable match for these shortage occupations (ADEM, 2022[54]).

← 8. Gross enrolment rates account for students of all ages, regardless of whether they fall within the official age group for the specified level of education. Early enrolment (i.e. enrolment among students younger than the official age group), late enrolment (i.e. enrolment among students older than the official age group) or grade repetition can cause gross enrolment rates to exceed 100%.

← 9. When interpreting PISA results for Luxembourg, it is important to note that the students going through the Luxembourgish initial school system represent fewer than half of individuals joining the Luxembourgish workforce. The inequality in PISA scores does not fully account for the inequality in employment outcomes, since half of the workforce was educated elsewhere.

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