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

2

Source: OECD Economic Outlook 99 Database

A stronger recovery in the US

Japan Euro Area United States0

2

4

6

8

10

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

3

U.S. unemployment back to pre-crisis level

2008Q1

09 10 11 12 13 14 15 16Q1

0

2

4

6

8

10

12

0

2

4

6

8

10

12

USA Japan OECD Euro Area

% %

Source: OECD Labour Force statistics.

4

Overall well-being is comparatively high

Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement and governance

Environmental quality

Personal security

Subjective well-being

0

5

10

USA OECD

Source: OECD Better Life Index, 2016.

5

The gender wage gap has narrowed

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

0

5

10

15

20

25

30

35

40Gender wage gap%

6

Labour market outcomes lag behind for some

Source: Bureau of Labor Statistics

Black or African American Asian White Hispanic or Latino ethnicity50

52

54

56

58

60

62

64

66

68

70

50

52

54

56

58

60

62

64

66

68

70UnemployedEmployed

% of civilian non institu-tional population

% of civilian non institu-tional population

7

Productivity has slowed

1995-2005 2005-2015 1995-2005 2005-2015United States OECD average

0%

1%

2%

3%

0%

1%

2%

3%

Average annual % change

Average annual % change

Source: OECD, Analytical database and OECD calculations.

8

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.

Feb-

07

Feb-

08

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

Feb-

16

-2

-1

0

1

2

3

4

5

6

-2

-1

0

1

2

3

4

5

6Core PCE price indexPersonal consumption deflatorCPI

2% inflation target

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

9

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)

USA Europe Asia0

1

2

3

4

5

6

7

8

9

USA Europe Asia02468

10121416182022

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

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

10

Public infrastructure growth has fallen off

Source: Bureau of Economic Analysis

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

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

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

General government capital stock (excluding defense)

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

11

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.

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

8

10

12

14

16

18

8

10

12

14

16

18Entry rate new establishments Exit rate of existing establishments

% %

12

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40Time to final decision

Months Months

13

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

2002-2007 2007-201250.0

52.5

55.0

57.5

60.0

50.0

52.5

55.0

57.5

60.0

% industries with increased share of sales by eight largest firms

14

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.

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0.30

0.32

0.34

0.36

0.38

0.40

0.42

0.30

0.32

0.34

0.36

0.38

0.40

0.42Gini index, OECD definition

15

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.

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15200

225

250

275

300

200

225

250

275

300National average

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

16

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.

1990 91 92 93 94 95 96 97 98 99 2000 1 2002 03 04 05 06 07 08 09 10 11 12 13 1460

65

70

75

80

85

60

65

70

75

80

85

Germany Japan United States OECD

Prime age female participation rates

% %

17

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

MEX CH

LUS

AJP

NIS

RSV

KAU

SCA

NES

TGB

RNZ

LKO

RCZ

ESV

NIT

APO

LNO

RPR

TCH

EES

PLU

XDE

UBE

LAU

THU

NNL

DFR

AIR

LFI

NSW

EDN

K

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% of GDP % of GDP

18

Ex convicts face dismal employment opportunities

• Reduce pre-screening for criminal records on employment applications

0

10

20

30

40

50

60

70Unemployment*%

No record Criminal record0

5

10

15

20

25

30Chance of callback for job interview%

*Early 2000s

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

19

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20% of population without health insurance coverage %

20

Within 30 minutes Within 30 to 60 minutes0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

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

21

• 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

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• 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

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.

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