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Making the Luxembourg Labour Market Work Better

Listed author(s):
  • Jeremy Lawson


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    Rapid economic growth over the past two decades has substantially increased employment in Luxembourg, which has largely been met by in–flows of cross–border workers and, to a lesser extent, immigration. Unemployment has remained low compared to other European countries. These significant social changes have been absorbed without substantially widening income disparities, facilitated by the generous welfare system made affordable by the strong economy. However, this favourable overall picture masks weaknesses in the design of labour market institutions and social transfers that reduce incentives to work for resident workers. Despite the strong economy, this has resulted in lower employment rates for certain groups of residents, notably those who are second–earners, younger or older, or from poorer socioeconomic backgrounds. Furthermore, the incentives provided by existing labour market institutions could make adjustment to changed economic prospects more difficult. The functioning and adaptability of the labour market could be improved without undermining social cohesion through a range of related measures. This could include aligning minimum wage adjustments more closely with economic conditions, which could be achieved through a Minimum Wage Council, and softening employment protection legislation. To raise incentives of residents, social benefits should be decoupled from average wages, and social transfers could be reoriented towards in–work social benefits. This Working Paper relates to the 2010 Economic Survey of Luxembourg. ( Améliorer le fonctionnement du marché du travail de Luxembourg La croissance rapide économique que le Luxembourg a connue au cours des deux décennies écoulées s’est traduite par une expansion considérable de l’emploi, attirant principalement des travailleurs frontaliers et, dans une moindre mesure, de la main-d’oeuvre immigrée. Le chômage est resté faible en comparaison des autres pays européens. Ces importantes évolutions sociales ont été absorbées sans accentuation notable des disparités de revenu, grâce à un système généreux de protection sociale que le Luxembourg a pu s’offrir du fait de la vigueur de son économie. Cette belle image d’ensemble masque toutefois des faiblesses dans la conception des institutions du marché du travail et des transferts sociaux qui émoussent les incitations à travailler pour les résidents. Malgré le dynamisme de l’économie, il en est résulté des taux d’emploi moins élevés pour certains groupes de résidents, notamment ceux qui font fonction de second apporteur de revenu, les jeunes ou les seniors, ou ceux qui sont issus de milieux socioéconomiques moins favorisés. Par ailleurs, les incitations offertes par les institutions du marché du travail existantes pourraient rendre plus difficile l’ajustement à l’évolution des perspectives économiques. Il serait possible d’améliorer le fonctionnement et l’adaptabilité du marché du travail sans saper la cohésion sociale par une série de mesures associées. Il s’agirait notamment de fixer les ajustements de salaire minimum plus étroitement en fonction de la situation économique, ce qui pourrait se faire par un Conseil sur le salaire minimum, et par un assouplissement de la législation relative à la protection de l’emploi. Afin d’accroître les incitations des résidents, les prestations sociales devraient être découplées des salaires moyens et les transferts sociaux pourraient être réorientés vers un système de prestations subordonnées à l’existence d’une activité. Ce document de travail porte sur l'Étude économique du Luxembourg (

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    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 778.

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    Date of creation: 08 Jun 2010
    Handle: RePEc:oec:ecoaaa:778-en
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