A significant part of the gaps between employment rates is explained by gaps between the weight of companies’ social contributions and differences between labour force skill levels

When comparing OECD countries, we see a high correlation between the employment rate (the percentage of the working-age population that has a job) on the one hand, and the weight of companies’ social contributions and labour force skills on the other hand. Econometric analysis shows that these two variables explain 70% of the employment rate gaps between the countries. OECD countries where the key objective of economic policy must be to restore an abnormally low employment rate (Portugal, Greece, Belgium, Spain, Italy, France) must therefore first reduce the weight of companies’ social contributions and (or) restore labour force skills. Our analysis shows that the employment rate gap for example between Germany and France (10.5 percentage points) is explained as follows: 35% by the gap between the weight of social contributions and 48% by the difference between labour force skill levels.