OECD countries have made some progress in reforms aimed at raising productivity but have been too slow to carry out employment-boosting labour market reforms, the organisation said.
In its annual assessment of economic policy reforms in member countries, the OECD said countries have taken measures to raise productivity which are broadly consistent with its recommendations.
But it said recommended reforms to increase labour utilisation 'have in most cases neither taken place, nor been planned'.
'Few moves are under way to reduce the implicit tax on continued work at older ages where this is high, tax wedges have been cut only selectively and reforms of employment protection legislation, minimum labour cost and wage bargaining systems have been virtually absent,' it added.
Jorgen Elmeskov, acting head of the OECD economics department, said OECD countries had made progress on just under two thirds of the policy priorities listed in the previous report on economic reforms.
'However, some of this progress is not very material, and progress has been much slower in thornier policy areas such as labour market regulation,' he said.
Buoyant economic growth should have made it easier to carry out reforms, but often strong growth reduces governments' sense of urgency over the need for reforms, he said.
The need to raise labour utilisation is particularly urgent for continental Europe, where the participation of older workers and women is low, unemployment rates are high and annual hours worked relatively short, the OECD said.
But only limited progress has been made in lowering disincentives to work at older ages in the ten European countries for which this was regarded as a priority, although France is currently negotiating on changes to the generous retirement arrangements available to some public sector workers.
No significant progress has been made on making wage formation more flexible and reducing minimum wage costs, while only limited action has been recorded in a number of countries to reform employment protection legislation, the OECD said.
Some steps have been taken to reform labour taxation, but results have been mixed, it said.
'In Germany a significant proportion of revenues from the 2007 VAT increase has been used to lower social contributions, but overall tax wedges on labour income -- including indirect taxes -- remain broadly unchanged,' it said.
Meanwhile, many countries have taken steps to reduce disincentives for women to reenter the labour market after taking time off to raise children.
And four of the eight countries which were urged to reform disability and sickness systems have taken measures to encourage a return to work among those receiving these benefits, including the UK. But the US has taken no significant measures in this area, the OECD said.
In the field of measures to raise labour productivity, progress has been made to ease entry and operational controls, boost competition and raise skill levels.
The EU services directive adopted in Dec 2006 will intensify cross-border competition between EU countries, although its impact will be weakened by the exclusion of many service industries from the directive, the organisation said.
But one area in which reforms to increase competition have been slow is agriculture.
Little progress has been made to reduce distortions in agricultural markets and the WTO Doha round of trade liberalisation talks remains stalled, it said.Thomson Financial News Super Focus
