2016 OECD ECONOMIC SURVEY

OF THE UNITED STATES

Unleashing productivity and expanding opportunity

Washington DC, 16 June 2016

www.oecd.org/eco/surveys/economic-survey-united-states.htm

@OECD

@OECDeconomy

Source: OECD Economic Outlook 99 Database

A stronger recovery in the US

0

2

4

6

8

10

Japan Euro Area United States

GDP growth since pre-crisis peakPer cent, 2008Q1-2016Q1

2

U.S. unemployment back to pre-crisis level

0

2

4

6

8

10

12

0

2

4

6

8

10

12

2008Q1 09 10 11 12 13 14 15 16Q1

USA Japan OECD Euro Area

% %

Source: OECD Labour Force statistics.

3

Overall well-being is comparatively high

0123456789

10Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement andgovernance

Environmental quality

Personal security

Subjective well-being

USA OECD

Source: OECD Better Life Index, 2016.

4

The gender wage gap has narrowed

0

5

10

15

20

25

30

35

40

1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

% Gender wage gap

5

Labour market outcomes lag behind for some

Source: Bureau of Labor Statistics

50

52

54

56

58

60

62

64

66

68

70

50

52

54

56

58

60

62

64

66

68

70

Black or African American Asian White Hispanic or Latino ethnicity

% of civilian non institutional population

% of civilian non institutional population

Unemployed

Employed

6

Productivity has slowed

0%

1%

2%

3%

0%

1%

2%

3%

1995-2005 2005-2015 1995-2005 2005-2015

United States OECD average

Average annual % change

Average annual % change

Source: OECD, Analytical database and OECD calculations.

7

Inflation is low

• Raise policy interest rates at a pace that gradually tightens financial conditions so as not to jeopardise the recovery and to promote a return of inflation to the Fed’s target.

Source: OECD, Economic Outlook database; US Department of Commerce, Bureau of Economic Analysis and the US Bureau of Labor Statistics.

-2

-1

0

1

2

3

4

5

6

-2

-1

0

1

2

3

4

5

6

Feb

-07

Feb

-08

Feb

-09

Feb

-10

Feb

-11

Feb

-12

Feb

-13

Feb

-14

Feb

-15

Feb

-16

Core PCE price index

Personal consumption deflator

CPI

2% inflation target

Y-o-Y % changes Y-o-Y % changes

8

Financial sector vulnerability has diminished

• Continue Dodd Frank and Basel III requirements

Note: Range of leverage and capital ratios for large and complex banks in 2015.Sources: SNL Financial, FDIC Global Capital Index (Hoenig Report)

0

1

2

3

4

5

6

7

8

9

USA Europe Asia0

2

4

6

8

10

12

14

16

18

20

22

USA Europe Asia

Basel III leverage ratio Tier 1 risk-based capital ratio%%

Minimum ratio (3%) Minimum ratio (4.5%) plus capital consumption buffer (2.5%)

9

Public infrastructure growth has fallen off

Source: Bureau of Economic Analysis

• Boost investment in, and maintenance of, infrastructure; in particular, promote mass transit.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

General government capital stock (excluding defense)

Y-o-Y % changes Y-o-Y % changes

10

Business dynamism is slowing

Source: Census Bureau

• Ensure personal bankruptcy procedures do not undermine incentives for entrepreneurship.

• Make R&D tax credits refundable for new firms.

8

10

12

14

16

18

8

10

12

14

16

18

1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

%

Entry rate new establishments Exit rate of existing establishments

%

11

Patenting delays are shortening, but still long

Source: Bureau of Economic Analysis

• Continue to speed up patenting decisions in line with targets without compromising patent quality

0

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Time to final decision

Months Months

12

Market concentration is increasing in many

industries

• Adapt antitrust policy to the new digital economy and winner-take-all outcomes. • Continue to strengthen pro-competitive policies, including in telecoms.

Source: Census Bureau

50.0

52.5

55.0

57.5

60.0

50.0

52.5

55.0

57.5

60.0

2002-2007 2007-2012

% industries with increased share of sales by eight largest firms

13

Income inequality is widening

Source: OECD Income distribution and poverty dataset.

• Expand the Earned Income Tax Credit.• Raise the minimum wage.• Max tax expenditures less regressive.

0.3

0.32

0.34

0.36

0.38

0.4

0.42

0.30

0.32

0.34

0.36

0.38

0.40

0.42

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Gini index, OECD definition

14

Gains in education performance have slowed

Source: National Assessment of Educational Progress (NAEP)

• Use federal funding for targeted programmes to reduce disparities in student opportunities .

• Encourage States to be ambitious in lifting educational attainment.

200

225

250

275

300

200

225

250

275

300

1990 92 94 96 98 2000 02 04 06 08 10 12 14

National average

Evolution of math scores in National Assessment of Educational Progress (NAEP) Score Score

15

Female labour force participation is falling

Source: OECD Labour Force statistics

• Require paid parental leave and improve access to quality childcare to help reduce wage gaps and improve career prospects.

60

65

70

75

80

85

60

65

70

75

80

85

1990 93 96 99 2002 05 08 11 14

Germany Japan United States OECD

Prime age female participation rates

% %

16

Spending on active labour market

programmes is low

• Develop reskilling programmes with established effectiveness in helping people back to work.

Source: OECD Public expenditure and participant stocks on labour market programmes dataset

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

ME

X

CH

L

US

A

JPN

ISR

SV

K

AU

S

CA

N

ES

T

GB

R

NZ

L

KO

R

CZ

E

SV

N

ITA

PO

L

NO

R

PR

T

CH

E

ES

P

LU

X

DE

U

BE

L

AU

T

HU

N

NL

D

FR

A

IRL

FIN

SW

E

DN

K

% of GDP % of GDP

17

Ex convicts face dismal employment

opportunities

• Reduce pre-screening for criminal records on employment applications

0

10

20

30

40

50

60

70

All labour force re-entriesunemployed a year later

Young men unemployed ayear after prison release

Unemployment*%

0

5

10

15

20

25

30

No record Criminal record

Chance of callback for job interview%

18

*Early 2000s

Source: Bureau of Labor Statistics, National Institute of Justice, Hall and Schulhofer-Whol (2015)

The Affordable Care Act has broadened

access to healthcare

Source: Centres for Disease Control and Prevention, National Health Interview Survey

• Continue to roll out the Affordable Care Act

0

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% of population without health insurance coverage %

19

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Within 30 minutes Within 30 to 60 minutes

Jobs are difficult to access

Note: in the 46 largest Metropolitan Statistical AreasSource: OECD calculations using estimates by Owen and Levinson (2014).

• Boost investment in, and maintenance of infrastructure; in particular, promote mass transit.

Per cent of jobs accessible by walking or public transit

20

• Rebalancing the policy mix

– Weak global growth and fiscal consolidation are weighing on prospects

– Monetary policy is overburdened

– Systemic financial risks remain

• Strengthening productivity growth

– Poor state of infrastructure is holding back productivity

– Business dynamism and entrepreneurship have weakened.

– Incumbents have acquired more market power

• Making growth more inclusive and sustainable

– Children from poor families lack the opportunity to do better than their parents

– Women’s opportunities will improve further, but the pace could be faster

– Reduce social and racial inequalities

– Helping displaced workers is gaining importance

– Meeting COP21 carbon emission goals

Policy challenges

21

• Rebalancing the policy mix

– Boost public investment spending

– Raise policy interest rates gradually

– Continue to implement Dodd Frank

• Strengthening productivity growth

– Ensure personal bankruptcy procedures do not undermine entrepreneurship

– Adapt antitrust policy to the modern economy

– Continue to strengthen pro-competitive policies, including in telecoms

– Remove unnecessary occupational licensing requirements

• Making growth more inclusive and sustainable

– Reduce disparities in student opportunities

– Require paid parental leave and improve access to quality childcare

– Develop reskilling programmes, reduce pre-screening

– Put a price on carbon

Key recommendations

22

More Information…

OECD

OECD Economics

Disclaimers:

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without

prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers

and boundaries and to the name of any territory, city or area.

23

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