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  • OECD: Obesity Rates and the Economy

    The good news: while obesity rates keep climbing in developed nations, the rate at which they are climbing has slowed down. This according to the latest OECD report on obesity among member nations. Rising obesity rates means rising costs to the economy. But there may also be a strong link from economic struggles to the rise in obesity. From the report: In 2008, the world economy entered one of the most severe crises ever. Many families, especially in the hardest hit countries, have been forced to cut their food expenditures, and tighter food budgets have provided incentives for consumers to switch to lower-priced and less healthy foods. During the 2008-09 economic slowdown, households in the United Kingdom decreased their food expenditure by 8.5% in real terms, with some evidence of an increase in calorie intake (the average calorie density of purchased foods increased by 4.8%). This change resulted in additional 0.08 g of saturated fat, 0.27 g of sugar and 0.11 g of protein per 100 g of purchased food (Institute for Fiscal Studies, Briefing Note No. 143). A similar trend was observed in Asian countries experiencing a recession in the late 1990s, with consumers switching to foods with a lower price per calorie (Block et al., 2005, Economics and Human Biology; World Bank, 2013, Working Paper No. 6538). Between 2008 and 2013, households in Greece, Ireland, Italy, Portugal, Spain and Slovenia decreased slightly their expenditure on fruits and vegetables, while households in other European OECD countries increased it at an average of 0.55% per year (OECD/ Imperial College analyses of passport data, Euromonitor International). Fruit and vegetable consumption was inversely related with unemployment in the United States, in the period 2007-09, and the effect was three times stronger in disadvantaged social groups at higher risk of unemployment (corresponding to a 5.6% decrease in fruit and vegetable consumption for each 1% increase in state-level unemployment). Given the size of job losses at the peak of the crisis, the most vulnerable groups may have reduced their consumption by as much as 20% (Dave and Kelly, 2012, Social Science and Medicine). Evidence from Germany, Finland and the United Kingdom shows a link between financial distress and obesity. Regardless of their income or wealth, people who experience periods of financial hardship are at increased risk of obesity, and the increase is greater for more severe and recurrent hardship (Munster et al., 2009, BMC Public Health; Conklin et al., 2013, BMC Public Health; Laaksonen et al., 2004, Obesity Research). An Australian study found that people who experienced financial distress in 2008-09 had a 20% higher risk of becoming obese than those who did not (Siahpush et al., 2014, Obesity). Financial hardship affects all household members. American children in families experiencing food insecurity are 22% more likely to become obese than children growing in other families (Metallinos-Katsaras et al., 2012, Journal of the Academy of Nutrition and Dietetics). While some evidence suggests that shorter working hours and lack of employment are associated with more recreational physical activity (Tekin et al., 2013, NBER Working Paper No. 19234), at times of increasing unemployment any gains are likely to be offset by reduced work-related physical activity. In the United States, in the aftermath of the economic crisis, leisure-time physical activity increased by three METs (metabolic equivalents – a measure capturing both duration and intensity of physical activity) but work-related physical activity decreased by 19 METs (Colman and Dave, 2013, NBER Working Paper No. 17406). In summary, the evidence of a possible impact of the economic crisis on obesity points rather consistently to a likely increase in body weight and obesity. Download the full report here .
  • OECD: Fiscal Impact of Migration

    As policy makers in advanced economies still struggle with immigration reform, the debate over the net economic impact continues. A recent policy brief by researchers at the OECD tries to bring some clarity to the issue. One key finding: migrants essentially have a "neutral fiscal impact," as the cost of the benefits they receive is balanced out by what they put back in in the form of taxes and other contributions. And the employment rate of migrants matters. A lot. From the brief: Labour migration brings greatest benefits. The rate of employment among migrants is the key factor in determining migration’s impact on the public purse. The biggest positive impact is found where an immigrant population includes large numbers of people who have arrived relatively recently to work. By contrast, the least positive impact is seen in countries where there is a longstanding migrant population and relatively little recent labour migration. But even where the impact is less favourable, the reasons have usually less to do with a greater dependence on social benefits and more to do with the fact that immigrants may be earning lower wages and thus paying lower taxes. Raising migrants’ employment rates to match those of locals is, where appropriate, an important consideration for public policy both for economic reasons and – in many cases – to help migrants meet their own goals. Positive showing for low-educated migrants. The fiscal situation of low-educated migrants – in other words, the difference between the contributions they make and the benefits they receive – is stronger than that of their native-born peers, a finding that may run contrary to popular perceptions. A boost to the labour force. Over the past 10 years, immigrants represented 47% of the increase in the workforce in the United States, and 70% in Europe. They play a major role in sectors of the economy witnessing great change. In Europe, new immigrants represented 15% of new hires in strongly growing occupations, such as in healthcare and in science and technology, and 22% in the United States. But migrants were also strongly present in declining occupations, taking up jobs that local workers may regard as unattractive. In Europe, migrants represented 24% of new hires in areas like machine operating and assembly; in the US, they represented about 28% of hires in production, installation and maintenance. Read the report here .
  • OECD's Better Life Index Update

    The OECD 's Better Life Index has been updated with 2013 data. Overall, most countries look to come in with higher well-being ranks. Another year of recovery (albeit not fast enough for some), seems to have had a positive effect. Giving equal weight to all 11 criteria, the top ten countries come in as Australia, Norway, Sweden, Denmark, Canada, Switzerland, U.S., Finland, Netherlands, and New Zealand. Once again, the U.S. comes out well when we give greater weight to income, housing, and jobs. But here are the ranking if we focus on on life satisfaction, health, and work-life balance: Explore the updated Better Life Index here .
  • OECD Report Focuses on Widening Gap Between Rich and Poor

    OECD Week starts today in Paris. The meetings with policy makers from OECD nations are based on two themes: "resilient economies for inclusive societies," and "empowering people for jobs and growth." Both themes will tie in recent OECD analysis on income inequality. The OECD has identified income inequality as a primary problem across the OECD countries, and the new report points out that the problem seems to be getting worse across member nations:
  • Educating Workers For The 21st Century

    It is all about the skills. Workers need skills in order to be successful in an increasingly stratified global economy. Companies need skilled workers to compete. So says the OECD 's Andreas Schleicher . In this Big Think video, Schleicher argues that we need to rethink our approach to education. Preparing global citizens for success in the 21st century depends on educating people for "jobs that have not been created" and new technologies that will arise, not just the ones we already have.
  • The Rise and Fall of Real Interest Rates

    Ahead of biennial meetings with the World Bank in Washington this week, the IMF 's research department has put out an interesting analysis of interest rates around the world. In the last thirty years, real interest rates have plummeted, from an average of 5.5% in the early 1980s to 0.33% post global economic crisis. From the report: The decline in real interest rates in the mid-2000s has often been attributed to two factors: • a glut of saving stemming from emerging markets economies, especially China; and • a shift in investors’ preferences toward fixed income assets—such as bonds—rather than equity, such as stocks. Both these factors put downward pressure on real interest rates globally while the expected return to invest in equities increased. The substantial increase in saving in emerging market economies, especially China, in the middle of the first decade of the 21st century was responsible for more than half of the decline in real rates (Chart 2). This was only partly offset by the reduction in saving in advanced economies. High-income growth in emerging market economies during this period seems to have been the most important factor driving the increase in savings. The IMF is now projecting a rise in real interest rates, but not to anywhere near the levels of the 1980s: Read the report here .
  • Russia's Market Volatility and Economic Diversity Problem

    The Winter Olympics are beginning their second week in Russia, and most people want to talk about the figure skating, the hockey, the medal count, maybe even the pageantry. But some economists have other thoughts on their minds. At Vox , World Bank economists Alvaro González , Leonardo Iacovone , and Hari Subhash are focusing on a major Russian weakness, and it isn't a lack of strong two-way forwards on the ice hockey team. No, they are concerned about Russia's "limited economic diversification." The nation's policy leaders have struggled to help limit market volatility, the authors note. Russia is susceptible to economic bad times that are really bad and last longer than for other large economies, and that makes it hard for new sectors to grow: Volatility in Russia is a nearly all-encompassing event. When things are booming, the boom is shared by nearly all manufacturing sectors. When things go bust, practically all sectors go bust. The relatively high level of concentration of output across firms and sectors exacerbates the problem. Further, when analysing slumps and surges across time and comparing these to other economies, we find that although surges in Russia have similar looking peaks and last about as long as those in comparator countries, the slumps are deeper (Figure 2) and longer (Figure 3). For slumps of less than 6 years (the horizontal axis), the probability (the vertical axis) of a slump persisting for another period is higher in Russia (the step-like line is above that of the other economies). The survival of new, relatively efficient firms (particularly during longer and deeper slumps) is a central weakness and likely key issue limiting economic diversification in Russia. Our analysis shows that during slumps, more productive firms tend to have lower odds of surviving relative to less productive ones than during surges. During long and deep slumps, older firms and firms facing less intense competition are more likely to survive. Unfortunately these firms are often not the champions of change and innovation that form the basis of diversification. In Russia the slumps do in fact wipe away some of the hard fought gains made by new, emerging entrants. So much for the new blood needed for the economy to diversify. Read Russian volatility: Obstacle to firm survival and diversification here .
  • OECD Report on Russian Economy: Structural Reforms Needed to Restart Strong Growth

    The Winter Olympics are set to begin in Sochi, Russia, and the news media has been focusing on the host nation's ongoing terrorism concerns. There are economic concerns as well, according to the latest analysis from the OECD. After a strong start to the 21st century--and Russia's economy weathered the storm of the global economic crisis relatively well--there are, according to the OECD , several structural problems that have slowed growth since late 2012. The economy has the capacity to change course--but not if it remains so dependent on commodity prices. Read the report here .
  • OECD's Gurría on Key Fixes For Struggling Global Economy

    OECD Angel Gurría presented his organization's latest Global Economic Outlook this week, and he gave a measured evaluation of the global economy. Unemployment is going to remain high, income inequality is posing serious risks to global growth and a healthy world economy, and the public has lost a lot of faith in policy makers. The key part of the speech, for us, is when Gurría outlines some prescriptions. Here are four: ●First, fixing the banks in Europe. This involves addressing the twin problems of non-performing loans and forbearance: recapitalising the banks (ideally without making deleveraging worse) and fully implementing the banking union. Policymakers also need to consider going beyond existing international regulatory initiatives and reforming the business model of banks. The separation of commercial banking and investment banking activities and adopting a leverage ratio of 5% would buttress the resilience of the banking sector. ●Second, we need to maintain open markets for trade and investment and reduce trade costs, including through trade facilitation reforms being discussed now at the WTO.There are increasing signs of trade protectionism that could jeopardise the still fragile economic recovery. ●Third, governments need to maximise the impact of the recovery on jobs. Greater and more targeted efforts are needed to upgrade the skills of the unemployed and those looking for jobs. Also, more effective labour activation policies are required to ensure that job-seekers are better incentivised in their search for employment. Lastly, progress needs to continue in some countries to add greater flexibility and dynamism in labour markets and to reduce excessively high labour costs. ●Finally, there is a need to overhaul regulations that restrict competition and to ensure a more effective policy support of innovation. In particular, policy makers need to adopt a broader concept of innovation, beyond the conventional view in which R&D is pre-eminent. Other assets such as organisational capital and design, and the ability to create value from data, are increasingly central to productivity growth in a knowledge-based economy. You can read or watch the full speech here . Here is a synopsis of the report:
  • OECD Report Looks at Impact of Global Financial Crisis on Life Satisfaction

    How's Life? That's what OECD analysts researched across all OECD nations for an annual report on well-being. And they found that the global economic crisis has had a "profound impact" on how people feel about their jobs, job prospects, governments, and overall satisfaction. Not surprisingly, people who lived in countries where GDP and employment dropped the most have had the greatest drop in life satisfaction. For example, life satisfaction dropped 20% in Greece. OECD Secretary General Angel Gurría calls the report a "wake-up call." The chapter that caught our eyes is titled Well-being and the global financial crisis . You can read it here . The full report is available here .
  • A Call to Consider More Women to Lead Central Banks

    Janet Yellen has emerged as the most likely replacement for Ben Bernanke as chair of the Federal Reserve Board of Governors. This prompted Caroline Freund , senior fellow at the Peterson Institute for International Economics , to do a little counting. In an op-ed for the Washington Post , Freund points out that, of the 34 members of the OECD, only Finland, Austria, and Poland have ever had a woman as top central banker. And those women no longer lead their respective central banks. Freund: There is a bright spot for women in the developing world. Of the 36 non-OECD countries with populations greater than 20 million, seven have had female central bank chairs. Here, the trend is positive, with five in office in 2013. Why is it that nearly all central bank leaders are men? One possibility is that relatively few women study economics and finance, which tend to be prerequisites. This leaves a very small pool of qualified candidates. But being a finance minister has similar requirements, and six OECD countries had female finance ministers in 2011. Four are in office today. A more troubling explanation is that women may still not be part of the tight-knit clubs from which central bank heads are chosen. Because central banks are independent, trust that the chairman’s goals are aligned with the administration’s interests is more critical than for other appointed positions. Bankers want someone they know and trust, the administration wants the same, and the independence of the institution means you’d better be pretty darn sure. In contrast to Cabinet positions, the Federal Reserve head cannot be fired if he or she strays from administration goals or fails to meet expectations. As an example, consider that a stellar publication record, a pedigree as former chairman of the Princeton economics department and service on the Fed board were initially not enough for Ben Bernanke to be asked to replace Alan Greenspan. President George W. Bush brought Bernanke in to head the Council of Economic Advisers and got to know him better before naming him Fed chairman. The lack of relative outsiders in this position suggests it is about not only what you know but also whom you know and how well. Women may perform less well in areas traditionally populated by old boys’ clubs. Read Where are the women in central banking? here .
  • OECD Projects Moderate Recovery in ADvanced Economies

    The OECD is offering up a relatively strong economic assessment for the global economy, and projects growth to continue in advanced economies. Emerging economies, however, are a different story. From the latest Interim Economic Assessment : In several major emerging economies, however, growth has slowed. While growth in China appears to have passed the trough, financial market turbulence - partly triggered by discussion of a tapering of quantitative easing in the United States - has highlighted difficulties facing a number of other emerging economies, especially those with large current account deficits. As emerging economies contributed strongly to economic dynamism in recent years, this slowdown makes for a continuation of sluggish global growth, notwithstanding the pick-up in advanced economies. While the improvement in growth momentum in OECD economies is welcome, a sustainable recovery is not yet firmly established and important risks remain. It is necessary to continue to support demand, including through unconventional monetary policies, in order to minimise the risk of the recovery being derailed. Meanwhile, both advanced and emerging economies face the challenge of slower trend growth. Therefore, reforms to boost growth, rebalance the global economy and reduce structural impediments to job creation remain vital. Read the full report here .
  • OECD Employment Outlook, 2013

    "Persistently high unemployment is threatening to leave a permanent scar in our societies," says OECD Sectetary General Angel Gurria . In a speech supporting the release of the OECD's 2013 Employment Outlook , Gurria called on policymakers to tackle the jobs problem (there aren't enough) across developed economies--and to pay particular attention to youth unemployment and long-term unemployment. We've posted helpful slides from the report below, but first here is a key excerpt from Gurria's speech: Our report reviews approaches adopted by seven different countries to combine adequate income support for the unemployed with effective re‑employment services. These countries also introduced a range of mutual obligations to help and encourage the jobless to find employment. Let me share with you some of the lessons learnt. First, institutional arrangements matter. Employment outcomes and services for clients can be improved by merging public employment services and benefit agencies to create a “one-stop shop”. Greater coordination between different levels of government can also make a real difference. Second, the effectiveness of employment services can be improved through more robust performance management. For example, Australia and Switzerland rate the performance of local employment offices after adjusting for differences in client profiles and local labour market conditions. Third, sufficient resources for cost-effective labour market activation policies should be available. Resources per unemployed jobseeker have declined by almost 18% since the start of the crisis through 2011. This raises concerns about the ability to prevent structural unemployment from gaining root. Putting effective activation strategies into place is not only important to deal with the crisis-induced rise in unemployment but also for coping with on-going structural change. In good or bad times every year, between 2 to 7% of all OECD workers are forced to leave their jobs for involuntary reasons. Providing effective job search assistance and necessary skills upgrading is vital to prevent discouragement and early withdrawal from the labour market, especially for older workers who lose their jobs. In emerging-markets and many developing countries, the major challenge in promoting an effective labour market activation strategy is to broaden the coverage and the scope of social protection. It is important to protect the most vulnerable social groups and allow them to invest in the human capital of their children and participate in productive activities. OECD Employment Outlook 2013 - press conference on 16 July 2013 from OECD - Organisation for Economic Co-operation and Development Read the report here .
  • OECD 2013 'Education at a Glance' Report

    In case any doubt lingers in you about the correlation between education and employment, the latest OECD annual report, Education at a Glance , affirms previous data on how much better people with higher ed degrees are faring during this jobless recovery. From the report: Unemployment rates are nearly three times higher among people without an upper secondary education (13% on average across OECD countries) than among those who have a tertiary education (5%). Between 2008 and 2011, the unemployment rate for the poorly-educated rose by around 4 percentage points, while it increased by only 1.5 percentage points for the highly educated. “Leaving school with good qualifications is more essential than ever,” said OECD Secretary-General Angel Gurría. “Countries must focus efforts on helping young people, especially the less well-educated who are most at risk of being trapped in a low skills, low wage future. Priorities include reducing school dropout rates and investing in skills-oriented education that integrates the worlds of learning and work. Though the focus should remain on quality of spending, Governments must ensure that investment in education does not fall as a result of the crisis.” This year’s report finds new evidence of the value of vocational qualifications as a pathway to employment: countries with a higher than average (32%) share of vocational graduates, such as Austria, Germany, Luxembourg and Switzerland, saw unemployment rise much less or even fall among 25-34 year-olds than their peers with general upper secondary qualifications. The crisis has also widened the earnings gap: the average difference in earnings from employment between the low educated and the highly educated has risen from 75 percentage points across OECD countries in 2008 to 90 percentage points in 2011. On average, the relative earnings of tertiary-educated adults are over 1.5 times that of adults with upper secondary education. People with upper secondary education earn 25% more than their peers who left school early. But a strange thing happened during the Great Recession and the following recovery. As education became more valuable to developed economies, the overall investment in education dropped. Read the full report here . And watch Angel Gurria discuss the report:
  • Germany's Weakening Infrastructure May Be a Sign of Larger Economic Vulnerability

    Germany continues to be hailed as the model developed economy--the one that has braved the storm while others have paid the price for careless economic policies. But talk to any of your German friends this summer and you are likely to hear them complain--if not about the overall strength of the economy, then about potholes and slipping train reliability. Der Spiegel does a bit of an ego-check in this week's issue. Apparently, the German Institute of Economic Research has come out with a report that "paints the picture of an ailing economy that has been seriously out of balance for years." The diagnosis is alarming. Although Germany has weathered the financial and economic crisis better than all other large industrialized nations and created over a million new jobs, this comes largely thanks to years of wage restraint by the country's trade unions. To make matters worse, the productivity of these jobs -- a decisive aspect of long-term growth and prosperity -- has contributed just as little to the current upswing as consumer demand, which has been an important growth driver in other countries. The Berlin institute points to a chronic lack of investments as the main cause for this low productivity. Both the state and the private sector spend too little money on infrastructure, education, plants and machinery. "Despite all the successes of the past few years, Germany has not created an investment basis to ensure robust growth," the researchers conclude. In other words, Germany is living off its reserves. Bridges are crumbling, factories and universities are deteriorating, and not enough is being spent to maintain phone networks. This has resulted in a massive impoverishment of the country, according to DIW calculations. Nearly 15 years ago, the state's net assets still corresponded to 20 percent of gross domestic product (GDP). When adjusted for inflation, this amounts to nearly €500 billion ($650 billion). By 2011, this had dwindled to 0.5 percent of GDP, or a mere €13 billion, primarily due to systematic neglect. All of Germany's political parties have pledged to spend more money on highways, transportation and education during the upcoming legislative period -- but they have often made such promises in the past. In the end, however, the already meager budgets for investment were slashed and the money was distributed to preferential groups of voters. It could be a similar story this time around. As for the infrastructure investment problem, take a look at where Germany stacks up: Read Ailing Infrastructure: Scrimping Threatens Germany's Future here .
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