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Strengthening Social Cohesion in Luxembourg: Making Efficiency and Equity Go Hand in Hand

  • Jean-Marc Fournier
  • Clara Garcia

Luxembourg is a rich and fast-growing country. However, inequality of disposable incomes has trended up modestly over the past decades and relative poverty has risen reflecting mainly the rapid growth of high incomes. The relatively high inequality of market incomes is substantially reduced by large social transfers, but the risk of relative poverty still affects the most vulnerable, such as the young, the less educated, single parents and migrants. At the same time the generous transfer systems tend to reduce work incentives. There is significant room for improvement in the design of the tax and transfer system to enhance work incentives and improve targeting, particularly for the less skilled workers. Reforms that tackle poverty traps would both reduce inequality and improve the labour supply of residents. Strong activation policies are important in getting people to jobs. Job opportunities would also be enhanced by improving education outcomes for pupils from low socio-economic backgrounds and for secondgeneration immigrants. Reducing high repetition rates and better targeting education spending to schools with high shares of vulnerable students would help improve outcomes. Renforcer la cohésion sociale au Luxembourg : Concilier efficacité et équité Le Luxembourg est un pays riche en croissance rapide. Néanmoins, les inégalités de revenus disponibles se sont légèrement accentuées au cours des dernières décennies, et la pauvreté relative a augmenté, essentiellement du fait de l'accroissement rapide des hauts revenus. Les inégalités relativement élevées des revenus marchands sont sensiblement atténuées par d'amples transferts sociaux, mais le risque de pauvreté relative pèse toujours sur les catégories les plus vulnérables, comme les jeunes, les personnes ayant un faible niveau d'instruction, les parents isolés et les migrants. Par ailleurs, le généreux système de transferts tend à réduire les incitations au travail. Il est possible d'améliorer sensiblement le système de prélèvements et de transferts pour renforcer les incitations au travail et améliorer le ciblage des dispositifs, en particulier pour les travailleurs peu qualifiés. Des réformes visant à remédier aux phénomènes de piège de la pauvreté permettraient à la fois de réduire les inégalités et d'améliorer l'offre de travail des résidents. Il importe de renforcer les mesures d'activation pour amener les individus à l'emploi. On pourrait également renforcer leurs perspectives d'emploi en améliorant les résultats scolaires des élèves issus de milieux modestes et des immigrés de deuxième génération. Une réduction des taux élevés de redoublement et un meilleur ciblage des dépenses d'éducation sur les établissements comptant une forte proportion de jeunes vulnérables contribueraient à améliorer les résultats du système d'enseignement.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 1032.

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Date of creation: 08 Mar 2013
Date of revision:
Handle: RePEc:oec:ecoaaa:1032-en
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