COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2018-03-07
Institutions: European Commission, Secretariat-General
Subjects: Austria, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.3.2018 SWD(2018) 218 final  COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2018 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}   
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Investment 

3.5.   Sectoral policies 

Annex A: Overview table 

Annex B: Macroeconomic Imbalance Procedure  Scoreboard 

Annex C: Standard tables 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators — Austria 

Table 2.1: 

Summary table on 2017 CSR assessment 

Table B.1: 

The MIP Scoreboard for Austria (AMR 2018) 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1:  GDP growth and contributions 

Graph 1.2: 

Investment by asset 

Graph 1.3: 

Headline and core inflation 

1 

4 

11 

15 

15 

21 

25 

33 

39 

42 

47 

48 

55 

10 

13 

47 

48 

49 

50 

51 

52 

54 

4 

4 

5 

 
 
 
 
 
Graph 1.4: 

Labour market outcomes — Austria 

Graph 1.5:  Gini index of wealth (2014) and income inequality (2016) 

Graph 1.6: 

Labour productivity 

Graph 1.7: 

Trade balance and export market share 

Graph 1.8: 

House prices and rental costs 

Graph 1.9:  General government debt and deficit 

Graph 1.10: 

Tax wedge (% of labour costs, 2016) 

Graph 1.11: 

2018 Ageing report - expenditure projections 

Graph 2.1:  Overall multiannual implementation of 2011-2017 CSRs to date 

Graph 3.1.1:  Composition of tax wedge on labour 

Graph 3.1.2:  Pension expenditure – long term projections 

Graph 3.1.3:  Long term projections for healthcare expenditure 

Graph 3.2.1:  Relative price developments and valuation gap 

Graph 3.3.1: 

Trends in labour costs and its components 

Graph 3.3.2:  Gaps in employment rate (20-64) and between male and female full-time equivalent 

employment rate, 2016 

Graph 3.3.3:  Unemployment rate by educational attainment 

Graph 3.3.4:  Science — Percentage of low performers in Austria by immigrant background 

Graph 3.4.1:  Regulatory restrictiveness in key professions in Austria and the EU (2016) 

Graph 3.4.2:  Venture capital as % of GDP 

Graph 3.4.3:  Enterprises with high levels of digital intensity by size (2016) 

Graph 3.5.1:  Austria’s R&D intensity in comparison to innovation leaders 

LIST OF BOXES 

Box 2.1: Tangible results delivered through EU support to structural change in Austria 

Box 3.1.1: Shifting taxes from labour to property 

Box 3.3.1:  Monitoring performance in the light of the European Pillar of Social Rights 

Box 3.4.1: Investment challenges and reforms in Austria 

Box 3.5.1: Policy highlights - Framework for crowd-funding and collaborative economy 

5 

6 

7 

7 

8 

8 

9 

9 

11 

15 

19 

20 

23 

25 

25 

28 

30 

34 

36 

37 

39 

14 

17 

26 

38 

41 

 
 
 
 
 
EXECUTIVE SUMMARY 

Austria’s strong economic performance offers a 
window  of  opportunity  to  improve  potential 
growth  and  address  remaining  challenges.  The 
sound  economic  outlook  provides  a  supportive 
environment to further strengthen public finances, 
social  outcomes,  and  innovation.  Austria  could 
also benefit from further measures to improve the 
pension 
sustainability 
expenditures  and  to  enhance  labour  market  and 
educational  outcomes  for  specific  groups  where 
vulnerabilities  still  exist.  Together  with  additional 
efforts  to  reduce  restrictive  regulations,  this  could 
help  to  boost  productivity  and  potential  growth, 
making  Austria  more 
future 
challenges (1). 

healthcare 

resilient 

and 

of 

to 

is 

to 

from 

expected 

employment 

public  finances  in  a  no-policy-change  scenario. 
After  widening  in  2016  due  to  the  tax  relief, 
headline  deficit 
improve 
progressively at unchanged policies, with revenues 
benefiting 
and 
strong 
consumption growth. Following the financial crisis 
Austria’s government debt increased significantly, 
peaking  at  84.3 %  of  GDP  in  2015,  due  to  the 
impact of support measures for the banking sector. 
Government  debt  declined  to  83.6 %  of  GDP  in 
2016  and  is  expected  to  continue  decreasing  to 
below  74 %  of  GDP  in  2019,  helped  by  the 
from  asset 
divestment  of 
management companies.  

impaired  assets 

between 

Austria  has  made  some  progress  in  addressing 
the  2017  country-specific  recommendations. 
With  regard  to  ensuring  financial  sustainability, 
some  progress  was  made  on  healthcare  but  no 
progress was made on the pension system. Limited 
towards  reforming  fiscal 
progress  was  made 
relations 
of 
the 
government.  Austria  has  made  some  progress  in 
improving  the  labour  market  participation  of 
women,  but  childcare  provision  is  still  below  the 
targets  for  the  under  3  years  old  and  regional 
differences  persist.  Limited  progress  has  been 
made  in  improving  the  educational  achievements 
of  disadvantaged  young  people.  Some  progress 
was  made  in  reducing  investment  barriers  in  the 
services sector.  

various 

levels 

track 

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  Austria  has 
already  reached  its  targets  on  tertiary  education 
attainment  and  limiting  early  school  leaving.  It  is 
on 
the 
renewable energy targets. However, more effort is 
needed 
research  and  development 
expenditure,  cut  greenhouse  gas  emissions, 
decrease  energy  consumption  and  reduce  poverty 
and social exclusion. 

the  employment  and 

to  meet 

raise 

to 

Austria  performs  relatively  well  on 
the 
indicators  of  the  Social  Scoreboard  supporting 
the European Pillar of Social Rights. Austria has 
robust  policies  to  facilitate  labour  market  access 
and  to  ensure  fair  working  conditions.  Policies  to 
reduce  poverty  and  social  exclusion  risks  are 
generally  effective.  Austria  has  well  developed 
institutional social dialogue mechanisms.  

to 

The  Austrian  economy  is  growing  robustly, 
supported  by  strong  private  consumption  and 
investment.  After  several  years  of  subdued 
progress,  GDP  growth  accelerated  to  1.5 %  in 
2016  and  is  expected  to  have  doubled  to  around 
3 % in 2017. The 2016 tax reform triggered a pick-
up  in  private  consumption  that  also  acted  as  a 
boost 
investment,  strengthening  domestic 
demand  in  2017.  On  the  back  of  improved 
developments  in  neighbouring  countries  and  in 
world  trade,  investment  also  benefitted  from 
markedly increasing exports, reversing in 2017 the 
trend  of  falling  export  market  shares  since  the 
financial  crisis  in  2008.  At  the  same  time,  the 
strong private consumption and investment growth 
increased  imports,  leading  to  only  a  marginal 
contribution by the external sector to GDP growth. 
For 2018 and 2019, the economic outlook remains 
favourable. GDP growth is expected to be broadly 
unchanged,  driven  mainly  by  stable  domestic 
demand  despite  a  slightly  decreasing  contribution 
rate 
investment.  The  unemployment 
from 
decreased  from  6.0 %  in  2016  to  5.5 %  in  2017. 
The  upswing  phase  is  also  reflected  in  higher 
headline and core inflation, which remained above 
the euro area average in 2017. 

Good  economic  conditions  and  the  fade  out  of 
bank  support  costs  are  expected  to  benefit 

(1)  This  report  assesses  Austria’s  economy  in  the  light  of  the 
European Commission’s Annual Growth Survey published 
on 22 November 2017. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  boosting 
investment,  pursuing 
structural reforms and ensuring responsible fiscal policies. 

1 

 
 
                                                           
Key structural issues analysed in this report, which 
point 
for  Austria’s 
economy, are the following: 

to  particular  challenges 

  Austria’s  fiscal  framework  provides  only 
weak incentives to improve cost efficiency. In 
2016 the different levels of government agreed 
on  several  initiatives  that  could  improve  the 
quality of public spending at subnational level. 
These  include  spending  reviews,  more  task-
oriented  financing,  benchmark  systems,  a 
reform  of  subnational  competencies  and 
discussions  on  increasing  tax  autonomy  at 
subnational  level.  While  these  initiatives  are 
promising, their effectiveness depends on being 
implemented  in  full.  Currently,  the  spending 
state 
powers  of  municipal  and 
governments  remain  far  greater  than  their 
revenue-raising  responsibilities,  giving  them 
little incentive to contain costs.  

federal 

  The  overall 

labour 

tax  burden  on 

is 
comparatively  large,  while  more  growth-
friendly  sources  of  revenue  are  underused. 
Despite  the  2016  tax  reform,  the  burden  on 
labour remains high and is set to increase as tax 
brackets  are  not  indexed  to  inflation.  This  is 
especially  true  for  low-income  earners  with 
adverse  effects  on  labour  supply  incentives. 
represent  a 
Social  security  contributions 
relatively 
tax  wedge. 
the 
Conversely,  revenues  from  recurrent  property 
taxes  are  significantly  below  the  EU  average 
due to the outdated tax base.  

large  share  of 

increases  while 

  The projections for medium- and long-term 
pension  and  healthcare  expenditures  point 
to  a  challenge  for  fiscal  sustainability. 
Current  pension  expenditure  is  comparatively 
high  and  is  expected  to  rise  further  as  life 
expectancy 
the  statutory 
retirement  age  remains  fixed.  Closing  the  gap 
between  the  effective  and  statutory  retirement 
ages  would  reduce  public  spending,  but  the 
potential  savings  are  lower  than  for  measures 
affecting  the  statutory  retirement  age.  For  the 
healthcare  sector,  the  main  driver  of  the  high 
expenditure  is  an  over-sized  hospital  sector, 
which  is  the  result  of  a  fragmented  financial 
are 
and  organisational 
efficiency gains to be made both at the system 
level,  by  shifting  services  to  the  less  costly 

structure.  There 

Executive summary 

improving 

outpatient sector, and within the hospital sector 
itself  by 
the  use  of  public 
procurement. In this context, implementing the 
ongoing reform aimed at strengthening primary 
healthcare in full could contribute to reduce the 
size  of 
sector.  Enforcing 
expenditure  ceilings  may  also  help  containing 
the projected spending increase. 

the  hospital 

  Banking  sector  resilience  continues 

to 
improve,  but  some  pockets  of  vulnerability 
still warrant monitoring. The capitalisation of 
Austrian banks increased substantially in 2016 
but profitability in the domestic market remains 
under pressure. Foreign-currency loans granted 
by  banks  on  the  local  market  have  further 
declined  but  are  still  a  matter  of  concern.  The 
asset quality and profitability of subsidiaries in 
central,  eastern  and  south-eastern  Europe 
continue  to  improve,  whereas  the  exposure  of 
Austrian banks to several markets has declined 
following 
restructuring  of  UniCredit. 
Despite  several  challenges  over  recent  years, 
Austrian insurance companies have managed to 
adjust  relatively  well  to  the  low  interest  rates. 
The  winding-down  of  the  asset  management 
companies  is  proceeding  better  than  expected 
and overall risks are limited. 

the 

to 

the 

  House  prices  have  grown  considerably  in 
recent  years  but  overall  risks  to  financial 
stability  seem  contained.  Prices  have  risen 
particularly  strongly  in  the  Vienna  region, 
where  some  overvaluation  can  be  observed. 
Housing investment has been subdued in recent 
years  compared 
relatively  strong 
population  growth,  but  picked  up  in  2017. 
Nevertheless, the price increases do not appear 
to  be  credit-driven  as  the  level  of  household 
mortgages remains relatively low. Furthermore, 
the  rental  market  and  social  housing  play  a 
strong  role  in  Austria,  so  that  the  house  price 
increase mainly affects wealthier households as 
well  as  tenants  in  the  private  urban  rental 
market.  The  macro-prudential  toolkit  has  been 
strengthened  and  can  be  activated  to  contain 
potential risks from real estate. 

  Austria’s  labour  market  performance  is 
improving but challenges for specific groups 
remain.  Over  several  years,  immigration  and 
overall  increasing  labour  market  participation 

2 

 
 
led to a rapid expansion of the labour force that 
outpaced  strong  employment  growth,  causing 
moderate  increases  in  the  unemployment  rate. 
In  2017  the  unemployment  rate  started  to  fall 
on  the  back  of  a  further  acceleration  in 
employment  growth.  Austria  has  reached  a 
high employment rate of 75.3 % in Q3 of 2017, 
thus  meeting  the  Europe  2020  target.  Wage 
increases  were  moderate,  improving  Austria’s 
competitive  position.  The  high  proportion  of 
women  in  part-time  work  and  the  high  gender 
pay gap remain issues of concern. This is partly 
due  to  the  still  comparatively  scarce  and 
uneven  provision  of  childcare  for  children 
below 3 years. The labour market integration of 
people  with  a  migrant  background  including 
refugees  is  also  a  policy  challenge.  So  is  the 
digital transformation of the economy. 

  Overall,  social  indicators  reflect  the  good 
economic  conditions,  but  vulnerabilities  for 
certain  groups  still  exist.  The  number  of 
people  at  risk  of  poverty  and  social  exclusion 
has  continued  to  decline.  By  contrast,  in-work 
poverty  is  rising,  especially  among  foreign 
workers.  In  addition,  while  benefit  adequacy 
has been overall favourable, the cuts in means-
tested  minimum 
in 
income 
several federal states may put larger families at 
risk of poverty. The risk of poverty and social 
exclusion for women  above 65  years  is higher 
than  for  men,  also  due  to  a  gender  gap  in 
pensions.  Wealth  inequality  is  particularly 
high.  

implemented 

  Learning 

of 

has 

agenda 

increased 

outcomes 

disadvantaged 
students have not improved. New reforms in 
education were introduced but their impact has 
yet  to  materialise.  The  second  package  of  the 
reform 
schools’ 
autonomy, the regional coordination of schools 
the  availability  of  all-day  schools. 
and 
Nevertheless,  recent  national  and  international 
testing  both  point  to  a  comparatively  weak 
performance  by  Austrian  students.  Students' 
educational  outcomes  also  continue  to  depend 
heavily  on  their  socio-economic  background 
they  have  a  migrant 
and  on  whether 
background.  At 
time,  Austria’s 
the  same 
tertiary  education  attainment  rate  has  reached 
the  national  and  Europe  2020  target.  Several 
policy  initiatives  have  been  launched  to  help 

Executive summary 

integrate  refugees  and  people  with  a  migrant 
background  into  the  education  system,  as  well 
as  to  encourage  adult  learning  and  improve 
digital education. 

These 

include 

hampers 

productivity 

  Restrictive  regulation  in  Austria’s  services 
and 
markets 
investment. 
innovation  and 
discourages 
Austria has high access barriers and restrictive 
rules  on  the  exercise  of  key  trades  and 
professions. 
specific 
shareholding  requirements,  extensive  reserved 
restrictions. 
activities  and 
High regulatory burdens also bear on the retail 
and  tourism  sectors.  These  barriers,  burdens 
and  restrictions  are  limiting  investment,  job 
creation  and  innovation  in  the  services  sector 
itself.  They  also  affect  other  parts  of  the 
economy for which competitive and innovative 
services are a crucial input. 

interdisciplinary 

in 

total 

  Stagnating  productivity  requires  a  strong 
focus  on  boosting  innovation  results  and 
supporting  innovative  businesses.  Austria  is 
investing  heavily  in  research  and  innovation 
but  has  not  yet  managed  to  overcome  the 
factor  productivity. 
stagnation 
Strengthening 
and 
supporting knowledge-intensive sectors remain 
therefore  important.  Austria’s  eco-system  for 
starting  and,  even  more  so,  for  scaling-up 
innovative  businesses 
a  policy 
challenge.  Apart  from  regulatory  barriers,  the 
lack  of  later  stage  funding  options,  such  as 
venture  capital,  play  a  role,  as  well  as  skill 
shortages in some professions. 

science-business 

remains 

links 

in 

its 

digitalising 

  Austria faces a challenge in spreading digital 
technologies 
including  broadband  and 
business  models  among  small  and  medium-
sized  enterprises  (SMEs).  Austria  is  well-
public 
advanced 
administrations  and  larger  companies  are  well 
placed to exploit the opportunities of the digital 
economy. SMEs, the backbone of the Austrian 
economy,  and  micro-enterprises,  are  lagging 
behind. Austria has only started to address this 
issue  with  initiatives  supporting  digitalization 
of  SMEs.  High-speed  connectivity  in  rural 
areas  is  also  an  issue.  Austria’s  national 
digitalization strategy still lacks monitoring and 
systematic performance review tools.  

3 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

in 

is  also  felt 

better  economic  climate 
the 
construction  sector.  Residential  housing  and  non-
residential  construction 
investment  have  both 
grown  noticeably  in  2017  after  several  years  of 
subdued  growth.  Thanks  to  strong  exports  and 
imports,  investment  in  machinery  and  equipment 
continued  its  solid  growth  in  2017.  Austria  now 
faces  the  challenges  of  ensuring  that  investment 
makes  a  sustained  contribution  to  growth  and  of 
channelling it to the uses that increase productivity 
most. 

Graph 1.2: 

Investment by asset 

GDP growth 

to 

interim 

in  2017.  Stable  demand 

Austria's  economy  is  growing  robustly  and  has 
entered  an upswing  cycle.  In  2016,  GDP grew by 
1.5 %  and  is  expected  to  have  doubled  to  around 
3 % 
from  private 
consumption and strong investment are supporting 
the  European 
GDP  growth.  According 
Commission  2018  winter 
forecast 
(European Commission, 2018a), they are expected 
to continue doing so in the coming years, although 
the  contribution  from  investment  is  expected  to 
slightly  decrease  (Graph  1.1).  Austria’s  exports 
increased  markedly  in  2017,  benefiting  from  the 
acceleration  in  overall  world  trade  and  good 
conditions in neighbouring countries. However, as 
imports have also increased on the back of strong 
private  consumption  and  investment,  net  trade  is 
contributing only marginally to economic growth.  

Graph 1.1:  GDP growth and contributions 

Source: Eurostat 

Inflation 

Austria's  inflation  rate  has  reached  2.2 %  in 
2017  and  remains  above  the  euro  area  average 
of  1.5 %.  The  strengthening  of  the  economy  can 
be felt in robust headline and core inflation, which 
have both reached 2.2 % in 2017. Increasing rents 
and the thriving tourism sector are contributing to 
continuously  rising  service  prices  (e.g.,  for  hotels 
and restaurants). The new government programme 
announces  a  reduction  of  the  VAT  rate  from 
currently  13  to  10 %  for  hotel  accommodations, 
which may counteract the price development in the 
tourism  sector.  So  far,  Austria’s  inflation  rate 
remains  above  the  euro  area  average  for  headline 
and core inflation, continuing the trend seen since 
2012. Based on higher inflation, wages can also be 
expected to rise more strongly in the coming years 
(Graph 1.3).  

(1) Winter forecast 2018 for real GDP growth, otherwise 
Autumn forecast 2017 
Source: European Commission 

Investment 

Investment  is  contributing  strongly  to  GDP 
growth.  In  2016,  investment  increased  by  3.7 %, 
ending a period of subdued investment since 2012. 
After  years  of  postponing  investment,  companies 
cleared  their  investment  backlog  and  acquisitions 
in  machinery  and  equipment  grew  particularly 
strongly with an increase of 8.6 % (Graph 1.2). In 
2017, 
investment  growth  further  accelerated, 
reflecting  the  overall  economic  upswing.  The 

4 

-5-4-3-2-1012345050607080910111213141516171819%, ppsPrivate consumptionPublic consumptionInvestmentInventoriesNet exportsReal GDP (% change)Forecast80859095100105110115120050607080910111213141516Index, 2005=100DwellingsOther buildings and structuresMachinery and equipment 
 
 
 
1. Economic situation and outlook 

Graph 1.3:  Headline and core inflation 

Graph 1.4: 

Labour market outcomes — Austria 

Source: Eurostat and European Commission 

Labour market 

On 
the  back  of  solid  economic  growth, 
employment  is  growing  faster  than  the  labour 
force. The strong economic activity aided a rise in 
employment  of  1.2 %  in  2016  that  exceeded 
growth  in  the  labour  force.  Consequently,  the 
unemployment  rate  is  reversing  its  trend  and 
dropping  for  the  first  time  in  several  years.  From 
6.0 % in 2016, the unemployment rate has dropped 
to 5.5 % in 2017 and is expected to remain around 
that  level  (European  Commission,  2017a).  The 
youth  unemployment  rate  (15-24  years)  increased 
for  several  years  but  declined  in  2017  to  9.7  %, 
below  the  EU  average  of  18.7 %.  Despite  the 
ageing  of 
labour  supply 
increased,  mainly  driven  by  increasing  labour 
market participation of women, older workers and 
workers  with  migrant  background.  However,  the 
to 
long-term  unemployment 
increase  (to  1.9 % 
to 
restrictions on early retirements.  

rate  continues 
in  2016),  partly  due 

the  population, 

the 

to 

the 

Wages  are  responding 
favourable 
developments  on  the  labour  market.  Nominal 
compensation per employee increased by 2.4 % in 
2016  and  is  expected  to  grow  by  2.3 %  annually 
between  2017  and  2019  as 
rises 
(European  Commission,  2017a).  Coupled  with 
solid productivity gains, this will improve Austria's 
competitive position. 

inflation 

(1) Activity rate and Employment rate(% of population), 
total, ages 20-64 
(2) Unemployment rate (% of labour force), total, ages 15-74 
Source: Eurostat 

is  considerably 

Despite  the  recent  improvements,  the  labour 
market  potential  of  older  workers,  the  low 
skilled,  women  and  people  with  a  migrant 
background  remains  underused.  The  rate  of 
female  part-time  employment,  at  47.9 %  in  2016, 
is one of the highest in the EU and well above the 
EU average of 31.4 %. However, the employment 
lower  when 
rate  of  women 
expressed  in  full  time  equivalent.  The  gender  pay 
gap of 21.7 % in 2015 remained persistently high, 
and  above  the  EU  average  of  16.3 %,  mainly  due 
to the high proportion of women in part-time work 
and  to  low  pay.  The  labour  market  integration  of 
people  with  a  disadvantaged  socio-economic 
background  and/or  a  migrant  background  remains 
a challenge. This is especially the case for women 
from  non-EU  countries.  The  employment  rate  of 
older  workers  is  improving  but  at  49.8 %  (2016) 
still below the EU average of 55.3 %. 

Social developments 

low 

remains 

inequality 

Income 
but 
opportunities  are  not  equal.  In  2016,  the  richest 
20 %  of households  in Austria  had  an  income  4.1 
times  greater  than  that  of  the  poorest  20 %.  This 
ratio has remained broadly stable over time and is 
below the EU average of 5.2. This is the combined 
result  of  a  progressive  income  tax  regime  and  a 
high  level  of  spending  on  social  protection  which 
is  effective  in  reducing  high  market  income 

5 

1001051101151201251301351401459095100105110115120125130135050607080910111213141516171819Index, 2005=100Index, 2005=100HICP inflation, AustriaHICP inflation, euro areaCore inflation, Austria (rhs)Core inflation, euro area (rhs)Forecast0123456745505560657075808500Q101Q102Q103Q104Q105Q106Q107Q108Q109Q110Q111Q112Q113Q114Q115Q116Q117Q1% of labour force% of populationUnemployment rate 15-74 (rhs)Activity rate 20-64Employment rate 20-64 
 
 
1. Economic situation and outlook 

inequality. Indeed, market incomes (i.e. before the 
effect  of  taxes  and  social  transfers)  are  more 
unevenly  distributed  in  Austria  than  in  most  EU 
countries. Educational inequalities linked to socio-
economic  status  suggest  social  mobility  remains 
low,  particularly  for  children  with  a  migrant 
background(2) (see also Section 3.3). 

Graph 1.5:  Gini index of wealth (2014) and income 

inequality (2016) 

Source: ECB, Eurostat 

Productivity 

Labour  productivity  in  Austria  remains  high 
while  total  factor  productivity  is  stagnating. 
Real  labour  productivity  per  person  increased 
again in 2016 as in the year before, but it still lags 
behind  its  pre-crisis  level.  However,  productivity 
per hour worked declined in 2016 for the first time 
since 2009. This is in line with the average annual 
hours worked per person, which have increased in 
2016  for  the  first  time  in  5  years.  Austria’s  total 
factor  productivity  dropped  markedly  during  the 
financial  crisis  and  has  not  yet  recovered, 
stagnating  at  below  pre-crisis  level.  This  is  in 
contrast  with  the  euro  area  overall,  where  total 
factor  productivity  was  also  hit  during  the  crisis 
but has been steadily growing since 2013 and has 
already surpassed its pre-crisis level.  

in 

the  highest 

Wealth inequality is high. The Gini coefficient (3) 
on net wealth (assets minus liabilities) was 0.73 in 
2014,  among 
the  euro  area, 
according  to  the  ECB's  Household  Financial  and 
Consumption Survey (Graph 1.5). A key driver is 
the  low  rate  of  house  ownership  at  the  lower 
the  comparatively  strong 
wealth  deciles  and 
concentration  of  wealth 
from  self-employed 
businesses  at  the  top  of  the  wealth  distribution. 
The median net wealth of households who owned 
their  own  homes  was  EUR  300 600  in  2014.  By 
contrast,  that  of  tenants  —about  45.0 %  of  the 
Austrian population —was only EUR 12 000. The 
persistent  rise  in  house  prices  might  increase 
wealth 
lack  of  capital 
acquisition  (inheritance  or  gift)  tax  and  low 
recurrent  property  taxation  provide  no  policy 
instrument to curb its growth.  

inequality,  while 

the 

the  social  situation  continues 

Overall, 
to 
improve. The proportion of the population at risk 
of poverty or social exclusion decreased for a third 
consecutive year in 2016. This was due to a further 
reduction  in  the  already  low  level  of  severe 
material  deprivation  (which  measures  absolute 
poverty)  to  3.0 %,  well  below  the  EU  average  of 
7.5 %.  However,  in-work  poverty  is  rising,  and 
foreign  workers  are  particularly  affected.  Foreign 
nationals  also  face  an  increasing  risk  of  relative 
their 
poverty,  although 
children  has  fallen  (see  Section  3.3  on  social 
policy). 

the  poverty  risk  for 

(2)  In 2015, the difference between PISA scores in science for 
15-year-olds which is explained by socio-economic and/or 
migrant background was one of the highest in the EU, and 
has not diminished from the PISA test in 2006. 

(3)  The Gini coefficient takes values between 0 and 1 and is a 
measure  of  equal  or  unequal  distribution,  with  higher 
values indicating a higher degree of inequality.   

6 

00.10.20.30.40.50.60.70.80.91LVDEIEATCYNLEEEAPTFRFILUHUSIITESELBEPLMTSKGini indexWealth indexIncome index after taxes and transfers 
                                                           
 
1. Economic situation and outlook 

Graph 1.6: 

Labour productivity 

positive  since  2013  and  continued  to  improve  to 
5.7 % of GDP in 2016 from 2.5 % in 2015. 

Graph 1.7: 

Trade balance and export market share 

Source: Eurostat, European Commission 

External position 

The  stable  development  of  Austrian  exports  is 
contributing  to  a  positive  current  account 
balance.  In  2016,  the  current  account  surplus 
stood at 2.3 % of GDP, reaching a level similar to 
recent  years.  For  many  years  Austria  has  had  a 
positive  trade  balance,  aided  particularly  by  its 
tourism  industry.  2016  goods  exports,  at  EUR 
128.9  billion,  are  more  than  twice  as  high  as 
services  exports,  at  EUR  55.7  billion.  However, 
almost all of the trade surplus of EUR 11.9 billion 
derives from services (EUR 11.5 billion) and only 
a  marginal  share  from  goods  (EUR  0.4  billion). 
This  has  been  the  trend  for  many  years,  and  in 
2009-2013  goods 
imports  surpassed  exports, 
thereby  reducing  the  trade  balance  (Graph  1.7). 
Besides  tourism,  business  services  for  companies 
are  also  contributing  more  and  more  to  Austria’s 
service exports. In 2017, exports overall increased 
markedly  and  Austria  managed  to  increase  its 
market share after a steady decline since 2007. The 
5-year  percentage  change  of  Austria’s  export 
market  share,  that  had  been  violating  the  MIP 
scoreboard threshold of -6 % for many years since 
2009, surpassed the threshold in 2016 (with -4 %) 
and turned positive in 2017, thanks to base effects 
trade  developments.  The  positive 
and  world 
contribution  of  households  and  corporations  to 
Austria’s net international investment position has 
outweighed 
negative 
contribution in recent years. As a result, Austria’s 
net  international  investment  position  has  been 

government’s 

the 

Source: European Commission 

Housing market 

House  prices  accelerated  strongly  in  2015-2016 
but  have  since  returned  to  more  moderate 
growth.  Since  their  peak  in  Q1-2016,  when 
nominal house prices increased by 13.4 % year-on-
year,  increases  have  slowed  to  4.9 %  in  Q3-2017. 
The strong increase in 2016 led to a warning by the 
European Systemic Risk Board in December 2016 
and the indicator for deflated house prices has been 
above  the  MIP  scoreboard  threshold  for  the  first 
time for Austria. The increase in house prices does 
not  appear  to  be  driven  by  mortgage  lending. 
Although growth in housing loans has accelerated 
in recent years (they increased by 4.0 % in 2016), 
it  is  still  below  2009  levels  and  the  mortgage-to-
GDP  ratio  (at  28.6 %)  is  low  by  European 
standards (EA 37.5 %). Increased housing demand 
due  to  the  increased  inflow  of  refugees  in  2015-
2016,  on  top  of  continuously  strong  migration 
from EU and non-EU neighbouring countries, has 
not  been  met  yet  by  sufficient  supply,  although 
housing  investment  is  increasing.  Nevertheless,  a 
sizeable share of the population is hardly affected 
by  increasing  house  prices.  This  is  because  the 
overall  home  ownership  rate  of  55.0 %  is  low 
(compared to the EU average of 69.3 %) and house 
price  increases  are  concentrated  on  the  higher 
segments of the market. According to the Austrian 
National  Bank,  house  prices  are  overvalued  by 

7 

90951001051101151201251301350001020304050607080910111213141516Index, 2000=100Nominal unit labour costsTotal factor productivity - ATTotal factor productivity - EAReal labour productivity per personReal labour productivity per hour worked-25-20-15-10-5051.01.21.41.61.82.02.22.401020304050607080910111213141516% of GDPTrade balance goods (rhs)Trade balance services (rhs)Export market share AT, valuesExport performance AT vs. advanced economies, valuesNet international investment position (rhs)% 
 
 
1. Economic situation and outlook 

roughly  20 %  in  the  capital  region  of  Vienna 
which  accounts  for  approximately  40 %  of  total 
residential  value.  In  the  rest  of  the  country, 
however,  house  prices  are  in  line  with  the  values 
explained  by  fundamental  indicators.  As  roughly 
80 %  of  Vienna’s  population  rent  their  home, 
overvaluation  risks  are  somewhat  mitigated  (see 
also Sections 3.2 and 3.4). 

Graph 1.8:  House prices and rental costs 

to  continue  declining  rapidly,  supported  by  good 
economic  conditions  and 
the  divestment  of 
impaired assets from nationalised ‘bad’ banks. 

Graph 1.9:  General government debt and deficit 

Source: European Commission 

and 

social 

latter  weighs  mainly  on 

The  tax  wedge  on  labour  is  particularly  high, 
especially  for  low-income  earners,  mainly  due 
to 
security  contributions.  Austria’s 
historically  good  record  on  revenue  collection  is 
due  to  a  sound  economic  structure,  good  tax 
compliance  and  an  overall  high  level  of  taxation. 
The 
labour,  with 
comparatively  high  revenues  from  social  security 
contributions 
taxes  paid  by 
income 
households.  As  a  result,  the  tax  wedge (4)  on 
labour  is  particularly  high  despite  the  significant 
cut 
in  2016  (Graph  1.10).  A 
comparatively  high  share  of  the  tax  wedge  is 
represented  by  social  security  contributions, 
reflecting the importance of social security on the 
spending  side.  As  the  progressivity  of  the  tax 
wedge  across  income  categories  is  rather  limited, 
the  burden  is  also  heavy  for  low-income  earners, 
who are considered particularly responsive to work 
incentives (Bargain et al., 2014). 

implemented 

(4)  The tax wedge on labour represents the difference between 
the  total  labour  cost  of  employing  a  worker  and  the 
worker’s net earnings. It is defined as personal income tax 
and  employer  and  employee  social  contributions  (net  of 
family  benefits)  as  a  percentage  of  total  labour  costs  (the 
wage and employer social contributions). 

Source: ECB, Statistics Austria, Oenb, Eurostat 

Public finances 

government  debt 

Austria’s  public  finances  are  expected  to 
improve  but 
remains 
relatively  high.  The  headline  deficit  widened 
to  -1.6 %  of  GDP  in  2016  due  to  the  tax  reform, 
but is expected to progressively improve to -0.6 % 
in 2019 in a no-policy-change scenario, supported 
by  economic  growth.  At  the  same  time,  the 
structural  budget  balance  is  expected  to  hover 
around 1 % of GDP. Austria’s fiscal structure has 
traditionally  been  characterised  by  relatively  high 
levels  of  both  revenues  and  expenditures  (49.1 % 
of GDP and 50.7 % of GDP respectively in 2016, 
versus an EU average of 44.7 % and 46.3 %). The 
high  spending  rate  mainly  reflects  the  importance 
of  the  welfare  state,  with  pensions  and  healthcare 
playing  a  particularly  significant  role  in  the 
government’s  budget.  Government  debt  increased 
sharply  in  the  aftermath  of  the  crisis,  due  to 
government support for the financial sector, which 
also  caused  several  peaks  in  the  government 
deficit.  After  peaking  in  2015,  government  debt 
declined to 83.6 % of GDP in 2016. It is expected 

8 

901001101201301401501601709010011012013014015016017008Q109Q110Q111Q112Q113Q114Q115Q116Q117Q1Index, Jan08=100Index, 2008Q1=100House price indexHousing mortgagesGross disposable income (4qma)Rent inflation (rhs)HICP (rhs)020406080100-25-5153507080910111213141516Impact of bank support measures on debtBank support measuresExpenditure for refugeesGovernment deficitGovernment debt (rhs)Government debt w/o liabilities from nationalised banks% of GDP% of GDP 
 
 
                                                           
1. Economic situation and outlook 

like 

fields 

in  STEM 

for  future  economic  growth.  The  low  number  of 
graduates 
ICT  and 
engineering,  in  particular  with  PhDs,  could  limit 
the scope for innovation in Austria. Young people 
with  a  migrant  background  continue  to  do  worse 
than their peers and education outcomes in general 
continue  to  be  strongly  related  to  the  socio-
economic background of parents. 

Graph 1.11:  2018 Ageing report - expenditure projections 

* weighted average 
Source: European Commission 

Digitalisation 

the 

with 

progress 

enterprises 

and  medium-sized 

Austria’s 
digital 
transformation  of  its  economy  is  mixed  and 
in 
small 
particular  are  lagging  behind.  Austria  is  doing 
well  on  some  aspects  of  digitalisation,  such  as  e-
government  and  digital  skills.  However,  it  ranks 
below  or  merely  in  line  with  the  EU  average  on 
others, such as e-commerce, e-procurement and the 
deployment  of  high-speed  broadband  in  rural 
areas.  Furthermore,  Austria’s 
is 
characterised  by  a  particularly  large  SME  sector 
and  only  relatively  few  large  companies.  While 
these  larger  firms  are  readily  adopting  digital 
technologies and business models, Austrian SMEs 
are lagging behind, creating a ‘digital divide’. This 
is  especially  problematic 
the  case  of 
technologies that bring particular benefits to SMEs 
(e.g.  cloud  computing  with 
low  upfront 
expenditure 
scalability).  Proper 
and 
implementation  of  Austria’s  national  strategy  for 
the digital future is thus paramount. 

economy 

easy 

its 

in 

Graph 1.10:  Tax wedge (% of labour costs, 2016) 

(1) Tax wedge as % of labour costs for a single person at 
100% of the average wage in the private sector, no children 
Source: OECD 

Pensions and healthcare 

The  projections  of  the  2018  Ageing  Report  for 
medium- and long-term pension and healthcare 
expenditures  still  point  to  a  medium  risk  for 
fiscal  sustainability.  The  equilibrium  between 
high  revenues  and  expenditures  has  proven 
successful  in  providing  good  levels  of  public 
it  could  be  particularly 
services.  However, 
vulnerable to population ageing, which will further 
increase  social  spending  in  a  context  of  already 
high  fiscal  pressure.  The  projections  of  the  2018 
Ageing  Report  point  to  a  further  increase  in 
pension and healthcare expenditures between 2016 
and  2070 
(European  Commission,  2018b). 
Compared  to  the  projections  of  the  2015  Ageing 
Report,  total  expenditure  is  starting  from  a  lower 
base  in  2016  than  previously  forecast  (European 
Commission,  2015a).  However,  the  trajectory  is 
slightly worse for pension expenditure, mainly due 
the  deteriorating  demographic  projections. 
to 
long-term  sustainability 
Overall, 
remains medium. 

the  risk  for 

Education and skills 

Implementation  of  Austria’s  education  reform 
agenda has so far not translated into improved 
education  outcomes..  Austria’s  poor  education 
outcomes,  with  about  25 %  of  14-year-olds  not 
fully reaching the minimum required basic skills in 
national  testing,  might  restrict  the  skills  available 

9 

0102030405060BEDEHUFRITATFICZSESISKPTELESEELUNLDKOECDPLUKIEIncome taxEmployee social security contributionsEmployer social security contributions% % 0510152025302016201920222025202820312034203720402043204620492052205520582061206420672070% of GDPAT - PensionsAT - HealthcareAT - Long term careEU* - PensionsEU* - HealthcareEU* - Long term care 
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators — Austria 

(1) NIIP excluding direct investment and portfolio equity shares. 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches.  
Source:  Eurostat and ECB as of 30 Jan 2018, where available; European Commission for forecast figures (Winter forecast 2018 
for real GDP and HICP, Autumn forecast 2017 otherwise) 

10 

2004-072008-122013-1420152016201720182019Real GDP (y-o-y)3,00,60,41,11,53,12,92,3Potential growth (y-o-y)2,11,00,91,11,71,82,12,0Private consumption (y-o-y)1,90,90,10,51,5...Public consumption (y-o-y)2,11,20,81,52,1...Gross fixed capital formation (y-o-y)1,7-0,20,41,23,7...Exports of goods and services (y-o-y)7,61,21,83,11,9...Imports of goods and services (y-o-y) 6,21,31,83,13,1...Contribution to GDP growth:Domestic demand (y-o-y)1,90,70,30,82,0...Inventories (y-o-y)0,4-0,1-0,10,20,0...Net exports (y-o-y)0,90,00,00,1-0,5...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,30,00,10,30,80,70,90,7Capital accumulation (y-o-y)0,70,50,50,50,50,60,60,6Total factor productivity (y-o-y)1,10,50,30,40,40,50,60,7Output gap0,4-0,3-0,8-0,8-1,0-0,20,10,4Unemployment rate5,34,75,55,76,05,65,55,4GDP deflator (y-o-y)2,11,71,82,31,11,81,61,7Harmonised index of consumer prices (HICP, y-o-y)2,02,31,80,81,02,22,11,9Nominal compensation per employee (y-o-y)2,52,22,02,12,42,32,32,3Labour productivity (real, person employed, y-o-y)1,7-0,4-0,20,50,2...Unit labour costs (ULC, whole economy, y-o-y)0,92,52,31,62,11,21,21,1Real unit labour costs (y-o-y)-1,20,80,5-0,71,0-0,6-0,3-0,6Real effective exchange rate (ULC, y-o-y)0,1-0,12,5-1,71,30,70,9-0,7Real effective exchange rate (HICP, y-o-y)-0,3-0,71,9-1,91,70,61,4.Savings rate of households (net saving as percentage of net disposable income)11,210,07,06,97,9...Private credit flow, consolidated (% of GDP)5,92,20,92,33,2...Private sector debt, consolidated (% of GDP)123,1129,7126,0123,9124,0...of which household debt, consolidated (% of GDP)50,953,151,150,951,3...of which non-financial corporate debt, consolidated (% of GDP)72,276,674,973,072,7...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).3,45,25,54,2...Corporations, net lending (+) or net borrowing (-) (% of GDP)0,01,92,20,50,90,71,31,8Corporations, gross operating surplus (% of GDP)26,925,323,924,223,524,325,125,8Households, net lending (+) or net borrowing (-) (% of GDP)5,24,02,22,12,82,32,22,1Deflated house price index (y-o-y)0,72,92,23,47,2...Residential investment (% of GDP)4,44,34,34,34,2...Current account balance (% of GDP), balance of payments2,92,62,21,92,12,22,93,7Trade balance (% of GDP), balance of payments3,83,23,13,63,2...Terms of trade of goods and services (y-o-y)-0,7-0,70,51,00,50,00,00,1Capital account balance (% of GDP)-0,1-0,1-0,1-0,5-0,2...Net international investment position (% of GDP)-12,8-5,12,32,55,7...Net marketable external debt (% of GDP) (1)-9,8-11,3-11,5-11,2-8,5...Gross marketable external debt (% of GDP) (1)175,9193,7178,8167,2159,4...Export performance vs. advanced countries (% change over 5 years)14,7-2,8-10,9-7,7-6,7...Export market share, goods and services (y-o-y)-0,5-4,71,5-3,72,9...Net FDI flows (% of GDP)1,42,80,91,70,4...General government balance (% of GDP)-2,8-3,2-2,3-1,0-1,6-1,0-0,9-0,6Structural budget balance (% of GDP).-2,5-1,2-0,3-1,0-0,9-1,0-0,9General government gross debt (% of GDP)66,278,882,484,383,678,676,273,4Tax-to-GDP ratio (%)42,242,243,543,842,942,742,342,1Tax rate for a single person earning the average wage (%)33,233,334,535,031,9...Tax rate for a single person earning 50% of the average wage (%)21,321,522,923,320,9...forecast 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

with 

in  a 

to  Austria 

implementing 

introduction  of 

Progress 
the 
recommendations  addressed 
in 
2017 (5)  has  to  be  seen 
longer-term 
the 
perspective  since 
European  Semester  in  2011.  Looking  at  the 
multi-annual  assessment  of  the  implementation  of 
the  CSRs  since  these  were  first  adopted,  50 %  of 
all the CSRs addressed to Austria have recorded at 
least  ‘some  progress’.  50 %  of 
these  CSRs 
recorded  ‘limited’  or  ‘no  progress’  (see  Graph 
2.1). Substantial progress has been achieved in the 
the 
consolidation  of  public 
stabilisation  of  the  financial  sector,  while  full 
implementation  has  been  achieved 
the 
transposition of the Service Directive.  

finances 

and 

in 

Graph 2.1:  Overall multiannual implementation of 2011-

2017 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact.  
** 2011-2012: Different CSR assessment categories.  
*** The multiannual CSR assessment looks at the 
implementation since the CSRs were first adopted until the 
2018 Country Report. 
Source: European Commission 

Over  the  last  6  years,  Austria  has  undertaken 
important  reforms  related  to  the  country-specific 
recommendations  without,  however,  sustainably 
resolving the underlying issues. 

to 

improve 

the  Austrian 

In  recent  years,  several  measures  have  been 
taken 
fiscal 
framework.  Since  2012,  the  Austrian  Stability 
Pact  provides  quantitative  budget  targets  and 
ceilings for all levels of government, with the aim 
to  encourage  fiscal  discipline.  Between  2015  and 
subnational 
rules 
2019, 

accounting 

for 

(5)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular Section 3. 

the 

number 

improve 

reducing 

governments  are  being  progressively  harmonised, 
which  will 
the  coordination  and 
monitoring  of  their  finances.  The  2017  Financial 
to  simplifying 
Equalisation  Law  contributed 
financial  relations  among  the  different  layers  of 
government, 
of 
intergovernmental 
and  marginally 
transfers 
increasing  the  amount  of  revenues  that  federal 
states  can  potentially  raise  through  autonomous 
taxes.  Nevertheless,  the  fiscal  framework  remains 
overly  complex,  and  the  misalignment  between 
raising 
and 
spending 
responsibilities  is  still  substantial.  In  these  areas, 
the  agreement  between  the  different  layers  of 
government  underlying  the  financial  equalisation 
law  contains  far  more  ambitious  initiatives  that 
still need to be implemented. 

revenue 

powers 

The 2016 tax reform substantially reduced taxes 
on  labour,  including  for  low  income  earners. 
The  reform  redesigned  tax  brackets  for  personal 
income  taxes  and  increased  several  targeted  tax 
allowances.  Non-wage  labour  costs  of  employers 
have  also  been  reduced,  in  particular  by  reducing 
their  contributions 
the  Family  Burden 
Equalisation  Fund.  Nevertheless,  the  burden  on 
labour still remains comparatively high, especially 
for low income earners.  

to 

Since  2014,  action  has  been  taken  to  increase 
the  effective  retirement  age.  The  2014  pension 
reform  introduced  several  financial  incentives  to 
retire  later  and  significantly  restricted  access  to 
early retirement. More recently, individual pension 
accounts  showing  personal  pension  entitlements 
are  being  developed,  with  the  aim  to  increase 
transparency  and  provide  incentives  to  longer 
working  lives.  However,  a  fiscal  sustainability 
challenge  remains 
the  expected 
evolution  of  the  effective  retirement  age  and  the 
current provisions on statutory retirement age. 

light  of 

in 

Austria  has  made  positive  steps 
towards 
increasing the efficiency in the healthcare sector 
but  underlying  challenges  remain.  In  2013, 
ceilings  for  healthcare  expenditure  growth  were 
introduced  up  to  2016,  as  well  as  specific  targets 
for  in-patient  hospital  consolidation  (such  as 
number of bed days per resident, length of stay and 
overall discharge rates), and for the availability of 
outpatient  multidisciplinary  primary  care  settings. 
These were positive measures, although the chosen 

11 

12%38%36%12%2%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
 
                                                           
2. Progress with country-specific recommendations 

notably  on  administrative  simplification  (such  as 
the  introduction  of  an  electronic  trade  register). 
This reduces compliance costs and mitigates some 
of the negative effects of regulation but it does not 
resolve  the  underlying  issue  of  restrictiveness. 
Since 2015, Austria has tabled various measures to 
facilitate  business  creation  in  the  services  sector 
and  adopted  a  revision  of  the  Trade  Licence  Act 
(Gewerbeordnung)  in  July  2017.  Austria  also 
participated  actively  in  the  mutual  evaluation  of 
professional  regulation  at  EU  level.  The  action 
plan  it  presented  as  part  of  this  exercise  was 
however unambitious and has not yet resulted in a 
systematic  attempt  to  remove  administrative  and 
regulatory obstacles across professions and trades. 

the 

Overall,  Austria  has  made  some (6)  progress  in 
addressing 
country-specific 
2017 
recommendations  (CSRs).  Limited  progress  was 
made  on  CSR1  in  addressing  the  sustainability  of 
the  pension  and  healthcare  system  together  with 
streamlining  the  fiscal  framework.  CSR  1  is 
closely  related  to  the  euro  area  recommendation 
(EAR)  2  regarding  the  pursuance  of  effective 
national  fiscal  frameworks  and  growth-friendly 
fiscal  consolidation.  Overall,  some  progress  was 
made  on  CSR2.  Some  progress  was  made  in 
improving  the  labour  market  participation  of 
women,  while  limited  progress  was  made  in 
improving 
the  educational  achievements  of 
disadvantaged  young  people,  both  of  which  are 
also reflected by EAR3. Some progress was made 
in  reducing  barriers  to  investment  in  the  services 
sector, which is related to EAR1. 

(6)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

targets  were  not  overly  ambitious.  The  2017 
Financial  Equalisation  Law  has  set 
tighter 
expenditure  ceilings  until  2021  and  reduced 
incentives  to  treat  outpatient  cases  as  inpatient, 
thereby  discouraging  hospital  excess  capacity. 
Outpatient  multidisciplinary  primary  care  is  also 
being  strengthened,  with  the  aim  to  shift  services 
these 
away  from 
measures have  the  potential  to  improve  efficiency 
and deserve thorough implementation, the general 
overlap  of  competencies  in  the  healthcare  sector 
remains to be addressed.  

the  hospital  sector.  While 

finances 

significant 

Government  intervention  played  an  important 
role  in  stabilising  the  banking  sector,  although 
public 
costs. 
faced 
Following  the  financial  crisis,  the  government 
nationalised  and  proceeded  to  orderly  wind-down 
three systemic banks. In order to cover part of the 
public  costs,  a  stability  fee  (bank  tax)  for  credit 
institutions  was  temporarily  introduced.  Although 
government  accounts  faced  important  costs,  the 
negative  consequences  of  disorderly  bankruptcies 
for the banking sector were prevented.  

Austria  has  partially  improved  labour  market 
outcomes  for  women.  While  female  employment 
has increased since 2011, most of the increase has 
been  in  part-time  employment.  Austria  addresses 
the low take-up of child care for children below 3 
years.  Only  some  progress  was  achieved  so  far, 
with  the  Barcelona  targets  of  33 %  coverage  not 
yet  reached,  and  uneven  coverage  between  the 
Länder. The harmonisation of pensionable age for 
men and women has been foreseen to start in 2024 
but  this  time  frame  is  not  ambitious.  Despite  the 
recent tax reform, the personal income tax system 
still  includes  unfavourable  elements  to  women's 
higher take-up of employment. The gender pay gap 
remains high. 

shows 

Austria's  policy  response  on  education  did  so 
far not lead to improved outcomes. International 
testing 
of 
disadvantaged  students  and  those  with  migrant 
background has deteriorated. In the area of higher 
education, strategic planning has improved and the 
number of drop outs has been reduced. 

performance 

that 

the 

improve 
Austria  has  made 
competition  and  investment  in  the  services 
sector,  but  the  overall  level  of  regulation 
remains  high.  Austria's  efforts  have  focused 

efforts 

to 

12 

 
 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2017 CSR assessment 

*This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

important 

ESI  Funds  are 
in  addressing  key 
challenges to inclusive growth and convergence in 
Austria,  notably  by  boosting  social  inclusion, 
thus 
supporting 
improving  their  participation  in  the  labour  market 

the  employability  of  women 

and  enhancing  cooperation  between  SMEs  and 
research 
institutions.  The  nation-wide  Smart 
Specialisation  Strategy  improves  federal-regional 
coordination. 

13 

   Austria  Overall assessment of progress with 2017 CSRs:  Some progress* CSR 1: Ensure the sustainability of the healthcare system and of the pension system. Rationalise and streamline competencies across the various layers of government and align their financing and spending responsibilities.  Limited progress  Some progress in improving the sustainability of the healthcare sector, including by improving public procurement practices.   No progress on ensuring the financial sustainability of the pension system.   Limited progress on reforming fiscal relations between the various layers of government.  CSR 2: Improve labour market outcomes for women through inter alia, the provision of full-time care services. Improve the educational achievements of disadvantaged young people, in particular those from a migrant background. Foster investment in the services sector by reducing administrative and regulatory barriers, easing market entry and facilitating company growth.  Some progress  Some progress in improving labour market outcomes for women.  Limited progress in improving child care services.  Limited progress in improving the educational achievements of disadvantaged young people, in particular those from a migrant background.  Some progress in reducing administrative and regulatory barriers, easing market entry and facilitating growth in the services sector.      
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: Tangible results delivered through EU support to structural change in Austria 

Austria is a beneficiary of European Structural and Investment Funds (ESI Funds) support and can 
receive up to EUR 4.9 billion until 2020. This represents around 3% of public investment (1) annually over 
the period 2014-2018. By 31 December 2017, an estimated EUR 2 billion (42 % of the total) was allocated 
to  projects  on  the  ground.  This  is  helping  105  enterprises  to  cooperate  with  research  institutions;  it  is 
contributing to the creation of more than 2000 new direct jobs in firms and is supplying jobs to nearly 600 
researchers. Allocated funds are also contributing to boosting the development of rural areas by supporting 
investments and improving environmental standards and broadband coverage. Out of the EU financing, EUR 
3 million will be invested through financial instruments.  

ESI  Funds  help  address 
implement  country-specific 
structural  policy  challenges  and 
recommendations.  Investments  in  research  and  development  in  the  private  sector  are  stimulated,  among 
others, by providing grants for the development of new products, by setting-up living labs or by facilitating 
and stimulating cooperation between SMEs and research institutions. The European Social Fund (ESF) also 
invests  in  coaching,  training  and  working  opportunities  for  people  with  a  distance  to  the  labour  market, 
which  in  turn  helps  enhance  the  overall  labour  market  participation.  Furthermore,  specific  measures  are 
supported which improve the job prospects of older workers. Austria also uses ESF investment for different 
social  policies  addressing  social  inclusion  measures,  especially  for  minorities  and  migrants,  the 
employability  of  women,  older  workers  and  workers  with  migrant  background.  ESF  supports  also  the 
implementation  of  the  EU  2020  country  specific  recommendations  by  assisting  measures  improving  the 
employability of women, older workers and workers with migrant background.   

Various  reforms  were  undertaken  already  as  precondition  for  ESI  Funds  support (2).  Austria 
developed  a  nation-wide  Smart Specialisation  Strategy for  research  and  innovation,  which  helps  focus the 
resources  and  efforts  on  product  specialisation  with  a  strong  market  potential.  Furthermore,  Austria 
improved  already  with  the  help  of  the  ERDF  the  coordination  between  the  regional  and  Federal  levels 
through the national wide Smart Specialisation Strategy. 

Austria  is  advancing  the  take  up  of  the  European  Fund  for  Strategic  Investments  (EFSI).  As  of 
December  2017,  overall  financing  volume  of  operations  approved  under  the  EFSI  amounted  to  EUR  931 
million,  which  is  expected  to  trigger  total  private  and  public  investment  of  EUR  2.8  billion.  More 
specifically,  9  projects  have  been  approved  so  far  under  the  Infrastructure  and  Innovation  Window 
(including 1 multi-country project), amounting to EUR 822 million in EIB financing under the EFSI. This is 
expected  to  trigger  nearly  EUR  2.3  billion  in  investments.  Under  the  SME  Window,  4  agreements  with 
financial  intermediaries  have  been  approved  so  far.  European  Investment  Fund  financing  enabled  by  the 
EFSI  amounts  to  EUR  109  million,  which  is  expected  to  mobilise  more  than  EUR  452  million  in  total 
investment. Over 1 000 smaller companies or start-ups will benefit from this support. Transport ranks first in 
terms  of  volume  approved,  followed  by  energy,  SMEs  and  RDI.  In  terms  of  operations  however,  energy 
ranks first. 

Funding under Horizon 2020, the Connecting Europe Facility and other directly managed EU funds is 
additional to the ESI Funds. By the end of 2017, Austria has signed agreements for EUR 755 million for 
projects under the Connecting Europe Facility. 

http://cohesiondata.ec.europa.eu/countries/AT 

(1)  Public investment is defined as gross fixed capital formation + investment grants + national expenditure on agriculture 

and fisheries 

(2)  Before  programmes  are  adopted,  Member  States  are  required  to  comply  with  a  number  of  so-called  ex-ante 

conditionalities, which aim at improving conditions for the majority of public investments areas 

14 

 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Fiscal framework 

In 

2017b). 

incentives 

Austria’s  fiscal  framework  still  suffers  from  a 
strong  misalignment  between  spending  powers 
and  revenue-raising  responsibilities  across  the 
different 
levels  of  government.  The  fiscal 
framework  is  particularly  complex  and  gives 
subnational  governments  weak 
to 
contain  costs  as 
their  spending  powers  are 
disproportionately higher than their revenues from 
autonomous  taxes  (European Commission,  2016a; 
European  Commission, 
2016, 
subnational  governments  (the  federal  states  and 
municipalities)  raised  revenues  from  own  taxes 
amounting 
(OECD  Fiscal 
Decentralisation  Database),  while  their  overall 
expenditure  amounted  to  17.7 %  of  GDP.  The 
2017 Financial Equalisation Law, which regulates 
the  financial  agreements  between  the  different 
levels of government up to 2021, has done little to 
issue.  The  new  government 
address 
2017 
programme 
announces  a  comprehensive  reform  of  the  fiscal 
framework  aimed  at  pooling  expenditure  and 
revenue  raising  competences  across  levels  of 
government (BKA, 2017).   

to  2 %  of  GDP 

in  December 

published 

this 

The  agreement  ratified  between  the  different 
levels of government contains several initiatives 
that could improve the efficiency and quality of 
public  spending.  These  include  regular  spending 
reviews,  more  task-oriented  financing,  benchmark 
systems  at  the  subnational  level,  as  well  as  the 
commitment  to  agree  on  a  general  reform  of 
subnational  competencies  by  the  end  of  2018.  In 
addition, several working groups have been set up 
to  prepare  proposals  for  increasing  tax  autonomy 
at the subnational level, including through property 
taxes.  While  these  measures  are  promising,  their 
effectiveness 
thorough 
implementation.  A  pilot  project  increasing  the 
task-orientation  in  the  allocation  of  child-care 
funds should start in January 2018, but is at risk of 
being delayed. 

hinges 

upon 

their 

Taxation 

Austria’s tax wedge remains one of the highest 
in the EU, in particular for low-income earners. 

The 2016 tax reform has reduced the tax wedge on 
labour  (European  Commission,  2017b).  However, 
with  47.1 %  (2016)  it  remains  relatively  high 
compared to an EU average of 42.8 % for a single 
earner  with  average  wage  (OECD  Taxing  wages 
Database). The tax wedge for low-income earners 
– a group considered to be particularly responsive 
to  work  incentives  –  remains  especially  high,  at 
42.8 %  compared  to  36.8 %  in  the  EU  (OECD 
Taxing  Wages  Database).  Furthermore,  without 
the tax brackets being indexed to inflation, the tax 
wedge  on  labour  will  continue  increasing  as 
nominal  wage  increases  due  to  inflation  push  tax 
payers  into  higher  tax  brackets  (‘fiscal  drag’). 
While  there  were  some  policy  discussions  in 
Austria  on  indexing  the  two  lowest  income  tax 
brackets to inflation, no such measure was adopted 
in 2017. The new government announced to tackle 
this issue within the context of a broader reform of 
the personal income tax system. 

Graph 3.1.1:  Composition of tax wedge on labour 

(1) 17 euro area (EA) OECD members: simple average of 
euro area countries excluding Cyprus and Malta 
(2) Average income tax includes central and local income 
taxes as well as family benefits 
(3) Social security contributions do not include contributions 
to private pension funds 
Source: OECD, 2016 

Social  security  contributions  represent  the 
largest  part  of  the  tax  wedge  on  labour,  while 
their 
income 
categories.  More  than  90 %  of  the  tax  wedge  for 
low-income  earners  is  due  to  social  contributions. 

is  regressive  across 

impact 

15 

010203040506050%67%100%133%167%200%250%in % of total      labour costsearnings in % of average wageAT - average income taxAT - employer social security contributionAT - employee social security contribution17 EA OECD members - average income tax17 EA OECD members - employer SSC17 EA OECD members - employee SSC 
 
 
3.1. Public finances and taxation 

about 17 percentage points of GDP between 2017 
and  2028  in  a  no-policy-change  scenario,  but  to 
remain slightly above the Treaty reference value of 
60%  of  GDP  (European  Commission,  2018c).  To 
reach  the  60 %  debt-to-GDP  ratio  by  2032,  a 
cumulative gradual improvement of 0.1 % of GDP 
in  the  structural  primary  balance  over  5  years 
would be necessary (starting from 2020). By 2060, 
a  fiscal  adjustment  of  3.2 %  of  GDP  would  be 
required  to  ensure  the  stabilisation  of  public  debt 
over  the  long-term,  mainly  due  to  the  strong 
projected growth in age-related spending (3.6 % of 
GDP between 2016 and 2070). 

Pensions  

Austria’s  public  expenditure  on  pensions  is 
comparatively high and is projected to increase 
further in the medium and long term. At 13.8 % 
of GDP, public spending on pensions in Austria is 
among the highest in the EU (the EU average was 
11.2 %  of  GDP  in  2016;  European  Commission, 
2018b).  Based  on  the  projections  of  the  2018 
Ageing  Report  the  expected  increase  in  pension 
expenditure  is  also  above  the  EU  average.  In 
particular,  spending  is  projected  to  increase  by 
1.1 %  of  GDP  between  2016  and  2040  –  when 
most  of  the  baby-boomer  generation  will  be  in 
retirement  –  and  by  0.5 %  of  GDP  by  2070  (the 
respective  EU  averages  are  0.8  %  and  -0.2  %  of 
GDP).  These  estimates  are 
slightly  more 
pessimistic  than  those  in  the  2015  Ageing  Report 
(European Commission, 2015a) and they still point 
to  a  medium  risk  to  fiscal  sustainability.  Current 
pension costs are reflected in relatively high social 
contribution rates, which represent the main part of 
the  tax  wedge  on  labour  (see  Section  3.1  on 
Taxation).  The  future  increase  in  spending  will 
reduce  the  fiscal  space  for  other  public  areas,  or 
alternatively increase government debt.  

The rising number of pensioners is projected to 
put pressure on pension expenditure. Increasing 
life  expectancy  and  low  birth  rates  in  Austria  are 
projected  to  significantly  increase  the  number  of 
people  aged  over  65  for  each  person  between  15 
and  64  years  old  (the  ‘dependency  ratio’).  This 
number is expected to rise from 0.3 in 2016 to 0.5 
in  2070  (European  Commission,  2018b).  If  the 
statutory retirement age remains fixed at 65 years, 
ceteris  paribus,  this  implies  an  increasing  number 
of pensioners and rising pension expenditure.  

With  77 %,  this  share  is  also  relatively  high  for 
average  income  earners.  Discussions  are  under 
way  on  streamlining  the  social  security  system  to 
it  more  efficient,  which  could  allow 
make 
contributions  to  be  reduced  without  affecting 
benefits.  As  individual  social  contributions  are 
based  on  flat  rates  and  capped  at  maximum 
amounts,  their  share  in  total  labour  costs  is 
constant  up  to  roughly  150 %  of  the  average 
income and regressive thereafter (see Graph 3.1.1). 
In  combination  with  the  progressive  schedule  of 
personal  income  taxes,  this  generates  a  relatively 
flat  profile  of  the  tax  wedge  across  income 
categories. 

Austria has potential scope to shift revenues to 
taxes that are less distortive to growth, such as 
property  and  environmental  taxes.  Revenues 
from  recurrent  property  taxes  are  particularly  low 
in  Austria,  at  0.2 %  of  GDP  compared  to  an  EU 
average of 1.6 % (2015). This is mainly due to the 
outdated tax base (European Commission, 2017b). 
A  EUROMOD  simulation  performed  by 
the 
European  Commission's  Joint  Research  Centre 
shows that updating the tax base for property taxes 
and  using  the  additional  revenues  for  reducing 
labour  taxes  would  have  a  limited  impact  on  the 
income  distribution  and  positive  effects  on  labour 
supply  and  economic  growth  (see  Box  3.1.1). (7) 
Environmental taxes generate revenues of 2.4 % of 
GDP,  in  line  with  the  EU.  There  nevertheless 
remains potential to shift the tax burden away from 
In 
labour 
addition,  tax  advantages  on  company  cars  in 
Austria 
losses  of 
EUR 558 million per year (Harding, 2014). 

(European  Commission,  2015b). 

to  estimated  revenue 

lead 

Long-term sustainability of public finances 

Based  on  the  2018  Ageing  Report  and  the 
Commission  2017  autumn  forecast,  Austria’s 
fiscal sustainability still faces a medium risk in 
the  medium  and  long  term.  Based  on  debt 
sustainability  analysis  by  Commission  staff, 
Austria’s  public  debt  is  projected  to  decrease  by 

(7)  EUROMOD simulates individuals’ and households’ benefit 
entitlements  and  tax  liabilities  (including  social  security 
contributions)  according  to  the  rules  in  place  in  each 
Member  State.  Simulations  are  based  on  representative 
survey  data  from  the  European  Statistics  on  Income  and 
Living Conditions (EU-SILC). 

16 

 
                                                           
 
3.1. Public finances and taxation 

Box 3.1.1: Shifting taxes from labour to property 

The  European  Commission's  Joint  Research  Centre  (JRC)  simulated  a  tax  shift  from  labour  to 
property  by  updating  the  tax  base  of  recurrent  property  taxes  to  reflect  properties'  market  values, 
and using the additional revenue for a reduction of labour taxes. To this end, the European Statistics on 
Income and Living Conditions (EU-SILC), which provides the input database for the microsimulation model 
EUROMOD,  has  been  enriched  with  information  on  current  property  market  values  from  the  Household 
Finance  and  Consumption  Survey  (HFCS) (1).  The  baseline  scenario,  which  reflects  tax-benefit  rules  in 
place  in  2016  reproduces  the  current  situation  of  outdated  cadastral  values  (2). Current  market  values  are 
then used as the taxable base, and the additional fiscal space is used to lower labour taxes in two alternative 
reform  scenarios:  (1)  an  across-the-board  reduction  in  social  security  contributions  by  16  pp  and  (2)  the 
introduction of a targeted  in-work benefit benefiting the middle and low income earners (3).  

Graph 1:  Budgetary effects of updating the tax base for property taxes (left), in-work benefit design (centre)  
and distributional effects of using the additional fiscal space for the in-work benefit (right) 

Source: European Commission, Joint Research Centre, based on the EUROMOD model. 

Based on the EUROMOD simulations, directly updating the tax base of  recurrent property taxes to 
reflect market values and proportionally adjusting the tax brackets would bring Austrian revenues in 
line with the EU average. In 2015, revenues from recurrent property taxes in Austria amounted to 0.2% of 
GDP (EUR 650 million, source Statistik Austria, property tax of non-agricultural real estate and land) while 
the EU average was 1.6% of GDP, which would correspond to EUR 5.7 billion in the case of Austria. Based 
on the EUROMOD simulations, using market values as an up-to-date taxable base and adapting the property 
tax  brackets  by  the  same  factor  summarising  the  difference  between  cadastral  and  market  values  (see 
footnote 2) would increase revenues by 1.4% of GDP, to EUR 5.5 billion, i.e., close to the EU average.  

Updating the taxable base would provide additional fiscal space amounting to 0.6% of GDP (EUR 2 billion). 
Austrian municipalities can multiply cadastral values by a fixed factor in order to partly correct the tax base 
for the outdated valuation of properties. In practice, almost all municipalities apply the highest multiplier of 
500 to cadastral values. When updating the tax base to market values, the municipal multiplier is halved in 
order  to  avoid  a  double  revaluation  of  the  tax  base.  Considering  this  correction,  potential  revenues  from 
recurrent property taxes amount to 0.8% of GDP (EUR 2.7 billion) instead of the current 0.2% of GDP. This 
fiscal space is used in two budget-neutral scenarios that reduce labour taxes.  

A targeted use of the additional revenues has slight redistributive effects and reduces the at-risk-of-
poverty  rate.  An  across-the  board  reduction  of  social  contributions  (reform  scenario  1)  has  barely  any 
statistically significant effect on disposable income across deciles, as the higher property tax liability at the 
top of the distribution is broadly offset by the higher reduction in social contributions in absolute terms. The 
more targeted in-work benefit (reform scenario 2) tends to redistribute income from higher to lower deciles, 
but the impact on the Gini coefficient for disposable income is negligible. Reform scenario 2 would lower 
the  at-risk-of-poverty  from  14.2%  to  13.2%  with  the  poverty  line  set  at  60%  of  median  equivalised 

17 

0.00.51.01.52.02.53.00.00.20.40.60.81.01.21.41.61.8123456789101000 Euro% of GDPIncome decilesSimulated mean annual property tax - Current cadastral values (rhs)EU average - revenues from recurrent property taxesRevenues from recurrent property taxes on updated tax base (non corrected)Revenues from rec. property taxes on updated tax base (corrected)Current revenues from recurrent property taxesSimulated mean annual property tax - Market values (rhs)-1.5-0.50.51.52.53.54.5-4.80.25.210.215.212345678910% of baseline% of populationIncome decilesChange in mean equivalised disposable income - scenario 2 (rhs)At-risk-of-poverty (60% of median) - baselineAt-risk-of-poverty (60% of median) - scenario 2At-risk-of-poverty (50% of median) - baselineAt-risk-of-poverty (50% of median) - scenario 205001000150020002500300004000800012000160002000024000280003200036000In-work benefitAnnual earnings24000.20.2 
 
 
  
3.1. Public finances and taxation 

disposable income. 

Shifting taxes from labour to property positively affects work incentives in both reform scenarios. In 
both reform scenarios, the average participation rate and full-time equivalent are higher than in the baseline 
scenario when considering the entire sample, although for reform scenario 2 the difference is very small. In 
reform scenario 1 (reduction of social contributions) the increase in labour market participation and average 
full-time equivalent is higher, which is due to a shift from short and long part-time to full-time employment 
and  over  time,  especially  for  women.  Overall,  in  reform  scenario  2  (in-work  benefit)  short  part-time  and 
over time decrease while long part-time is incentivised, which holds especially for women. Full-time work 
remains roughly stable for both men and women.   

Graph 2:  Labour supply (left) and growth effects (right) 

(1) Average values are calculated for all households subject to behavioural changes. Short part time and long part time: 
weekly hours intervals [1-15] and [16-32]. Full time and Over time: weekly hours intervals [33-42] and [43-60].   Full-time 
equivalent is measured in terms of population working full time.   
Source: European Commission, Joint Research Centre, EUROMOD (left) and QUEST model simulations (right) 

Shifting  taxes  from  social  security  contributions  to  property  leads  to  an  increase  in  employment, 
exports  and  consumption,  while  reducing  housing  investment.  The  macroeconomic  effects  of  reform 
scenario  1  have  been  analysed  using  the  Commission's  QUEST  model (4).  The  reduction  in  social 
contributions decreases the implicit tax rate on employees, leading to an increase in employment over the 
ten years following the reform (0.3 %). The tax shift also increases competitiveness, leading to higher net 
exports.  On  the  other  hand,  higher  taxes  on  housing  incentivise  homeowners  to  substitute  housing 
investment with consumption. Over ten years, the effects on GDP and on government balance are positive, 
but moderate.  

(1)  The 

matching 

statistical 

Eurostat: 
http://ec.europa.eu/eurostat/web/experimental-statistics/income-consumption-and-wealth.  See  Lamarche  (2017)  for  an 
extensive  description  of  the  methodology  to  estimate  the  joint  distribution  of  income,  consumption,  and  wealth 
(http://ec.europa.eu/eurostat/documents/7894008/8074103/income_methodological_note.pdf).  The  present  analysis 
uses 2014 EU-SILC data and the second wave of HFCS for Austria. 

performed 

EU-SILC 

between 

HFCS 

and 

by 

is 

(2)  As EU-SILC does not contain information on the current cadastral values of households' properties, these have been 
approximated based on the matched information on current market values. In particular, the current market value of an 
immovable property (household main residence or other real estate property) as matched from the HFCS are multiplied 
with a factor that captures the difference between cadastral and market values at an aggregate level: 

The total cadastral value is approximated by dividing the actual total tax base by an average tax rate that takes into 
account the current tax schedule for both types of property, ensuring macro-validation of the simulated revenues. 
(3)  The in-work benefit amounts to 0.2% of annual earnings, up to a maximum of EUR 2 400 per year and declining for 
annual earnings above EUR 20 000. This leads to a phase-in until annual earnings of EUR 12 000, a plateau until EUR 
20 000 per year and a phase out until EUR 32 000 per year. Eligibility conditions are hours worked (25 per week or 
more) and age (16 years or older). 

(4)  See Ratto et al. (2009) for an introduction into the model and Varga and in 't Veld (2014) for a recent application. 

Barrios et al. (2017) present a framework of analysis for the dynamic scoring of tax reforms in the EU, which links 
EUROMOD and QUEST. Barrios et al. (2017) also present the labour supply model used in the analysis. 

18 

-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%Full-time eq.Labour market part.Shortpart timeLongpart timeFull timeOver timeScenario 1 - AllScenario 2 - AllScenario 1 - MalesScenario 1 - FemalesScenario 2 - FemalesScenario 2 - Males-0.4-0.3-0.2-0.100.10.20.30.4012345678910GDPEmploymentConsumptionInvestmentExportImportGovernment balance (% GDP)Years afterthe reform% change 
 
 
  
 
 
 
 
 
3.1. Public finances and taxation 

expenditure  would  amount  to  14 %  of  GDP(9), 
around  0.4 %  of  GDP  lower  than  in  the  baseline 
scenario  in  2070,  still  pointing  to  a  medium 
sustainability  risk.  On  the  contrary,  linking  the 
statutory  retirement  age 
life 
expectancy  would  reduce  expenditure  by  2.3 % 
GDP by 2070 as  compared  to  the baseline, which 
would  bring  the  classification  of  Austria’s  long-
term  fiscal  sustainability  to  low  risk  (see  Graph 
3.1.2) (10). 

to  changes 

in 

to  start  harmonising 

Austrian  women  still  have  one  of  the  earliest 
in  the  EU.  The 
statutory  retirement  ages 
government  plans 
the 
statutory  retirement  ages  for  women  and  men 
(currently  60  and  65  years,  respectively)  by  2024 
the  process  by  2033.  This 
and 
contributes to lower pension adequacy for women 
aged over 65 (see Section 3.3).  

to  finalise 

Healthcare 

Based  on  the  2018  Ageing  Report,  public 
healthcare  expenditure  is  projected  to  increase 
significantly in the medium and long term, thus 
posing  a  medium  risk  to  fiscal  sustainability. 
Public  spending  on  healthcare  is  currently  among 
the  highest  in  the  EU,  at  7 %  of  GDP  against  an 
(European 
EU  average  of  6.8 % 
Commission,  2018b).  Expenditure  is  projected  to 
increase by 0.7 % of GDP by 2040, and by 1.3 % 
of  GDP  by  2070  (the  respective  EU  averages  are 
0.6 %  and  0.9 %  of  GDP).  The  new  ceilings  for 
healthcare  expenditure  laid  down  in  the  2017 
Financial Equalisation Law, as incorporated in the 
Ageing  Report  projections,  play  a 
in 
containing the spending increase (see Graph 3.1.3). 

in  2016 

role 

baseline  projection  is  introduced  linearly  over  the  period 
2018-2030  and  remains  5  percentage  points  higher 
thereafter.  The  higher  employment  rate  of  this  group  is 
assumed to be achieved through a reduction of the inactive 
population. 

(9)  This 

includes  expenditure  on 

the  ‘Ausgleichszulage’ 
(Equalising Allowance) and ‘Rehabilitationsgeld’ benefits. 
(10)  Retirement  ages  are  shifted  year-over-year  in  line  with 
change  in  life  expectancy  at  current  retirement  ages. 
Statutory retirement age is projected to rise by 5.2 years for 
men and 4.9 for women over 2016-70, which is assumed to 
correspond to higher participation rates with no effects on 
unemployment.  Around  one  third  of  the  expenditure 
decline stems from the denominator effect (enhanced GDP 
growth), whereas two thirds are due to the numerator effect 
(decreased  pension  spending)  (European  Commission, 
2018b). 

Graph 3.1.2:  Pension expenditure – long term projections 

Source: European Commission 

is 

Following past reforms, the effective retirement 
increasing.  The  government  has 
age 
implemented  several  reforms  of 
the  pension 
system since 2014, significantly reducing access to 
early 
retirement  schemes  and  most  notably 
reducing access to invalidity pensions. As a result, 
the  effective  retirement  age  has  increased  since 
2014,  reaching  60  years  and  4  months  in  2016 
(BMASK, 
retirement 
opportunity  (Teil-Pension)  allows  employees  to 
remain  in  part-time  work  while  receiving  part  of 
their pension. Financial support by the state makes 
it  possible  to  reduce  working  time  by  50 %  while 
receiving 75 % of their salary.  

2017).  The 

partial 

from 

increasing 

Closing  the  gap  between  the  effective  and  the 
statutory  retirement  age  can  only  partially 
improve  pension  sustainability.  As  pension 
entitlements  are  linked  to  the  statutory  retirement 
the  effective 
age,  savings 
retirement  age  are  partly  offset  by  higher  benefits 
once  workers  decide  to  retire.  Accordingly,  after 
having  decreased  since  the  2014  reforms,  federal 
transfers to the pension system are projected to rise 
again  in  the  coming  years.  A  simulation  by 
European  Commission  staff,  based  on 
the 
projections of the 2018 Ageing Report, shows that 
increasing  the  effective  retirement  age  to  65.3 
years for men  and 64.5 years for women by 2040 
(equivalent to a 5 percentage point increase in the 
participation  rate  of  workers  between  55-74  years 
old), would only marginally improve the long-term 
fiscal  sustainability(8).  In  fact, 
total  pension 

(8)  A scenario with the employment rate of older workers (55-
74)  being  5  percentage  points  higher  compared  with  the 

19 

101112131415162016201920222025202820312034203720402043204620492052205520582061206420672070% of GDPAWG Reference ScenarioScenario 1 -Increasing effective retirement ageScenario 2 -Linking statutory retirement age with life expectancy at 65 
 
                                                           
                                                                                   
3.1. Public finances and taxation 

Extending  implementation  of  these  ceilings  into 
the next years could further contribute to improve 
fiscal sustainability. 

Graph 3.1.3:  Long term projections for healthcare 

expenditure 

harmonised,  benefits  and  the  services  provided 
vary across funds. Governance and administration 
costs  for  healthcare  are  comparatively  high  in 
Austria: 0.4 % of GDP compared to an EU average 
of 0.2 % in 2014. The new government programme 
announces  a  reduction  to  at  most  five  social 
insurance funds. This could help improve the cost-
efficiency, transparency and equity of the system.  

of 

sector 

change, 

0.62 %) 

indicates 

increasingly 

Austria’s  health  sector  has  room  for  savings 
and  quality  improvements  from  more  effective 
procurement, such as more EU-wide tendering. 
is  confronted  with 
Austria's  health 
demographic 
complex 
products and higher market concentration for some 
inputs. In this context, EU-wide procurement could 
offer  lower  prices,  higher  quality  and  greater 
innovation.  The  modest  value  of  health-related 
tenders published EU-wide by the Austrian health 
sector  (0.23 %  of  GDP,  compared  to  an  EU 
for 
average 
improvements  in  this  area  (11).  Fast  adoption  and 
implementation of the pending public procurement 
reform law as well as increased awareness among 
tendering  authorities  would  be  ways  to  increase 
EU-wide  tendering.  Austria’s  public  hospitals 
aggregate  their  tenders  at  the  level  of  the  federal 
states  (Länder),  and  are  increasingly  tendering 
cross-regionally.  Cross-border  joint  procurement 
projects  are  however  limited.  Extending  cross-
regional  and  cross-border  tendering  could  achieve 
volume  savings  for  commoditised  inputs  and 
amortise  costly  expertise  for  complex  products. 
Finally, a further move away from price as the sole 
award  criterion  (still  51 %  of  EU-wide  tenders  in 
2016) could raise quality and promote innovation. 

scope 

Current  efforts  in  preventive  healthcare  are 
relevant  for  the  fiscal  sustainability  challenge. 
Although  expenditure  on  preventive  healthcare  in 
Austria  is  at  the  EU  average  of  0.2 %  of  GDP  in 
2014, the number of healthy life years is relatively 
low.  Together  with 
spending 
projections,  this  underlines  the  importance  of 
improving  the  health  status  of  the  population.  In 
this  regard,  the  revocation  of  the  smoking  ban  as 
announced  in  the  new  government  programme 
would  be  a  missed  opportunity  to  reduce  the 
incidence  of  life-style  related  health  risk-factors.

long-term 

(11)  The  total  amount  is  EUR 0.78  billion  compared  for 
example to Sweden’s EUR 3.59 billion for a population of 
similar size.  

Source: European Commission 

low 

A  thorough  implementation  of  the  ongoing 
reform  of  outpatient  healthcare  could  make 
efficiency  gains  possible  in  the  medium  term. 
Overall,  the  Austrian  healthcare  system  ensures 
broad access to good-quality services, as shown by 
the  very 
level  of  self-reported  unmet 
healthcare  needs.  Nevertheless,  mainly  due  to  the 
incentives  embedded  in  the  fiscal  framework, 
together  with  free  choice  of  provider  and  no 
gatekeeping,  the  system  relies  heavily  on  the 
less  costly  outpatient 
hospital  sector,  while 
services are underused (OECD and EOHSP 2017).  
As  part  of  the  agreement  on  the  2017  Financial 
Equalisation  Law, 
levels  of 
government and the social security funds agreed to 
strengthen  the  provision  of  outpatient  services,  in 
order  to  shift  services  away  from  the  hospital 
sector.  To  this  end,  75  primary  healthcare  centres 
and  networks  will  be  created  by  2021.  While  the 
reform is currently progressing, it is important for 
its  success 
that  new  contractual  agreements 
between  general  practitioners  and  social  security 
funds  will  ensure  the  right  incentives  for  all 
parties.  

the  different 

The high number of healthcare insurance funds 
points  to  potential  efficiency  gains.  Austria  has 
18 health insurance funds, to which individuals are 
assigned  based  on  their  region  and  occupational 
broadly 
contributions 
status.  While 

are 

20 

67892016201920222025202820312034203720402043204620492052205520582061206420672070AT - Hypothetical scenario without expenditure ceilingsAT - AWG Reference ScenarioEU weighted average - AWG Reference Scenario% of GDP 
 
                                                           
3.2.  FINANCIAL SECTOR 

Banking sector and insurance sector 

and 

eastern 

Capital 

activities. 

south-east  Europe 

The  overall  health  of  Austria’s  banking  sector 
has  continued  to  improve.  The  banking  sector 
substantially  increased  its  capital  ratios  in  2016 
retained  profits  and  several  banks’ 
to 
due 
restructuring 
adequacy 
(including  the  capitalisation  of  subsidiaries  in 
central, 
- 
CESEE)(12)  strengthened  further  and  reached 
18.5 % at the end of June 2017, up from 18.2 % in 
2016. Due to their traditional business model, and 
notwithstanding  the  increase  in  2016,  Austrian 
banks  continue  to  have  lower  leverage  ratios  than 
their  European  peers.  The  liquidity  position  of 
banks has remained adequate. Intra-group liquidity 
transfers  to  the  CESEE  countries  have  declined 
further as efforts to increase the funding sources of 
subsidiaries  in  their  host  countries  have  paid  off. 
Thanks 
favourable  macroeconomic 
conditions,  the  formation  of  new  non-performing 
loans  in  Austria  has  slowed:  the  non-performing 
loan  ratio  declined  to  4.1 %  at  the  end  of  June 
2017  from  5.1 %  in  2016  (ECB,  Supervisory 
Banking Statistics). 

the 

to 

so 

taken 

far, 
Notwithstanding  measures 
achieving  further  efficiency  gains  to  support 
profitability remains a priority. The profitability 
of  Austrian  banks  on  the  local  market  remained 
robust  in  2016  and  increased  in  the  first  half  of 
2017 against the same period of the previous year. 
It  was  supported  by  a  significant  reduction  in  the 
cost  of  risk.  However,  this  positive  trend  hides  a 
weakening  of  underlying  operating  profits  as  low 
interest  rates  and  increasing  operating  expenses 
continue to take their toll. Banks have stepped up 
their adjustment efforts but some of these have yet 
to  bear  fruit.  Improving  bank  profitability  still 
in  operating 
requires  a  sustainable 
efficiency. The cost-to-income ratio for operations 
on  the  local  market  deteriorated  in  2016:  it 

increase 

(12)  The CESEE (central, eastern and south-east Europe) region 
includes  Turkey  and  the  following  sub-regions:  i)  central 
and  eastern  Europe,  consisting  of  the  Czech  Republic, 
Hungary,  Poland,  Slovakia  and  Slovenia;  ii)  south-east 
Europe,  consisting  of  Albania,  Bosnia  &  Herzegovina, 
Bulgaria,  Croatia,  Kosovo,  FYI  Macedonia,  Montenegro, 
Romania  and  Serbia;  iii)  the  Baltic  region,  consisting  of 
Estonia,  Latvia  and  Lithuania,  and  Russia,  Ukraine  and 
other  countries  in  the  Commonwealth  of  Independent 
States group. 

increased  to  74.5 %  from  62.8 %  in  2015  and 
remained  above  the  EU  average  of  roughly  60 %. 
Meanwhile,  the  Austrian  banking  sector  still  has 
scope  to  further  reduce  the  total  number  of 
branches  in  order  to  move  closer  to  the  EU 
average. 

expand 

standards 
institutions 

Foreign-currency  loans  granted  by  banks  on 
the  local  market  have  further  declined.  The 
decrease  in  foreign-currency  loans,  in  particular 
Swiss franc-denominated  loans,  is the  outcome  of 
supervisory  measures  to  curb  foreign  exchange 
lending  adopted  by  the  banking  supervisors  since 
2008.  In  June  2017,  a  revised  version  of  the 
Financial  Market  Authority’s  minimum  standards 
for  risk  management  and  granting  of  foreign 
currency and repayment vehicle loans entered into 
the 
force.  The 
revised 
to  provide 
obligations  of  credit 
sufficient  information  to  borrowers.  They  also 
include  new  requirements  aimed  at  improving 
market  transparency  and  a  new  chapter  on  risk 
provisions  to  be  made  by  banks.  At  the  end  of 
September  2017,  the  outstanding  stock  of  foreign 
currency loans granted by Austrian banks declined 
by  67 %  as  compared  to  October  2008  (when  the 
Financial  Market  Authority  first  recommended 
banks refrain from granting foreign currency loans 
to  unhedged  borrowers).  The  share  of  foreign 
currency  loans  to  households  in  total  loans  has 
continued to decrease and stood at 15 % at the end 
of  September  2017.  Roughly  80 %  of 
the 
outstanding  foreign-currency  loans  to  Austrian 
households will mature from 2021 onwards.  

in  CESEE  has  continued 

The  asset  quality  and  profitability  of 
subsidiaries 
to 
improve.  At  the  end  of  June  2017,  the  total 
exposure  of  Austrian  banks  to  CESEE  countries 
stood  at  EUR  209.9  billion,  up  from  EUR  193 
billion  in  2016(13).  The  most  important  host 
markets  for  Austrian  banks  with  international 
operations  are  the  Czech  Republic,  Slovakia, 
Romania, Croatia and Poland. The restructuring of 
the  UniCredit  Group  in  2016  led  to  a  significant 
change  in  the  geographical  risk  profile  of  the 
Austrian  banking  sector  as  its  exposure  to  several 

(13)  The  comparability  of  end-June  2017  data  with  earlier 
figures is limited  due to recent  methodological changes to 
data collection. 

21 

 
 
  
                                                           
                                                           
3.2. Financial sector 

had  a  significant 
impact  on  public  finances 
(European  Commission,  2016a).  Over  time  the 
assets  of  these  three  vehicles  are  being  divested, 
which will partly reduce public costs. At the end of 
2016, liabilities from the three financial defeasance 
vehicles  classified  as  part  of  government  debt 
amounted  to  6.1  %  of  GDP,  while  the  overall 
impact  on  debt  from  the  support  to  the  financial 
sector was 9.4 % of GDP. 

than  planned  and 

The winding-down of the three public financial 
defeasance  vehicles  is  proceeding,  with  limited 
overall risks. As the recoveries from the winding-
down  of  the  HETA  assets  have  been  higher  than 
expected,  in  May  2017  the  Financial  Market 
Authority  reduced  the  haircut  on  HETA’s  debt 
from  54 %  to  35.6 %,  resulting  in  a  recovery  rate 
of  64.4 %.  In  July  2017, 
interim  payments 
amounting  to  EUR  5.4  billion  took  place  due  to 
high  cash  reserves,  despite  the  initial  plan  to  wait 
for  the  complete  resolution.  The  winding-down  is 
also  proceeding  faster 
is 
expected to be concluded by 2020 instead of 2024, 
with most assets expected to be divested by 2018. 
While  divestments  are  on  track  to  meet  these 
targets,  some  delay  cannot  be  excluded  as  the 
remaining  assets  are  less  attractive  than  the  ones 
already  sold.  KA  Finanz  returned  its  banking 
licence  in  September  2017,  becoming  a  winding-
down  vehicle  owned  by  the  Republic  of  Austria. 
The decision was taken in order to reduce funding 
costs  —  as  short-  and  medium-term  market 
funding  has  been  replaced  by  public  long-term 
funding  —  and 
in 
regulatory 
particular on capitalisation. The conversion into an 
asset management company will also considerably 
shorten  the  time  needed  for  winding  down  KA 
Finanz’s  assets.  This  is  now  expected  to  be 
completed  by  2026  instead  of  2040  as  previously 
planned.  No  consequences  for  public  finances  are 
expected,  as  all  KA  Finanz’s  assets  and  liabilities 
were  already  included  in  government  debt.  The 
winding-down 
proceeding 
according to plan and is expected to be completed 
by mid-2018. 

requirements, 

Immigon 

of 

is 

Housing market 

House  prices  in  Austria  have  grown  robustly 
over the last decade including during the crisis 
years.  Between  2005  and  2016  nominal  house 
prices  grew  on  average  5.0 %  annually.  Rental 
prices followed a similar path, increasing by 3.3 % 

markets (for instance, Turkey, Russia and Croatia) 
declined.  As  of  October  2016,  the  total  assets  of 
the  subsidiaries  of  Austrian  banks  in  CESEE 
countries decreased by roughly 40 % compared to 
the situation before the restructuring of UniCredit. 
Asset quality has continued to improve in most of 
the  markets  in  the  CESEE  region,  partly  due  to 
efforts  made  by  banks  to  clean  up  their  balance 
sheets.  Furthermore,  profitability  has 
also 
increased  thanks  to  lower  impairment  charges  for 
credit  risk.  Overall,  despite  the  improved  outlook 
even  in  more  challenging  markets  (for  instance, 
Ukraine),  remaining  risks  warrant  further  close 
oversight. 

faced 

insurance 

The 
several 
sector  has 
headwinds  in  recent  years.  Low  interest  rates, 
increases  in  life  expectancy,  climate  change  and 
digitalisation  are  some  of  the  main  challenges 
faced  by  insurance  companies  in  recent  years. 
Total gross written premiums in Austria fell 1.9 % 
in 2016 from the previous year, mainly due to the 
decline  in  such  premiums  for  life  insurance.  The 
life insurance business has contracted on the back 
of  the  low  interest  rates,  the  low  expected  rate  of 
return  and  the change  in  the tax  treatment  of new 
life  insurance  contracts  following  the  2016  tax 
reform. Insurance companies have taken measures 
to adjust to the low interest rates by changing their 
product  portfolios  and 
improving  operational 
efficiency,  including  through  mergers.  Overall, 
Austrian  insurance  companies  have  been  better 
placed  to  cope  with  the  challenges  posed  by  low 
interest rates than those in several peer countries as 
the share of guaranteed products in their portfolios 
has  been  lower.  Austrian  insurance  companies 
with 
been 
significantly  exposed  to  CESEE  countries,  which 
make  a  high  contribution  to  their  gross  written 
premiums.  Developments  in  these  host  markets 
therefore also warrant close oversight. 

international 

operations 

have 

Nationalised banks 

The  liabilities  of  ‘financial  defeasance  vehicles’ 
set up in the aftermath of the crisis still account 
for  a  significant  share  of  government  debt. 
Between 2009 and 2015, the non-viable (winding-
banks  — 
down) 
of 
and 
Kommunalkredit,  Hypo  Alpe  Adria 
Volksbanken  —  were  included  in  government 
accounts  as  corresponding  financial  defeasance 
vehicles  (KA  Finanz,  HETA  and  Immigon).  This 

segments 

three 

22 

 
3.2. Financial sector 

income to afford buying a home as well as tenants 
in the private urban rental market (see also Section 
3.4). 

There  seem  to  be  no  indications  of  excessive 
credit  growth  and  risks  to  financial  stability. 
Between  2005  and  2016,  housing  mortgages  rose 
on  average  4.6 %  annually.  Rising  credit  flows 
reflect  the  increased  transaction  values  due  to 
house  price  increases.  Lending  to  households  for 
housing  purposes  has  been  supported  by  the 
favourable  financing  conditions,  with 
lending 
standards  remaining  broadly  unchanged  in  recent 
years.  Changes  in  investment  strategies  towards 
real  estate  as  a  reaction  to  the  low  interest  rates 
might have created additional housing demand and 
increases.  Overvaluation, 
contributed 
measured  as  the  overall  price  gap  exceeding  the 
long-term  average  and  not  being  explained  by 
fundamental  data,  has  increased  since  2010  and 
stood at 3.9 % in 2016 (see Graph 3.2.1). A similar 
indicator  by  the  Austrian  National  Bank  specifies 
that  overvaluation  is  about  20 %  in  Vienna  but 
negligible in the rest of the country. The risks of a 
credit-driven  house  price  bubble  thus  appear 
contained. 

to  price 

The  macro-prudential 
toolkit  has  been 
strengthened  to  contain  potential  risks  from 
real  estate  financing.  The  Austrian  authorities 
have  stepped  up  their  efforts  to  finalise  the  legal 
framework  for  introducing  macro-prudential  tools 
to  contain  potential  risks  from  financing  of  both 
commercial  and  residential  real  estate  following 
the warning issued by the European Systemic Risk 
Board  in  2016.  The  macro-prudential  toolbox 
includes the possibility of imposing limits on loan-
to-value  ratios,  debt  service-to-income  ratios  and 
debt-to-income  ratios,  as  well  as  maturities  limits 
and  minimum  amortisation  requirements.  These 
tools  can  be  applied  individually  or  jointly,  but 
only to the flow of new loans. The tools are not yet 
activated  as  the  Financial  Market  Stability  Board 
has  assessed  that  current  developments  do  not 
warrant  this  However,  credit  institutions  will  be 
subject to enhanced reporting requirements on real 
estate financing from mid-2018 onwards. 

Private sector debt 

In  2016  private  sector  debt  remained  roughly 
flat  for  a  second  year  in  a  row,  at  124 %  of 
GDP.  On  the  back  of  the  increase  in  nominal 

per  year.  Having  increased  by  7.2 %  in  2016, 
deflated  house  prices  were  above  the  6.0 % 
threshold of the MIP scoreboard for the first time. 
In  2016,  the  European  Systemic  Risk  Board  also 
indicated that house price developments in Austria 
required  closer  monitoring.  The  price-to-rent  and 
price-to-income  ratios  have  increased  noticeably 
over the last decade, by 1.7 % and 2.7 % annually.  
Especially 
ratio  departs 
increasingly from its long-term average since 2012 
(Graph 3.2.1).  This 
the  decreasing 
affordability  of  housing  and  particularly  of  house 
ownership. However, quarterly house price data in 
2017 point to a slowdown in house price inflation, 
back to levels below the scoreboard threshold.  

the  price-to-income 

illustrates 

Graph 3.2.1:  Relative price developments and valuation 

gap 

(1) Overvaluation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps. Long-term values are computed over 1995-2016. 
Source: European Commission 

The  increase  of  house  prices  differs  across 
regions.  House  price  increases  have  been  much 
more  pronounced  in  the  capital  region  of  Vienna 
(6.8 %  on  average  between  2005  and  2016)  than 
elsewhere  (4.4 %).  However,  the  impact  on  the 
population is mitigated by the fact that about 80 % 
of  households  in  Vienna  live  in  rented  housing 
compared with 50 % in the rest of the country. In 
addition,  social  housing,  which  is  home  to  about 
40 %  of  all  households  that  rent,  and  strict  rental 
regulations  play  an  important  role  in  providing 
affordable  housing  in  Austria.  In  line  with  these 
national  characteristics,  the  recent  house  price 
increases  mainly  affect  households  with  enough 

23 

-15-10-5051015202530000204060810121416Model-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg. 
 
3.2. Financial sector 

GDP, the share of private sector debt as % of GDP 
declined steadily from 2010 to 2015 and remained 
broadly  stable  in  2016  below  the  macroeconomic 
scoreboard  threshold.  The  indebtedness  of  non-
financial  corporations  declined  slightly  in  2016 
from  the  previous  year  to  72.7 %  of  GDP. 
Meanwhile, household debt increased to 51.3 % in 
2016, up from 50.9 % in 2015.  

Despite increasing further, private sector credit 
flow  remained  below 
the  macroeconomic 
scoreboard  threshold  of  12 %.  Spurred  by 
favourable  financing  conditions,  private  sector 
credit flow (as % of GDP) edged up to 3.2 % at the 
end  of  2016  from  2.3 %  in  2015.  The  breakdown 
of private credit flow shows that the credit flow to 
households  (as  %  of  GDP)  continued  the  upward 
trend seen since 2012, as it rose to 1.2 % at the end 
of  2016.  Meanwhile,  the  credit  flow  to  non-

financial  corporations,  which  has  gained  further 
momentum since 2014, increased to 2.1 % of GDP 
at the end of 2016, up from 1.6 % in the previous 
year.  The  credit  rise  was  more  marked  for 
households than for corporates, for which internal 
resources have been the main source of financing. 
Low  interest  rates  have  supported  the  debt-
servicing  capacity  of  non-financial  corporates, 
which  remain  exposed  to  interest  rate  risk  due  to 
their high proportion of loans with variable interest 
rates.  Household 
further 
momentum  in  2017,  driven  mainly  by  mortgage 
credit. Meanwhile, the share of loans with variable 
interest  rates  (traditionally  high  in  Austria  and 
above  international  standards)  and  of  foreign 
currency  loans  in  total  loans  has  continued  to 
the  exposure  of 
decline.  This  has  reduced 
households to interest rate and currency risks. 

lending 

gained 

24 

 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

labour  market  performance 

Austria’s 
is 
improving  but  some  structural  challenges 
persist.  Thanks 
to  strong  economic  growth, 
employment is growing faster than the labour force 
supply.  After  6  years  of  continued  increases, 
unemployment therefore started to decline in 2017 
and is expected to remain low. It still shows strong 
regional  differences,  however.  The  employment 
rate  has  risen  to  a  record  high  of  75.3 %  (Q3-
2017). Despite population ageing the labour supply 
increased,  mainly  driven  by  rising  numbers  of 
women,  older  people  and  people  with  a  migrant 
background either in work or seeking a job.   

Graph 3.3.1:  Trends in labour costs and its components 

force  than  in  peer  countries.  Over  the  past 
decade  Austria  has  experienced  increased  inflows 
of  people  mainly  from  new  EU  Member  States. 
Recently,  however,  these  have  been  surpassed  by 
non-EU  migrants  due  to  an  increased  number  of 
people  seeking  protection  (OECD,  2017a).  The 
proportion  of  women  working  has  also  increased 
over  the  past  10  years  to  70.9 %,  above  the  EU 
average of 65.3 %. Similarly, the employment rate 
of  older  workers  increased  from  33 %  in  2006  to 
49.2 %  in  2016,  but  it  is  still  below  the  EU-28 
average of 55.3 %. Once out of the labour market, 
it is more difficult for older workers to return. The 
additional labour supply is positive as it is partially 
mitigating the drop in the workforce caused by the 
ageing  of  the  population.  Nonetheless,  absorbing 
the  additional  labour  supply  in  the  labour  market 
remains  one  of  the  challenges.  The  ‘employment 
bonus’, a subsidy aimed at creating  new jobs, was 
introduced in July 2017 but has seen limited take-
up and was phased out end of January 2018. 

Graph 3.3.2:  Gaps in employment rate (20-64) and 

between male and female full-time equivalent 
employment rate, 2016 

Source: European Commission 

in 

line  with 

Wages  are  growing 
the 
performance  of  the  labour  market.  Nominal 
compensation per employee increased by 2.4 % in 
2016  and  is  expected  grow  by  2.3 %  annually 
between  2017  and  2019.  Coupled  with  solid 
productivity gains, this has resulted in a fall in the 
nominal unit labour cost, thus improving Austria’s 
competitive  position.  As  inflation  picked  up,  real 
wage growth slowed, from 1.3 % in 2016 to 0.5 % 
in 2017. 

Source: Eurostat 

Immigration  and  the  increased  numbers  of 
women  and  older  people  working  or  seeking  a 
job led to a faster expansion of Austria’s labour 

25 

-3-2-1012345602030405060708091011121314151617*18*19*Rate of change y-o-y (%)Inflation (GDP deflator growth)Real compensation per employeeProductivity contribution (negative sign)Nominal unit labour costULC in Euro Area05101520253035MTITELROCZSKPLHUIEEU28ESUKNLLUCYHRBEDEEEATFRBGPTDKSISEFILVLTpercentage pointsER gapER FTE gap 
 
 
 
 
 
3.3. Labour market, education and social policies 

Box 3.3.1:  Monitoring performance in the light of the European Pillar of Social Rights 

The  European  Pillar  of  Social  Rights,  proclaimed  on  17  November  2017  by the  European  Parliament,  the 
Council  and  the  European  Commission,  sets  out  20  principles  and  rights  to  benefit  citizens  in  the  EU.  In 
light of the legacy of the crisis and changes in our societies driven by population ageing, digitalisation and 
new ways of working, the Pillar serves as a compass for a renewed process of convergence towards better 
working and living conditions. 

Austria  performs  relatively  well  on  the  indicators  of  the  Social  Scoreboard  (1)  supporting  the 
European Pillar of Social Rights. They reflect Austria's focus on active labour market policies and a strong 
positive impact of social transfers on reducing poverty risks. The strong involvement of social partners in 
high-level decision-making, characterised by minimum government intervention, contributes to fair working 
conditions and a good functioning of social dialogue.  

A  high  share  of  part-time  employment  of 
women  coincides  with  a  fairly  large  pay  gap. 
The gender employment gap is relatively low but it 
widens  significantly  if  full  time  equivalents  are 
taken  into  account.  The  high  share  of  part  time 
employment  of  women  hampers  the  full  use  of 
their  labour  market  potential  which  would  be 
crucial  in  the  context  of  an  ageing  population  to 
sustain  the  welfare  system.  There  is  a  strong 
gender  segmentation  of  the labour  market  and the 
gender related part-time employment is among the 
highest in the EU. 

the  given 

Social  transfers  (other  than  pensions)  have  a 
strong impact on poverty reduction. Cash family 
benefits have a very strong impact on reducing the 
at-risk-of  poverty  rate.  This  type  of  benefits 
reduces the at-risk-of poverty rate of families with 
children  by  approximately  8  to  23  pps  depending 
on 
family  constellation.  Benefits 
dedicated  to  families  and  children  especially 
reduce  the  at-risk-of-poverty  rates  of  households 
with  young  children  (at  the  age  up  to  6  years). 
Family  allowances  and  parental  leave  benefits 
compensate to a considerable degree for the lower 
income  deriving  from  lower  employment  rates  of 
parents. 

(1)  The  Social  Scoreboard  includes  14  headline  indicators,  of  which  12  are  currently  used  to  compare  Member  States 
performance.  The  indicators  "participants  in  active  labour  market  policies  per  100  persons  wanting  to  work"  and 
"compensation  of  employees  per  hour  worked  (in  EUR)"  are  not  used  due  to  technical  concerns  by  Member  States. 
Possible alternatives will be discussed in the relevant Committees. Abbreviation: GDHI – gross disposable household 
income.  

The  high  share  of  part-time  employment  of 
women  indicates  a  still  significant  untapped 
labour  potential.  The  gender  differences 
in 
Austria’s  employment  rates  are  relatively  low  at 
7.8 %, compared with an EU-28 average of 11.6 % 
in  2016.  However,  this  is  not  the  case  when 
considering  the  full-time  equivalent  employment 
rates  (see  Graph  3.3.2).  Women’s  part-time 

employment  is  among  the  highest  in  the  EU  at 
47.9 %,  compared  with  the  EU-28  average  of 
31.4 % in 2016. This reflects the division between 
women  who  do  paid  and  unpaid  work.  There  is  a 
gender  gap  of  17  percentage  points  in  the  time 
spent  in  unpaid  care  work  per  week,  putting 
Austria  in  the  25th  place  in  2015  (Bergmann  and 
Sorger,  2017).  This  does  not  only  hurt  women’s 

26 

Early leavers from education and training (% of population aged 18-24)Better than averageGender employment gapBetter than averageIncome quintile ratio (S80/S20)Better than averageAt risk of poverty or social exclusion (in %)Better than averageYouth NEET (% of total population aged 15-24)Good but to monitorEmployment rate (% population aged 20-64)Better than averageUnemployment rate (% population aged 15-74)Good but to monitorGDHI per capita growth To watchImpact of social transfers (other than pensions) on poverty reductionBest performersChildren aged less than 3 years in formal childcareBetter than averageSelf-reported unmet need for medical care Better than averageIndividuals' level of digital skillsBetter than averageSocial protection and inclusionDynamic labour markets and fair working conditionsEqual opportunities and access to the labour marketAUSTRIAMembersStatesareclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaveragesandclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituations").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaveragebutitisimprovingfast.Formethodologicaldetails,pleaseconsultthedraftJointEmploymentReport2018,COM(2017)674final.NEET:neitherinemploymentnorineducationortraining;GDHI:grossdisposablehousehold income. 
 
 
3.3. Labour market, education and social policies 

been  low  (estimations  range  from  0.6 %  to  2 %). 
Austria  supports  expanding  ECEC  for  children 
below  the  ages  of  3-4  by  giving  the  federal 
provinces  incentives  to  improve  their  institutional 
childcare  e.g.,  through  co-financing  the  start-up 
costs of new childcare places (16).  

People  with  a  migrant  background  find  it 
harder  to  get  work.  Around  21 %  of  Austria’s 
workforce  in  2016  had  a  migrant  background.  In 
2016,  the  employment  rate  of  non-EU  born 
persons  was  17.1  pp  lower  than  that  of  EU-born 
nationals.  The  lower  number  of  people  with  a 
migrant background who are in work or seeking a 
job  is  mainly  due  to  their  qualification  levels  and 
correlates with their country of origin. Their labour 
market performance is influenced by their reasons 
for  migrating,  their  education  level  and  their 
socioeconomic  background.  The  increase  of  the 
unemployment rate of foreign born (from non-EU 
28)  from  2010  to  2016  was  much  higher  (10.3  % 
to  14.3  %)  than  the  increase  of  unemployment  of 
Austrian  nationals  (4.1  %  to  4.7  %)  for  the  same 
period.  The  employment  situation  of  native-born 
with  foreign  born  parents  (i.e.  second-generation) 
is also unfavourable(17). 

their 

low  qualification 

Getting  refugees  into  work  will  remain  a 
challenge,  particularly  for  women.  Austria  has 
made  considerable  efforts  to  accommodate  and 
integrate  refugees  (18).  More  asylum  seekers  and 
refugees  want  to  work  but  a  number  of  factors  
levels  and 
including 
insufficient  German  language  skills  as  well  as 
institutional  barriers  hinder  this.  Of  the  9 523 
refugees  recognised  between  2015  and  mid-2016, 
15.2 %  were  in  employment  by  the  end  of  2016. 
66.8 %  were  registered  at  Public  Employment 
Service Austria (AMS) and 18 % were outside the 
labour  force  (AMS,  2017).  The  Integration  Act 
"Integrationsjahrgesetz"  adopted  in  June  2017 
obliges  refugees  and  beneficiaries  of  subsidiary 
protection to a one year labour market integration 

(16)  Its  goal  is  to  improve  ECEC-coverage  rate  for  children  in 
the age below 3 years. It also aims to expand the opening 
hours of existing institutions and to close regional gaps in 
access to childcare for children aged over 3 

(17)  In  2014,  native  born  with  foreign  born  parents  had  lower 
employment  rate  (59.2%)  by  around  14.4  %  points  than 
native-born without a migrant background (73.6%). 

(18)  In  June  2017,  the government  adopted  the  Integration Act 
(Integrationsjahrgesetz),  a  package  of  measures  to  find 
work for refugees and asylum seekers who are likely to be 
granted asylum. 

income  and  career  prospects  but  also  reduces  the 
adequacy of their pensions. 

in 

Austria’s  gender  pay  gap  of  21.7 %  in  2015  is 
wider  than  the  EU  average  of  16.3 %,  mainly 
due  to  the  high  proportion  of  women  in  part-
time  work  and  on  low  pay.  The  gap  remains 
persistently  high  despite  a  slight  reduction  in 
recent years. It is driven by gender segmentation in 
the 
in 
labour  market,  with  women  working 
economic sectors that offer comparatively low pay 
for the same level of qualification. In 2013, women 
low-wage 
were  proportionally  more  often 
employment  in  all  branches,  and  even  among 
female  full-time  earners  the  percentage  of  low-
wage  earners  is  high  (Geisberger,  2012).  The 
strong influence of traditional gender roles and the 
undervaluation  of  women’s  work  and  skills  also 
play a key role (Bergmann and Sorger, 2017). Part-
time work is often associated with lower earnings 
per  hour  and  this  combination  contributes  to 
Austria’s wide gender gap in pensions (see Section 
3.1.  on  pensions).  Despite  a  reduction  of  5  pp 
compared  to  2015,  the  low  wage  trap  for  second 
earners (14)  is  still  6  pp  above  the  EU  average. 
Moreover,  the  tax  reform  of  2015  and  2016 
benefitted  men  more than women (Rechnungshof, 
2017). 

formal 

attending 

Although  significantly  increasing  over  the  past 
ten  years,  the  rate  of  formal  childcare  remains 
below the targets. The proportion of children aged 
childcare  has 
below  3 
substantially  increased,  from  10.8 %  in  2006  to 
25.4 % in 2016. However, it remains below the EU 
Barcelona  target  of  33 %  participation  in  early 
childhood education and care (ECEC). Progress is 
hampered  by  the  institutional  set-up  and  by  the 
lack  of  a  framework  to  improve  quality  (15).  On 
opening  hours  and  availability  during  public  and 
school  holidays,  there  are  substantial  differences 
between  Vienna  and  the  federal  provinces  (Baier 
and  Kaindl,  2011;  Fink  2013).  In  Vienna,  44.3 % 
of  0-2  year-olds  were  in  childcare  in  2016  while 
the figure for Styria was 14.2 %. Parental leave for 
fathers  was  introduced  in  1990  but  take-up  has 

(14)  The low wage trap is defined as the rate at which taxes are 
increased  and  benefits  withdrawn  as  earnings  rise  due  to 
increased  work  productivity.  Example:  principle  earner 
(100 % wage), second earner: increase from 33 to 67 %. 
(15)  This  could  involve  raising  the  level  of  staff  qualifications 
introducing  compulsory  quality  criteria  for  all 

and 
stakeholders. 

27 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

qualification  profiles,  putting  pressure  on  low-
skilled  and  elderly  workers.  AMS  regularly 
identifies  professions  that  will  be  particularly 
impacted  by  digitalisation  and  tailors  its  advice 
services  accordingly.  Basic  digital  skills  will 
become  an  essential  requirement  of  all  jobs.  In 
2017 around 33 % of Austrians aged 16-74 did not 
them  at  a 
have  basic  digital  skills,  putting 
disadvantage  in  the  jobs  market.  Adapting  to 
technological  change  may  require  people  in  all 
segments  of  the  labour  market  to  upskill  through 
continued  adult  education.  The  relevance  of 
Austria’s  ‘dual’  vocational  education  system  will 
thus increase in the future (Hausegger et al., 2016). 
the  share  of  companies  reporting 
Moreover, 
difficulties 
is 
ICT 
significantly higher in Austria (60 %) than the EU 
average  (40 %)  according  to  the  European Digital 
Scoreboard. 

specialists 

finding 

in 

to 

institutions 

Austria  is  well  placed  to  adapt  its  labour 
market 
digitalisation. 
Digitalisation will have profound effects on careers 
and working patterns. While crowd-working is still 
a  minor  phenomenon  in  absolute  terms,  numbers 
are  rising  (Huws  and  Joyce,  2016).  Specific 
digitalisation  challenges  arise,  such  as  protection 
of  employees’  data  and  striking  the  right  balance 
life.  Austria  has 
between  work  and  private 
acknowledged  the  need  to  prepare  labour  market 
institutions for the digital economy and is working 
on modernising employee protection, including for 
non-traditional forms of employment (teleworking, 
freelancing, crowd-working). Austria can build on 
the existing coverage of independents in the social 
security  system  to  cover  freelancers  and  crowd-
workers 
the 
corresponding  measures  under  Austria’s  national 
digitalization strategy is still pending. 

Implementation  of 

as  well. 

implemented 

programme 
public 
employment  service.  Asylum  seekers  with  a  high 
likelihood  of  being  granted  asylum  also  have 
access to these measures. 

the 

by 

Graph 3.3.3:  Unemployment rate by educational 

attainment 

Source: Eurostat 

(Q2-2017), 

Low-skilled  workers  have  been  hit  particularly 
hard  by  unemployment.  People  with  only 
compulsory  education  are  particularly  affected  by 
the 
unemployment.  At  13.1 % 
unemployment  rate  for  low-qualified  workers  is 
more  than  twice  Austria’s  overall  unemployment 
rate  of  6.1 %(19).  In  2016  almost  half  (46.8 %)  of 
those  registered  as  unemployed  had  completed 
only 
level 
(Pflichtschulabschluss); 51.2 % of this group were 
long-term  unemployed 
(AMS,  2016).  Active 
labour  market  policies  remain  crucial  to  upskill 
these workers and help them find new jobs. 

compulsory 

school 

the 

and 

The  digital  transformation  of  the  Austrian 
economy will lead to widespread changes in job 
requirements. 
qualification 
profiles 
Forecasts for Austria predict a significant increase 
in  automation  of  routine  tasks  in  the  production 
sector and in business administration functions. In 
Austria, these changes will not necessarily lead to 
job  losses.  They  will  however  significantly  alter 

(19)  According  to  Public  Employment  Service  Austria,  the 
unemployment 
in  2016  of  people  with  only 
compulsory  education  (Pflichtschulabschluss)  is  three  to 
five times higher than that of groups with higher levels of 
education (AMS, 2016). 

rate 

Social policy and inclusion 

The  overall  social  situation  reflects  the  good 
economic  conditions.  In  2016  the  number  of 
people at risk of poverty or social exclusion fell for 
the  third  consecutive  year.  The  improvement  was 
driven by a decline in severe material deprivation, 
which measures absolute poverty, and by a fall in 
the number of households with low work intensity. 
Austria’s  real  gross  disposable  household  income 
per  capita  stagnated  following  the  crisis  but  2016 
data  suggest  household  income  has  increased  ,  in 

28 

0246810121401020304050607080910111213141516% labour force 20-64High skilledMedium skilledLow skilled 
 
                                                           
3.3. Labour market, education and social policies 

ownership of property assets. The opportunities for 
young  people  from  a  disadvantaged  background 
are also relatively poor, as evidenced by the strong 
results  and 
the  2015  PISA 
link  between 
socioeconomic background.  

The system of long-term care faces challenges in 
funding  and  staffing  which  may  complicate 
access  for  patients.  In  2018,  the  provisions  for 
personal  and  family  contributions  to  long-term 
care  from  an  individual’s  wealth  (Pflegeregress) 
will  be  abolished.  There  are  no  clear  estimates  of 
the projected impact of this measure on demand, or 
of  its  overall  financial  cost.  In  the  face  of 
demographic trends and staff shortages, the current 
system  is  already  under  pressure  and  increased 
constraints 
demand  may 
(Grossmann  and  Schuster,  2017).  Based  on  the 
projections of the 2018 Ageing Report and without 
considering any additional impact on demand from 
the new measures, total expenditure for long-term 
care is already expected to increase from 1.9 % of 
GDP in 2016 to 2.6 % in 2040 and 3.8 % in 2070 
(European Commission, 2018b). Furthermore, it is 
unclear how these changes to the existing funding 
model,  which  will  mean  the  system  is  no  longer 
progressive,  will  affect  the  already  high  level  of 
inequality  in  the  distribution  of  wealth  (Firgo, 
2017) 

capacity 

cause 

ensures 

ratios.  This 

Austria  faces  a  particular  challenge  to  provide 
adequate  pensions  for  women  over  65.  The 
pension  system  features  relatively  high  aggregate 
replacement 
adequate 
pensions, reducing old age poverty risks. A means-
tested  equalisation  supplement  (Ausgleichszulage) 
for  contributions  above  30  years  also  reduces  this 
risk.  Nevertheless,  the  risk  of  poverty  for  women 
over 65 remains higher than that for men. Shorter 
working  lives,  career  interruptions  due  to  care 
responsibilities,  part-time  work,  and  the  high 
gender  pay  gap  lead  to  lower  contributions  and 
thus to lower pension benefits for. Austria’s gender 
gap in pensions for 65-74 year-olds was 40.5 % in 
2016, above the EU average. 

Austria’s  social  protection  for  employees  and 
the self-employed performs well. Austria has one 
of  the  highest  coverage  rates  of  unemployment 
term  unemployed  but 
benefits  for 

the  short 

line  with 
conditions. 

the 

improved  overall  economic 

in-work  poverty 

is  rising, 
By  contrast, 
particularly  among  foreign  workers.  While 
improved  labour  market  conditions  and  falling 
unemployment  have  been  broadly  beneficial,  the 
increase  in  in-work  poverty  raises  questions  over 
the  quality  of  job  creation.  In  2016  Austria’s  rate 
of  in-work  poverty  increased  slightly  from  7.9 % 
to  8.3 %.  This  overall  increase  was  driven  solely 
by a rise in in-work poverty among (both EU and 
non-EU) foreign nationals, from 21.7 % to 24.8 % 
whilst  for  Austrians  the  rate  of  in-work  poverty 
remained  stable  at  a  relatively  low  5.4 %.  The 
social partners agreed in 2017 on a monthly gross 
minimum wage of EUR 1 500 for all sectors, to be 
implemented nationally by 2020. 

under 

subsidiary 

protection. 

Austria’s  welfare  system, though  robust, might 
not  sufficiently  protect  certain  groups  against 
poverty.  The  poverty  gap  remains  significantly 
below the EU average. The means-tested minimum 
income 
(Bedarfsorientierte  Mindestsicherung) 
provides support for poor citizens in need and for 
persons  who  are  granted  asylum  as  well  as  for 
those 
The 
benchmarking  exercise (20)  shows  that  in  Austria 
the minimum income benefits are somewhat below 
the national poverty threshold, still more generous 
than  in  most  EU  member  states.  However,  the 
legislation is currently set at state ("Länder") level, 
which  creates  variations  within  the  country.  The 
new  Government  envisages  establishing  a  federal 
framework with upper ceilings regardless of family 
composition,  thus  potentially  increasing  poverty 
risks  for  larger  families.  The  Land  of  Upper-
Austria  introduced  such  a  cap  of  1.500  Euro  per 
month  for  a  family  with  2  or  more  children 
already. 

Income inequality remains low, but both wealth 
and  opportunity  are  unequally  spread.  The 
S80/S20,  which  measures 
the  distribution  of 
income, remained low at 4.1 in 2016, compared to 
an  EU  average  of  5.2.  This  is  largely  due  to  the 
redistributive  effects  of  taxes  and  benefits.  In 
contrast,  the  continued  rise  in  house  prices  might 
increase  wealth  inequality  due  to  the  unequal 

(20) According  to  the  results  of  the  benchmarking  exercise  in 
the  area  of  minimum  income  carried  out  by  the  Social 
Protection Committee, see Draft Joint Employment Report.  

29 

 
                                                           
 
3.3. Labour market, education and social policies 

Graph 3.3.4:  Science — Percentage of low performers in 

Austria by immigrant background 

maximum  duration  of  benefits  is  rather  low (21). 
However,  employees  or  self-employed  with  gross 
monthly earnings below EUR 425.70 (Geringfügig 
Beschäftigte), a majority of whom women, are not 
covered by unemployment insurance(22). They can 
opt  into  other  strands  of  social  insurance,  i.e. 
sickness,  maternity,  pensions  and 
invalidity 
schemes.  National  data  show  that  the  number  of 
people  employed  under  such  conditions  has 
increased  steadily  (from  148 278  in  1996  to 
273 093  in  2008  and  341 735  in  2015)  while  the 
number  of  marginal  freelance  contracts  has 
declined (European Commission, 2017c). 

Education and skills 

and  will 

responsibilities 

Austria made  progress  on  its  education reform 
but  performance  in  basic  skills  remains  below 
EU  average.  The  second  package(23),  adopted  in 
mid-2017,  gives  schools  more  autonomy  and 
allow 
clearer 
administrative  clustering  of  several  schools. 
Schools are to determine also class and group size 
and  school  heads  will  be  allowed  to  select  their 
teachers.  The  law  foresees  that  within  model 
regions, parents and teachers may vote with simple 
majority to convert a school into a comprehensive 
for  pupils  aged  10-14(24).  Federal 
school 
authorities will nominate the directors of the newly 
created 
‘education 
directorates’  (Bildungsdirektionen)  in  agreement 
with  the  regional  governor.  The  proportion  of 
pupils in all-day schooling improved from 23.13 % 
in  2016/2017  to  24.36 %  in  2017/2018.  However, 
the more comprehensive type, called  verschränkte 
Form, still accounts for only 18 % of pupils in all-
day schooling at general compulsory schools.  

regional 

hybrid) 

(still 

(21)  According  to  the  results  of  the  benchmarking  exercise  in 
the  area  of  Unemployment  benefits  of  the  EMCO,  see 
Draft Joint Employment report. 

the  marginally 

(22)  Approximately  half  of 

employed 
(Geringfügig Beschäftigte) are subject to compulsory social 
insurance  as  they  are  at  the  same  time  either  in  a  regular 
job or recipients of unemployment benefits or of a pension. 
(23)  The  first  implementation  package,  adopted  in  2016, 
introduced  a  better transition  between  the  last  compulsory 
year  of  early  childhood  education  and  the  first  2  years  of 
primary school. 

(24)  Vorarlberg,  is  in  the  process  of  doing  so  and  can  provide 

important evidence for further nationwide reform. 

Source: OECD 

Overall,  performance  in  basic  skills  remains 
below  EU  average.  A  wide  performance  gap 
remains  between  students  with  and  without 
migrant  background.  National  testing  in  2016 
confirmed  that  many  pupils  lack  basic  skills  in 
German. 38 % of 10 year-olds in 2015 and 45 % of 
14 year-olds in 2016 did not reach the basic level 
or did so only partially as measured by the Federal 
Institute  for  Education  studies  (BIFIE,  2016  and 
2017). Comparing the 2012 and 2015 PISA results, 
the  proportion  of  low  achievers  increased  in  all 
i.e.  mathematics, 
three  core  areas  surveyed, 
(European  Commission, 
reading  and  science 
2017b).  Native  born  pupils  outperform  first 
generation  migrants  by  82  PISA  score  points 
(translating  into  almost  3  years  of  school).  PISA 
indicates  weaker  science  performance  among 
students  who  do  not  speak  the  language  of 
instruction  at  home.  Recent  international  testing 
(PIRLS)  confirmed  a  widening  gap  in  reading  for 
those  with  weak  socio-economic  or  migrant 
(Wallner-Paschon  et  al.,  2017). 
background 
National  testing  confirms  this  trend  and  shows  a 
major difference between listening and reading(25). 
Many  students  with  a  migrant  background  attend 
non-academic  lower  secondary  schools  (NMS) 
where  up  to  59 %  do  not  reach  or  only  partially 

(25)  According  to  Wallner-Paschon  et  al.  (2017),  for  reading, 
young  people  with  a  migrant  background  trail  with  75 
score  points,  compared  to  477  points  for  young  people 
without a  migrant  background; for listening the scores are 
96 and 423, respectively. Accounting for social background 
reduces the disadvantage to 48 and 68 points, respectively. 

30 

05101520253035404550% 
                                                           
 
                                                           
3.3. Labour market, education and social policies 

Austria’s tertiary educational attainment rate is 
40.1%,  reaching  both  the  national  and  Europe 
2020  targets.  The  number  of  students  and 
graduates  has  continually  increased  over  the  last 
decade.  However,  resources  and  teaching  staff 
have  not kept pace  (European  Commission  2016a 
and 2017b). The intended move to capacity-based 
financing  has  not  been  finalised.  Such  a  ‘fully 
managed’  system  of  access  to  higher  education  is 
planned  to  be  linked  to  a  relative  increase  of 
available 
improve  quality  and 
effectiveness by, among other things, boosting the 
student-teacher  ratio  to  levels  comparable  to  the 
international  average.  This  measure  has  not  been 
adopted but figures among the priorities of the new 
government.  Having  adopted  a  national  strategy 
‘on  the  social  dimension  in  higher  education’(27) 
allows  mitigating  rising  inequality,  also  through 
such  a  reform.  Study  grants  have  already  been 
increased and the range of recipients enlarged(28). 

resources 

to 

structural 

Austria is expected to increase the use of digital 
technology in higher education. This is important 
teaching  and  publishing(29).  Higher 
for  both 
funds 
education 
(Hochschulraumstrukturmittel)  will  be  invested  in 
a  new  ‘e-infrastructure’  and  in  developing  a 
national  infrastructure  for  creating,  discovering 
and  sharing  open  educational  resources.  Austria 
has a lower number of graduates in some fields of 
science, technology, engineering, and mathematics 
(STEM),  particularly  at  PhD  level,  limiting  the 
innovation.  The  project  "Zukunft 
scope 
Hochschule" addressed this with a particular focus 
on  ICT  graduates.  Austria  has  the  second  biggest 
gender gap in STEM graduates. For ICT, the share 
of  women  among  recent  graduates  is  only  17 %, 
among the lowest in Europe.  

for 

Austria  has  also  launched  its  digital  education 
strategy  ‘School  4.0  —  let’s  get  digital’.  Digital 
skills  will  be  introduced  into  the  curriculum  of 

(27)https://wissenschaft.bmwfw.gv.at/bmwfw/studium/nationale

-strategie-zur-sozialen-dimension/ 

(28)  The strategy is the first comprehensive document aimed at 
improving  access  to  higher  education  for  less-represented 
groups.  It sets quantitative  goals up until  2025.  The paper 
identifies  three  broad  goals:  more  integrative  access; 
preventing  dropout  and  improving  results;  and  optimal 
framework conditions for policy steering.  

in  preparing 

reach the minimum level in reading, whilst this is 
essential 
for  work.  The  new 
Government  announced  to  strengthen  policies  on 
early tracking and separation, including for special 
education,  and  wants  to  introduce  an  education 
result obligation until 18 years for all. 

to 

for 

the 

and 

Training 

integrate 

Education 

Various policy and legal initiatives seek to help 
young  people  with  a  migrant  background, 
including recognised refugees and people under 
‘subsidiary  protection’ 
into 
Austrian  society.  These  include  measures  to 
reduce  early  school  leaving  like  the  recently 
Act 
adopted 
the 
(Ausbildungspflichtgesetz).  This  expands 
framework 
of 
skills 
upgrading 
disadvantaged  young  people.  Since  July  2017  all 
young  people  aged  up  to  18  are  obliged  to  be  in 
education, training or employment. The Integration 
Act  of  June  2017  makes  it  compulsory  for 
migrants to attend courses in language, culture and 
values. Austria has pledged to pay special attention 
to  the  transition  from  nursery  school  to  primary 
school.  The  new  Government  aims  at  reinforcing 
German support in schools, and introducing in case 
of  lacking  language  skills  a  second  year  of 
compulsory early childhood and care (ECEC). The 
quality of the latter should be improved through a 
indicators, 
framework  on  quality 
common 
including  smaller  groups,  higher  standards  for 
initial  and  continued  training  as  well  as  of 
management.  

Austria 

Pathways, 

Upskilling 

In line with the 2016 Council Recommendation 
on 
is 
implementing  its  Adult  Education  Initiative. 
This enables adults who lack basic skills or never 
graduated  from  lower  secondary  education  to 
continue and finish their education free of charge. 
Since  many  of  those  with  a  migrant  background 
and  most  recognised refugees  opt for  professional 
training 
training,  vocational 
(VET) (26) is crucial to their integration. Initiatives 
and  programmes  integrate  refugees  into  formal 
VET  by  assessing  and  validating  their  skills  and 
qualifications gained abroad. An essential aspect is 
to  support  young 
in  gaining  an 
apprenticeship  diploma  and  help  them  choose  the 
appropriate occupation. 

education 

refugees 

and 

(26)  A  current  challenge 

regional  mismatch 
apprenticeship-based vocational education and training  

the 

is 

(29)  Performance-based  financing  agreements  with  higher 
education institutions will provide incentives for increasing 
digital 
teaching  programmes.  Licensing 
educational  content  for  open  use  should  help  it  spread  to 
other users. 

learning  and 

in 

31 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

and 

lower 

schools 

secondary 

primary 
in 
2018/2019.  Digital  training  for  teachers  is  also 
compulsory  for  new  teachers  with  6  points  from 
the  European  Credit  Transfer  and  Accumulation 
System. They have to complete a modular training 
within  3  years  of  beginning  their  career,  but  it 
remains  optional  for  other  teachers.  A  virtual 
pedagogical institute will support this. The strategy 
also  has  a  hardware  component  that  is  not  yet 
financed. By 2021, all schools will have broadband 
and  WLAN  access,  compared  to  96 %  of  federal 
and 78 % of compulsory schools today.  

32 

 
3.4.   INVESTMENT 

General investment situation 

the 

total 

Investment  grew  strongly  in  2017  but  did  not 
improve 
factor 
stagnating 
productivity.  Austria's  total  factor  productivity 
has  been  stagnating  in  recent  years,  against  the 
overall trend in the EU of slightly rising TFP (see 
Graph  1.6).  Overcoming  this  stagnation  requires 
productivity  enhancing  investments,  notably  in 
innovation  and  digitalization.  Total  investment  in 
Austria  increased  by  3.7 %  in  2016.  This  strong 
investment growth was the main contributor to the 
economic  upswing,  ahead  of  private  consumption 
and  exports  also  in  2017.  However,  investment 
growth  is  expected  to  slow  down  from  2018 
onwards  (to  2.7 %  in  2018  and  2.4 %  in  2019) 
which  will  also  dampen  GDP  growth.  Strong 
investment in equipment drove investment growth 
in  2016  and  2017  as  firms  worked  through  a 
backlog  of  necessary  replacements.  For  2018, 
investment in business expansion is expected to be 
on  par  with  replacements  (WKÖ,  2017a).  This 
type of investment contributes strongly to growth, 
productivity and employment. 

Strong  housing  demand  is keeping  up  pressure 
on  building  supply.  The  population  grew  on 
average by 0.6 % yearly from 2010 to 2016, faster 
than  the  EU  average  of  0.2 %  per  year.  The 
number  of  households  increased  by  40  170  on 
average  per  year  between  2010  and  2016  due  to 
migration  and a  trend  towards  more  single-person 
households.  Thus, 
together  with  depreciation, 
housing demand can be estimated at approximately 
56 780  dwellings  per  year.  This  is  broadly  in  line 
with  the  average  number  of  completed  dwellings. 
However,  stronger  housing  demand  due  to  the 
refugee  crisis  since  2015  has  outpaced  supply  in 
the last 3 years, contributing to the overall upward 
pressure on house prices. Housing construction has 
grown  at  a  subdued  level  in  the  last  decade  and 
only picked up in 2017. Nevertheless, the number 
of  completed  dwellings  per  1 000  people  at  5.6 
units demonstrates that Austria comes from one of 
the  highest  rates  in  the  EU  (the  average  of  16 
comparable  EU  countries  is  3.0).  Along  with 
institutional  changes 
the  region's  housing 
in 
market schemes since 2005, this may also explain 
the weak growth rate of housing investment as the 
overall number of units completed is already high. 
The  population  increase  has  been  particularly 
strong in Vienna, averaging 1.4 % a year between 
2010  and  2017,  and  peaking  at  2.0 %  in  2016 

during the refugee crisis. This was also reflected in 
stronger  price  pressures  than  in  the  rest  of  the 
country  (see  Section  3.2)  despite  the  fact  that  the 
number  of  completed  dwellings  has  almost 
doubled from 4 173 units in 2010 to 8 061 units in 
2016 in Vienna compared to an increase of 32 % in 
the rest of the country.  

Services sector 

Reform  of  Austria's  services  sector  regulation 
would 
strongly  benefit  productivity  and 
the  Austrian 
throughout 
competitiveness 
economy.  High  levels  of  regulation  in  Austria's 
services  sector  result  in  less  competition  and 
innovation  and  therefore  less  productivity  in  the 
itself  (European  Commission, 
services  sector 
2017b).  This  directly  affects  50 %  of  GDP 
produced  by  the  services  sector  and  45 %  of 
employment  in  the  overall  services  sector.  The 
high  level  of  regulation  has  gone  hand  in  hand 
with  declining  wage-adjusted  labour  productivity 
and negative levels of allocative efficiency in this 
area. Restrictive regulation also limits employment 
and contributes to wage inequalities, impacting the 
22 %  of  the  Austrian  labour  force  who  work  in 
regulated professions. Low competitive pressure in 
business  services  are  furthermore  evidenced  by 
below average churn rates and above average gross 
operating rates in sectors such as legal, accounting, 
architectural  and  engineering  activities.  Around 
35 %  of 
created  by  Austrian 
manufacturing  is  created  by  service  inputs  so  that 
services  sector  regulation  also  harms  Austrian 
manufacturing industries.  

the  value 

the 

trade 
removed 

Austria  has  revised  only  some  aspects  of  its 
service  sector  regulation.  In  July  2017,  Austria 
licence  act 
adopted  a  revision  of 
(Gewerbeordnung)  which 
access 
requirements  for  19  trades  (Teilgewerbe)  and 
expanded  the  scope  of  activities  which  can  be 
exercised 
licence 
(Nebenrechte)(30). Administrative fees for all trade 
law procedures, including the notification of a new 
trade  business  were  dropped.  A  planned  one-stop 

under 

trade 

each 

(30)  Activities  related  to  (regulated  or  free)  trades  can  be 
provided  to  up  to  30 %  of  annual  turnover;  in  the  case  of 
regulated trades, they must however not exceed 15 % of the 
provision  of  services  per  contract  and  be  "economically 
complementary"  to  the  actual  activity  from  within  the 
original  trade  (wirtschaftlich  sinnvolle  Ergänzung  der 
eigenen Tätigkeit). 

33 

 
 
                                                           
3.4. Investment 

mutual evaluation of regulated professions and the 
reform  analysis  of  January  2017 
lower 
(European  Commission, 
regulatory 
barriers 
intentions  of 
2016a).  Previously  announced 
allowing 
among 
traders  and  liberal  professions  have  also  not  been 
implemented.   

interdisciplinary 

companies 

to 

Low market dynamics and high prices point to 
a  relatively  weak  performance  of  the  Austrian 
retail  sector.  According  to  Eurostat,  the  retail 
sector  is  characterized  by  low  churn  rates  and 
wage-adjusted productivity below the EU average. 
Food  prices  are  the  third  highest  in  the  EU.  The 
overall restrictiveness of the regulatory framework 
positions  Austria  around  the  average  of  EU 
Member  States.  Nevertheless,  some  issues  can  be 
identified that contribute to the sector's suboptimal 
performance. 
concern 
They 
regulations  affecting 
the  daily  operations  of 
retailers  such  as  restrictions  on  sales  promotions 
and shop opening hours, as well as complex retail 
establishment procedures. 

particularly 

Austria's  tourism  sector  is  doing  well  but  is 
impacted  by  regulatory  and  fiscal  burdens. 
Austria has a large tourism industry which is doing 
well  in  general  terms.  However,  tight  profit 
margins  are  a  challenge.  Furthermore,  skill  and 
labour  supply  shortages  exist  for  some  tourism 
professions.  More  broadly,  tourism  in  Austria  is 
heavily  impacted  by  new  online  business  models. 
Austria  is  reacting  with  a  policy  initiative  as 
regards 
(Tourismus-
Digitalisierungsstrategie).  The  new  government 
programme  2017-2022  furthermore  foresees  an 
overall  tourism  strategy  with  annual  monitoring. 
The  programme  focuses  on  addressing  labour 
shortages and on reducing regulatory and financial 
burden.  A  first  specific  measure  announced  is  a 
reduction  of  VAT  on  accommodation  from  13 % 
to 10 % (BKA, 2017). 

digitalization 

Business environment and access to finance 

Austria  has  managed  to  improve  its  business 
environment,  notably  for  start-ups,  and  plans 
further  reductions  of  the  regulatory  and  tax 
burden.  Austria’s  business  environment  has 
traditionally  been  difficult  for  those  starting  a 
business.  In  recent  years,  start-up  numbers  have 
however  increased  strongly  with  a  peak  in  2016 
(WKÖ,  2017b).  This  is  partly  due  to  the  cyclical 

also 

reform 

shop,  including  permits  for  which  the  regions 
(Länder)  are  competent,  was  not  implemented 
however.  This 
reduced  only 
marginally  the  high  number  of  trades  for  which 
professional  qualification  is  required(31).  The  new 
government  has  therefore  announced  a  further 
revision of the trade licence act to be implemented 
by  July  2020  (BKA,  2017).  As  regards  liberal 
professions  serving  the  business  sector,  Austria 
merely  revised  the  law  on  economic  trustees 
(Wirtschaftstreuhandsberufsgesetz)  notably  by 
simplifying educational requirements. 

Graph 3.4.1:  Regulatory restrictiveness in key professions in 

Austria and the EU (2016) 

Source: European Commission 

Regulatory  barriers 
in  Austria's  business 
service sector are still among the highest in the 
EU. In key business services, such as legal, patent 
agent,  architectural  and  engineering  services, 
Austrian  regulation  is  restrictive.  Except  in  the 
case of lawyers and accountants, it is significantly 
more restrictive than the EU average and at or near 
the  highest 
level  of  restrictiveness  for  civil 
engineers and architects (Graph 3.4.1). Restrictions 
on 
regulated 
professions  affect  architects,  engineers  and 
patent/trademark  agents.  Shareholding,  company 
form  or  exclusivity  requirements  exist  in  Austria 
notably 
and 
patent/trademark agents. Particularly wide-ranging 
reserved  activities  exist  for  architects,  engineers, 
accountants,  tax  advisers,  patent/trademark  agents 
and tourist guides. Austria has so far not used the 

interdisciplinary 

firms  between 

architects, 

engineers 

for 

(31)  Two  regulated  professions  were  liberalised,  job  brokerage 
(Arbeitsvermittlung)  and  production  of  cosmetic  articles 
(Erzeugung von kosmetischen Artikeln). 

34 

0.00.51.01.52.02.53.03.54.04.55.0AccountantArchitectCivil engineerLawyerPatent agentReal estate agentTourist guidescoreATEU weighted averageAll other MS 
 
                                                           
3.4. Investment 

procedures  governing 
registered 
company offices can also create regulatory burden. 

transfers  of 

also 

explain 

In  2016,  value  added 

Despite  the  high  levels  of  investment  in  R&D, 
Austria’s  share  of  knowledge-intensive  sectors 
in  the  economy  is  still  relatively  low.  Austria  is 
lagging  behind  the  EU's  innovation  leaders(33)  on 
the  share  of  knowledge  intensive  sectors  in  its 
economy.  This  might 
its 
comparatively  weaker  performance  in  innovation 
output. 
in  high-tech 
knowledge  intensive  services  was  3.5 %  of  total 
value  added,  well  below  the  EU  average  of  5 % 
(2014).  In  high-tech  (HT)  manufacturing  sectors 
too,  at  1.69 %  in  2016  Austria  only  ranks  just 
above the EU average of 1.67 % (2014). Austria's 
strength  still  lies  in  the  medium-high-tech  (MHT) 
manufacturing sector (accounting for 6.5 % of total 
value added in 2016 vs an EU average of 5.7 % in 
2014)(34).  Business  enterprise 
research  and 
development intensity in these sectors is high - the 
third  highest  for  both,  HT  and  MHT.  While  the 
efforts undertaken  take  time  to  be  reflected  in  the 
corresponding  structural  indicators,  maintaining 
high  investment  levels  is  important  to  increase 
Austria's share in these sectors and help it catch-up 
with the innovation leaders. 

Austria  has  not  yet  managed  to  create  the 
vibrant  "ecosystem"  of  innovative  companies 
found in comparable Member States. With only 
2.9 %  of  its  employment  in  fast-growing  firms  in 
innovative sectors (35) in 2014 (compared with the 
4.8 % EU average), Austria's economy lags behind 
most other EU Member States. This can be partly 
explained by  the  structure of  its  economy and  the 
resilience of existing companies. However, Austria 
has  not  yet  been  able  to  create  an  ecosystem  for 

(33)  "Innovation  leaders"  are  countries  with  a  performance  at 
least  20 %  above  the  EU  average  in  the  European 
Innovation  Scoreboard  (EIS).  In  the  2017  EIS,  these  are 
Sweden,  Denmark,  Finland,  the  Netherlands,  the  United 
Kingdom,  and  Germany.  Austria  is  closely  behind  this 
group  with  a  summary  innovation  index  of  119 %  of  the 
EU average. 

(34)  Austria  ranks  highly  in  the  automotive  sector,  but  also  in 
the  transport  and  tourism  sectors.  The  latter  two  are  not 
captured  here  as  they  are  not  considered  as  knowledge-
intensive sectors. 

(35)  Number  of  employees  in  high-growth  enterprises  in  50 % 
most innovative sectors, as a share of total employment for 
enterprises  with  10  or  more  employees.  High  growth 
enterprises  are  defined  as  firms  with  an  average  annual 
growth  in  employees  greater  than  10 %  a  year,  over  a 
three-year  period,  and  with  10  or  more  employees  at  the 
beginning of the observation period. 

in 

reforms 

resulted 

undertaken 

administrative 

support  with 

the  start-up  strategy. 

upswing  but  also  reflects  the  success  of  the 
the 
structural 
implementation  of 
In 
particular  the  combination  of  direct  and  indirect 
and 
financial 
regulatory  simplification  has 
in  a 
genuinely  improved  start-up environment.  Among 
the  regulatory  improvements  adopted  in  2017, 
Austria  has  notably  facilitated  setting  up  limited 
liability  companies  by  abolishing  the  requirement 
of  a  notary  act  for  one-person  limited  liability 
companies  (32).  The  government  programme  for 
2017-2022  puts  particular  emphasis  on  further 
reducing 
tax  burden  on 
companies  as  key  instruments  to  further  improve 
the  business  environment  (BKA,  2017).  This 
includes  a  reduction  in  the  corporate  tax  (second 
highest in the EU) as well as a host of measures to 
reduce  the  regulatory  and  administrative  burden 
imposed in particular on SME. 

the  regulatory  and 

While  start-up  numbers  are  continuously 
increasing  and  survival  rates  are  high,  scaling 
up  remains  a  problem  for  Austrian  firms. 
Rising  start-up  numbers  combined  with  a  high 
survival  rate  point  to  a  strong  environment  for 
business  creation.  The  same  positive  assessment 
cannot  yet  be  made  for  the  later  phases  in  firms' 
life-cycle.  The  share  of  high-growth  firms  among 
active  companies  with  at  least  10  employees  is 
6.5 % in 2015 and thus considerably below the EU 
average  of  9.9 %.  This  lack  of  high-growth  firms 
partly  explains  Austria's  stagnating  total  factor 
productivity,  as  company  productivity  is  highly 
correlated  with  firm  size.  Furthermore,  start-ups 
making  the  transition  to  become  bigger  firms 
create  a  disproportionately  higher  number  of  new 
jobs.  A  lack  of  later-stage  financing  options  (see 
below) is a key obstacle, while firms also cite the 
high regulatory and tax burden as well as a lack of 
skilled labour in certain areas (not least as regards 
digital skills, see section 3.3) as important barriers 
to  company  growth.  Several  programmes  try  to 
target the skills issue, such as "R&D Competences 
for Industry" through which the Austrian Research 
training  for 
Promotion  Agency  (FFG)  funds 
employees of SMEs. The lack of national rules and 

(32)  Austria's  complex  and  costly  procedures  for  starting 
limited  liability  companies  are  a  reason  for  its  relatively 
low ranking in international scoreboards, such as the World 
Bank's "Cost of doing business" ranking. 

35 

 
                                                           
                                                           
3.4. Investment 

with  an  overall  investment  volume  of  EUR  185 
million  over  three  years.  This  includes  a  risk 
capital bonus to seed and pre-seed investments.   

Public capital markets and FinTech innovation 
offer  yet  unexploited  funding  opportunities  for 
Austrian firms. Public capital markets can play a 
pivotal  role  in  helping  start-ups  and  high-growth 
companies 
to  scale  up  and  expand.  High 
administrative  burden  caused  by  regulation,  low 
and  even  decreasing  research  on  listed  SMEs  and 
thus  insufficient  visibility  of  listed  companies  for 
potential  investors  form  bottlenecks  in  Austria. 
This  hampers  access  to  capital  markets  for  SMEs 
and  mid-caps.  The  creation  of  an  ecosystem  that 
fosters equity as well as better financial education 
would  tap  sources  of  investments  that  so  far  are 
underused.  The  2015  law  on  alternative  financing 
created  a  tailor-made  regulatory  environment  for 
3.5.1).  Recent 
(see  Box 
crowd-funding 
as 
such 
in 
developments 
cryptocurrencies/initial coin offerings and artificial 
intelligence  based  applications,  could  further 
extend the scope of alternative forms of funding. 

FinTech, 

Digital transformation 

struggling.  Overall,  Austria 

While  larger  Austrian  companies  are  well 
advanced  in  adopting  digital  technologies  and 
business  models,  most  small  and  very  small 
firms  are 
is 
performing  well.  On  average  it  ranks  slightly 
above other Member States in terms of businesses 
using  digital  technology (European  Commission 
2017d).  Austrian  businesses  are  ahead  of  their 
European  peers  in  the  use  of  e-invoicing  but  they 
have  been  relatively  slow  to  move  to  electronic 
selling,  especially  SMEs.  Both  the  relatively  low 
number  of  SMEs  selling  online  (15 %)  and  the 
similarly  low  share  of  turnover  (6 %)  show  that 
this  sales  channel  remains  underdeveloped(37). 
sell  online,  Austrian 
However,  when 
companies are quick to do business across borders 
–  more  than  10 %  do  so.  Cloud  computing  is 
another area where Austrian businesses are behind 
the EU average, despite the advantages that cloud 
computing offers  (such  as  low upfront  investment 
costs  and  easy  scalability)  in  particular  to  (very) 
small  businesses  (OECD,  2017).  Austria  has 
created  the  initiative  "KMU  Digital"  to  support 
SME in their digitalization efforts. Austria adopted 

they 

(37)  The Austrian tourism sector is an exception to this rule. 

highly  innovative  start-ups  that  is  as  vibrant  as 
those  of  the  innovation  leaders  (36).  Finding  the 
right policy mix to both support the innovativeness 
of  its  strong  MHT  manufacturing  sector  and  to 
create  the  right  incentives  for  HT  manufacturing 
and  HT  knowledge-intensive  services  sectors  to 
flourish  is  therefore  crucial.  Recent  initiatives  to 
take  advantage  of  Austria's  relative  strength  in 
specific sectors, include its "Strategy for the future 
for  life  sciences  and  pharmaceuticals  in  Austria" 
(2016),  "Innovative  Vienna  2020"  (2015)  and  the 
"Global Incubator Network". Several international 
have 
accelerators 
start-up 
established themselves in Vienna. 

incubators 

and 

Graph 3.4.2:  Venture capital as % of GDP 

Source: European Commission 

Austria's  equity  financing  culture  remains 
underdeveloped  which  limits  company  growth 
and  poses  a  resilience  risk.  Austria's  firms 
traditionally  rely  on  bank  credit  for  most  of  their 
financing needs. This puts them at risk in the event 
of  a  future  crisis.  Venture  capital  financing  in 
Austria  amounted  to  0.014  %  of  GDP  which  is 
lower  than  the  EU  average  of  0.027  %  and  also 
lower  than  in  the  five  Member  States  which  are 
innovation  leaders  (see  Graph  3.4.2).  Venture 
capital  for  later  stage  funding  constituted  only 
38 %  of  all  venture  capital  in  2016.  The  public 
sector accounts for a high share of venture capital 
investment.  The  start-up  package  of  policy 
measures  adopted  in  2016  provides  financial 
support and regulatory improvements for start-ups, 

(36)  London, Berlin, Stockholm and Amsterdam are among the 
world's top 20 start-up ecosystems in 2017 according to the 
Global  Startup  Ecosystem  Report  2017  (Startup  Genome, 
2017). 

36 

FISEDKDEUKNLATEU0.000.020.040.060.080.100.120.14% of GDPSeed plus start-upLater stage 
 
                                                           
                                                           
3.4. Investment 

Public administration 

low  on 

level  and  also  ranks 

Austria  has  one  of  the  lowest  publication  rates 
for  public  procurement  contracts  advertised  at 
joint 
EU 
procurement  between  public  authorities.  In 
2015,  the  share  of  public  contracts  for  works, 
goods and services (including utilities and defence) 
published  by  the  Austrian  tendering  authorities 
under EU procurement legislation was only 2.2 % 
of GDP. This is a slight reduction of 0.1 pp. from 
2014  and  is  only  around  half  the  EU  average  of 
4.16 %.  Contract  notices  from  Austrian  tendering 
authorities  are  not  always  complete.  This  was  for 
example  the  case  for  the  11 %  of  notices  in  2017 
(down  from  32 %  in  2016)  where  the  contract 
volume  was  not  indicated.  Furthermore,  in  2017 
Austria  used  central  purchasing  bodies  on  joint 
procurement among public authorities for only 5 % 
of tenders. This represented no improvement over 
the  2011  value  and  was  markedly  below  the  EU 
average of 8 % (European Commission, 2017e).  

in  providing 

scores  highly 

Austria 
e-
government  services  to  businesses  and  citizens 
but  there  is  some  delay  in  rolling  out  e-
procurement.  Austria  continues  to  improve  its 
offer  of  digital  (online)  public  services  and  in 
particular  their  mobile  accessibility.  More  than 
(98 %)  of  the  most-used  public  services  are 
available  online.  Austria's  aim  is  to  have  a  one-
stop  shop  platform  available  and  to  reduce  the 
need  for  people  and  business  to  actively  interact 
with  public  authorities  or  use  public  services.  For 
instance  certain  tax  claims  will  be  automatically 
handled  for  the  user.  Austria  also  intends  to 
introduce one nation-wide usable "digital identity" 
managed  by  a  central  system  which  would  give 
users  an  overview  of  which  data  is  available  and 
how and by whom it can be used (BKA, 2017). In 
contrast to this leadership in general e-government, 
Austria has not yet adopted the pending legislative 
proposal  that  would  modernize  the  e-procurement 
rules.  Individual  tendering  authorities  have  begun 
to  introduce  e-procurement  systems,  choosing 
among a small number of technical solutions with 
some  differences  between 
them.  Austrian 
authorities  are  aware  of  the  risk  that  these 
differences  could  lead  to  additional  burden  for 
tenderers and are monitoring the situation. 

a comprehensive digitalization strategy in January 
2017 and has implemented some of the announced 
actions.  Monitoring  and  benchmarks  are  missing 
however. 

Graph 3.4.3:  Enterprises with high levels of digital intensity 

by size (2016) 

Source: European Commission 

Concerns  over  security  and  privacy  hinder 
some aspects of digital transformation. Austrian 
firms  and  the  Austrian  public  have  an  overall 
positive  view  on  digitalization.  Furthermore,  they 
do  not  necessarily  face  digital  security  incidents 
more  often  than  those  in  other  Member  States. 
Cyber crime has however been on the rise recently 
(31 %  from  2015  to  2016).  Austria  is  also  among 
those  Member  States  where  businesses  and  the 
public have the greatest concerns over security and 
privacy.  Around  52 %  of  the  Austrian  public  are, 
for  example,  bothered  that  their  online  activities 
are being recorded to provide tailored advertising. 
Slightly  more  than  20 %  of  individuals  said  they 
would  not  use  cloud  computing  due  to  concerns 
over  security  and  privacy  (compared  to  an  EU 
average of around 13 %).  For businesses, the risk 
of  security  breaches  discouraged  more  than  40 % 
of Austrian firms from using cloud computing (far 
more  than  in most other  OECD  countries). Policy 
initiatives  such  as  "KMU  digital"  therefore  also 
offer  advice  services  to  SME  regarding  privacy 
and  security.  The  Austrian  government  plans  to 
adopt an overall digital security strategy, to review 
its legal rules and to strengthen the digital security 
institutional framework (BKA, 2017). 

37 

0102030405060708090DKFISENLUKATEU28DE% of enterprisesSmallMediumLarge 
 
3.4. Investment 

Box 3.4.1: Investment challenges and reforms in Austria 

Section 1. Macroeconomic perspective  

Investment in Austria (see also Section 1) held up fairly well throughout the financial crisis. Compared to the EU 
average  the  decline  was  less  severe  and  the  recovery  quicker.  Since  the  end  of  2015  investment  activity  by  the 
corporate  sector  has  picked  up.  This  is  partly  due  to  replacement  needs,  but  also  it  is  supported  by  increased 
consumption  triggered  by  the  2016  tax  reform  and  a  general  upswing  in  the  economy.  Since  2017,  construction 
investment, including that in housing, grew noticeably. With accelerating economic growth the investment climate 
has also improved. The availability of bank credit does not act as a macroeconomic constraint on investment but 
equity  funding  remains  underdeveloped.  Strong  housing  demand  in  Austria  due  to  continuing  migration  and  a 
growing  population  calls  for  higher  public  and  private  investment  in  dwellings.  Available  building  space, 
especially in the capital region, as well as the availability of fiscal space might act as limiting factors for increased 
investment in social housing.  

Section 2. Assessment of barriers to investment and ongoing reforms 

Barriers to investment in Austria exist but are relatively modest overall, as the European Commissionʼs assessment 
confirms  (European  Commission,  2015c).  Some  reforms  have  been  adopted  in  the  area  of  regulated  professions 
and administrative simplification (see Section 3.4). Continued efforts and further reform measures to reduce the tax 
wedge, improve the business environment and better meet consumption and housing demand will help strengthen 
overall investment in Austria. 

Main barriers to investment and priority actions underway: 

1.  The  overall  tax  wedge  remains  high  despite  the  recent  tax  reform,  as  a  large  part  consists  of  social  security 
contributions that remained broadly unchanged. Additionally, without the tax brackets being indexed to inflation, 
the tax wedge on labour will continue increasing (see Sections 3.1). Reducing the tax wedge on labour and shifting 
taxation  to  more  growth-friendly  sources  like  property  or  environmental  taxes,  can  incentivise  investment 
activities. 
2.  The  high  degree  of  regulation  of  the  services  sector  constitutes  a  barrier  to  investment  and  competition  in 
services  but  also  for  manufacturing  firms  which  depend  on  services  inputs.  While  the  2017  reform  of  the  trade 
licence act and the reforms to reduce administrative burden bring some improvements, the regulatory level remains 
high and continues to hinder market entry and business development (see Section 3.4). 
3. The start-up environment has improved while scaling-up remains an issue and Austria has not yet established 
the  vibrant  ecosystem  for  innovative  enterprises  seen  in  other  Member  States.  Business  creation  and  company 
growth,  notably  of  innovative  firms,  are  key  triggers  of  investment,  job  creation  and  productivity  increases  (see 
Section 3.4).  

38 

Regulatory/ administrative burdenCSRTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCSRCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation EnergyLegend:TransportNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
3.5.   SECTORAL POLICIES 

Research and innovation 

in 

to 

itself 

improve 

the  past  decade 

Austria  is  a  strong  innovator,  with  a  solid 
public  commitment  to  support  research  and 
the 
innovation.  In  2011,  Austria  set 
ambitious  goal  of  becoming  an  innovation  leader 
in the EU by 2020. It has undertaken considerable 
efforts 
the 
performance of its research and innovation system, 
with  a  performance  increase  relative  to  the  EU  of 
9 %  since  2010. (European  Commission,  2017f) 
This  makes  it  the  7th  strongest  innovator  in  the 
EU, right behind the EU's innovation leaders. With 
an  R&D  intensity  of  3.09 %  of  GDP  in  2016,  it 
ranks  second  in  the  EU  (38)  just  behind  Sweden 
(3.25 %). Austria has the goal of raising the private 
sector  contribution  to  overall  R&D  spending  to 
two  thirds,  preferably  to  70  %.  To  achieve  this 
goal, Austria recently increased its indirect support 
for  private  R&D  by  raising  the  research  tax 
premium from 12 % to 14 % from 1 January 2018. 
An  evaluation  of  the  tax  premium  conducted  in 
2017  confirmed  its  benefits  in  attracting  national 
and  international  private  investments  (BMWFW 
and  BMVIT,  2017).  Austria  ranks  top  in  the  EU 
with regard to direct and indirect public support for 
business  enterprise  R&D  (BERD)  expenditures, 
with  total  public  support  for  BERD  at  0.4 %  of 
GDP  in  2015.  Despite  these  efforts  and  the 
significant  performance  improvements,  Austria 
will  only  reach  its  self-set  2020  R&D  intensity 
target  of  3.76 %  if  R&D  intensity  grows  at  a  rate 
of 5.1 % per annum over the period 2016-2020. 

Austria  has  a  solid  research  and  science  base, 
but  there  is  room  to  increase  its  scientific 
excellence.  Austria's  universities  rank  well  below 
the innovation leaders and other strong innovators 
international  university  rankings  (39).  The 
in 
country performs strongly in scientific output, with 
11.5 %  of  the  top  10 %  most  cited  scientific 
publications  worldwide  and  ranking  sixth  in  the 
EU  (EU  average  of  11.1 %  for  2014  values). 
However,  Austria  performs  less  well  on  the  top 
1 %  most  cited  publications,  an  indicator  of 
scientific  excellence.  In  late  2016,  the  "Research 

(38)  When the data is adjusted for the structural composition of 
countries, Austria ranks highest in the EU according to the 
OECD  Science,  Technology  and  Industry  Scoreboard 
2017.  

(39)  No  Austrian  university  is  listed  within  the  top  150  in  the 
Academic  Ranking  of  World  Universities  2017  (Shanghai 
ranking)  or  within  the  World  University  Ranking  (Times 
Higher Education). 

Billion"  initiative  was  adopted,  with  the  aim  of 
providing EUR 700 million in public funding and 
EUR  500  million  in  private  funding  for  research 
and  innovation  in  2017-2021.  Its  implementation 
will  depend  on  the  new  government.  The  "Future 
of  Universities"  project  was  launched  in  spring 
2016  to  ensure  the  strategic  development  of  the 
Austrian  university  system.  It  identifies  several 
areas  of  action  to  boost the university  system  and 
to  prepare  the  first  steps  towards  capacity-based 
university funding. 

Graph 3.5.1:  Austria’s R&D intensity in comparison to 

innovation leaders 

(1) Denmark: Break in series between 2007 and the previous 
years; Netherlands: Breaks in series between 2011 and the 
previous years and between 2012 and the previous years; 
United Kingdom: Break in series between 2011 and the 
previous years. 
Source: European Commission 

Stronger  science-business  links  would  ensure  a 
better translation of Austria's R&D investments 
into  innovation  output.  Supporting  knowledge 
transfers and science-business cooperation remains 
important  for  Austria,  as  well  as  promoting  an 
entrepreneurial spirit within and outside the higher 
education  system.  Various  public  initiatives  have 
been  launched  in  the  past  decades.  They  include 
the  "Academia  plus  Business  (AplusB)  centers", 
Excellent 
the 
Technologies  (COMET)",  the  "Christian  Doppler 
Laboratories"  as  well  as 
the  "FFG  Bridge 
programme". More recent initiatives include Spin-
off  Fellowships  (September  2017)  to  support 
university  spin-offs  and  the  2017  intellectual 
property  strategy,  which  aims  at  supporting  the 
translation  of  scientific  output  into  innovation. 

"Competence  Centres 

for 

39 

12340607080910111213141516R&D intensity (%)ATSEDEDKFINLEUUKAT target: 3.76% 
 
                                                           
 
3.5. Sectoral policies 

spectrum revenues (Breitbandmilliarde). There are 
also regional-level initiatives to roll out high-speed 
infrastructure,  for  instance  in  Lower  Austria.  By 
to  have 
2025,  Austria's  ambitious  aim 
nationwide  coverage  of  gigabit  connections  and  a 
nation-rolling-out  of  mobile  5G  infrastructure. 
This  may  be  financed  by  revenues  from  further 
spectrum auctions (starting in 2018 for 5G). 

is 

Energy, climate change and environment 

Austria is on track to meet only one of the three 
Europe  2020  targets  on  energy  and  climate 
change.  Austria  is  well  on  track  towards  its  2020 
target on renewable energy. It is also implementing 
measures  under  the  Energy  Efficiency  Law  to 
achieve  the  2020  energy  efficiency  target  but  has 
recently  shown  growing  final  and  primary  energy 
consumption.  Furthermore,  according  to  its  own 
projections,  Austria  will  fall  2  percentage  points 
short of meeting its 2020 emission reduction target 
for greenhouse gases in the sectors not covered by 
the EU Emission Trading System. Transport is the 
sector  with  the  highest  emissions  in  Austria  and 
transport emissions are not decreasing. 

Swift  implementation  of  planned  projects  and 
active  regional  cooperation  remain  crucial  as 
regards  Austria's  electricity  and  gas  networks. 
Progress  on  the  high-tension  380-kV  ring  in 
Austria,  a  crucial  project  with  significant  benefits 
on  neighbouring  countries,  depends  on  the  legal 
review  of  its  environmental  impact  assessment. 
The  implementation  of  increased  cross-border 
capacities  in  particular  with  Germany,  Italy  and 
Switzerland  is  on  track.  The  current  national 
arrangements 
for  managing  congestion  and 
defining  bidding-zones  in  central  Europe  do  not 
necessarily  reflect  actual  congestion  accurately. 
This  is  leading  to  increasing  limitations  on  cross-
border  flows  of  electricity.  While  the  bilateral 
agreement  between  Germany  and  Austria  on  an 
interim solution for this problem is a positive step, 
further discussions with neighbouring countries are 
needed  for  the  agreement  to  be  implemented. 
Concerning gas infrastructure, Austria’s role as an 
important  transit  country  requires  it  to  maintain  a 
to  network  planning  and 
regional  approach 
increased  efforts 
to  establish  market-based 
solutions to infrastructure usage. 

However,  it  remains  a  challenge  to  convert  the 
current  strengths  of  Austria's  public  science  base 
into  solutions  that  tackle  the  current  needs  of 
is  aiming  at 
Austrian  businesses.  Austria 
addressing these issues in the future post-2020 RTI 
strategy (BKA, 2017). 

for 

strategy 

its  national 

Since  2011,  Austria  has  tabled  a  multitude  of 
initiatives  and  programmes  and  has  started  to 
evaluate  their  overall  effectiveness.  Austria 
adopted 
research, 
technological development and innovation in 2011 
(‘Der  Weg  zum  Innovation  Leader’).  Since  then, 
90 % of the measures formulated have been or are 
in  the  process  of  being  realised.  Recent  measures 
are  the  "Open  Innovation  Strategy"  (2016),  the 
"Intellectual  Property-Strategy"  (2017),  and  the 
"Creative  Industries  Strategy  for  Austria"  (2016) 
and  the  "Life  Science  Strategy"  (2016).  In  recent 
years,  a  clear  evaluation  culture  has  been 
established.  Evaluations  were  performed,  for 
example,  on  the  AplusB  centers,  the  research  tax 
premium,  the  Austria  Wirtschaftsservice  and  the 
Forschungsförderungsgesellschaft.  Nonetheless, 
ex-post  evaluation  in  Austria  can  be  difficult 
because  data  availability  from  different  sources  is 
restricted  or  data  cannot  be  linked  due  to  privacy 
issues  (BMWFW  and  BMVIT,  2017)  Finally, 
Austria has commissioned the OECD to perform a 
review of its innovation system which will be used 
to  develop  the  post-2020  Research,  Technology 
and  Innovation  (RTI)  strategy.  The  results  of  the 
review are expected in end-2018 (ibid.). 

Network industries and infrastructure 

Austria continues to have problems in ensuring 
next-generation  broadband  coverage  in  rural 
areas,  in  particular  for  public  institutions  such 
as  schools.  In  2017,  90 %  of  all  Austrian 
households  were  covered  by  a  high-speed 
(next-generation  access)  network, 
broadband 
which  is  above  the  EU  average.  While  Austria 
increased the coverage of high-speed broadband in 
rural  areas  to  45 %  in  2017,  a  'digital  divide' 
in 
between  urban  and  rural  areas  remains, 
particular  as  regards  connections  for  public 
institutions such as schools. To this end, Austria in 
2017  continued 
the  Breitband 
Austria  2020,  a  funding  scheme  financed  by 

implement 

to 

40 

 
3.5. Sectoral policies 

Box 3.5.1: Policy highlights - Framework for crowd-funding and collaborative economy 

Crowdfunding  and  the  provision  of  collaborative  economy  services  are  two  activities  that  are  small  but 
rapidly  growing  in  Austria.  The  volume  of  funds  raised  through  crowdfunding  tools  is  growing 
exponentially.  Austrian  citizens  are  also  both  offering  and  consuming  an  increasing  amount  of  services 
intermediated by online platforms, in particular in some sectors such as short-term accommodation. Austria's 
authorities on the federal, regional and local level have reacted by adapting the applicable policy framework. 
Two initiatives have in particularly established a good balance between supporting new business models and 
ensuring compliance with existing legal obligations or protecting users such as small investors. 

The  2015  Law  on  Alternative  Funding  has  created  a  tailor  made  regulatory  environment  for  crowd-
funding  projects.  It  covers  both  direct  calls  of  an  issuer  as  well  as  those  offered  by  internet  platforms.  It 
foresees a number of obligations of the issuer in terms of information (such as thresholds, scope, periodicity 
and route of information obligation), the auditing duty, and regulations for internet platforms (information 
obligation,  validation  of  issuer  information,  privacy)  and  several  regulations  to  prevent  abuse.  With  these 
rules to protect small scale investors, it has created trust in crowd-funding with citizens who are otherwise 
not active participants in capital markets. In terms of project volumes, the rules apply to projects of up to 
EUR  1.5  million.  For  projects  above  this  threshold  (but  below  EUR  5  million)  the  law  foresees  the 
obligation to issue a simplified prospectus. The tailored regulatory environment has been well received by 
the  market,  resulting  in  a  160  %  volume  increase  in  crowd-funding  even  in  the  first  full  year  of  its 
application. 

A  new  law  on  the  promotion  of  tourism  in  Vienna  is  applicable  since  August  2017.  It  is  based  on  an 
evaluation  of  developments  in  collaborative  short-term  accommodation  services  in  the  city.  Based  on 
statistical evidence, Viennese authorities did not identify a need to impose additional regulatory restrictions 
on citizens renting out their homes short-term. Instead, the city chose an enabling approach and introduced 
new  legislation  to  improve  the  compliance  of  accommodation  providers  with  already  existing  tourist  tax 
(Ortstaxe) obligations. The responsibility of enforcing tax rules remains with the public authorities, but the 
new  law requires  collaborative  platforms  intermediating  short-term  accommodation  services  to  inform tax 
authorities of the identity of providers of such services and the addresses of rented properties. Vienna's new 
law limits itself to data that platforms already have at their disposal. Thus, such regime can be considered to 
establish  a  balanced  framework  where  it  does  not  impose  additional  monitoring  obligations  and  remains 
within EU data protection rules. Alternatively, the law allows collaborative platforms to conclude voluntary 
agreements with the City of Vienna, allowing the collaborative platform to calculate, withhold and remit the 
applicable tourist tax to authorities, thereby reducing administrative burden and facilitating tax compliance. 

The  evaluation  of  collaborative  short-term  accommodation  services  and  their  development  allowed  the 
Viennese authorities to adopt a targeted regulatory measure addressing a specific policy objective (ensuring 
tax compliance) while seeking to minimise regulatory and administrative burden.  

are 

the 

technology 

Austria's  eco-innovation  performance  is  good 
and stable but constrained by limited resources 
lack  of  an  overall 
and 
strategy. 
a 
sectors 
Environmental 
particularly dynamic part of the Austrian economy 
and  contribute  to  export-oriented  growth.  They 
have  also  performed  significantly  more  strongly 
than the overall economy since the financial crisis. 
The main drivers of eco-innovation in Austria are 
high  environmental  standards,  well-functioning 
environmental  protection 
laws  and  various 
environment-related financial incentives offered by 
the state. Austria also improved its ranking within 
the  Eco-Innovation  Scoreboard  and  is  now  the 
eighth best performing Member State. This puts it 

slightly above the EU average, within the group of 
the  so  called  average  eco-innovation  performers. 
The  main  barriers  to  further  improvements  of  its 
eco-innovation are the limited financial and human 
resources  into  research  and  development  (R&D) 
activities  and  the  low  integration  of  various 
activities and policy measures across governmental 
into  a  coordinated  eco-innovation 
institutions 
policy.  In  fact,  Austria  has  no  yet  established  an 
overarching  policy  programme  for  eco-innovation 
or the circular economy. 

41 

 
ANNEX A: OVERVIEW TABLE 

Commitments 

Summary assessment (40) 

2017 country-specific recommendations (CSRs) 

CSR 1:  Pursue  its  fiscal  policy  in  line  with  the 
requirements  of  the  preventive  arm  of  the  Stability 
and  Growth  Pact,  which  entails  achieving 
its 
medium-term  budgetary  objective  in  2018,  taking 
into  account  the  allowance  linked  to  unusual  events. 
Ensure the sustainability of the healthcare system and 
of  the  pension  system.  Rationalise  and  streamline 
of 
the 
competencies 
government  and  align  their  financing  and  spending 
responsibilities. 

various 

across 

layers 

  Pursue 

its 

fiscal  policy 

line  with 
in 
the  preventive  arm  of 

the 
requirements  of 
the 
Stability  and  Growth  Pact,  which  entails 
achieving its medium-term budgetary objective in 
2018, taking into account the allowance linked to 
unusual events. 

Austria  has  made 
addressing CSR 1. 

limited  progress 

in 

This  overall  assessment  of  CSR  1  does  not 
include an assessment of compliance with the 
Stability and Growth Pact.: 

  The  compliance  assessment  with 

the 
Stability and Growth Pact will be included 
in spring when final data for 2017 will be 
available. 

(40)  The following categories are used to assess progress in implementing the 2017 country-specific recommendations (CSRs): 

No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations,  to  be  interpreted  on  a  case-by-case  basis  taking  into  account  country-specific  conditions.  They 
include the following: 

-no legal, administrative, or budgetary measures have been announced  
-in the national reform programme, 
-in any other official communication to the national Parliament/relevant parliamentary committees or the European Commission,  
-publicly (e.g. in a press statement or on the government's website);  
-no non-legislative acts have been presented by the governing or legislative body;   
-the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has 
not proposed any clearly-specified measure(s) to address the CSR. 

Limited progress: The Member State has: 
-announced certain measures but these address the CSR only to a limited extent; and/or 
-presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and  substantial  further,  non-

legislative work is needed before the CSR is implemented;  

-presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

Some progress: The Member State has adopted measures  
-that partly address the CSR; and/or  
-that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures have been 
implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision, but 
no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

42 

 
 
 
 
                                                           
 
 
 
 
 
 
 
 
A. Overview table 

  Ensure the sustainability of the healthcare system 

and of the pension system. 

  Some  progress 

by 

improving 

improving 

the 
in 
sustainability  of  the  healthcare  sector, 
including 
public 
procurement  practices.  The  reform  of 
primary healthcare services is progressing. 
The  reform  is  expected  to  help  shifting 
services  away  from  the  hospital  sector, 
thus containing expenditure in the medium 
term. 

  No  progress  on  ensuring  the  financial 
sustainability  of  the  pension  system.  No 
new  measures  taken  so  far.  However,  due 
to  the  proper  implementation  of  previous 
measures  aimed  at  encouraging 
later 
retirement,  the  effective  retirement  age  is 
increasing. 

  Limited  progress  on  reforming  fiscal 
relations  between  the  various  layers  of 
government.  The  Parliament  ratified  the 
increased autonomy for federal states to set 
the  contribution  rate  for 
the  housing 
subsidy.  Although  this  is  a  step  towards 
increased  tax  autonomy  at  the  subnational 
level,  the  amount  of  additional  revenues 
potentially  raised  by  this  subsidy  is  small 
compared 
the  spending  powers  of 
federal  states.  The  pact  for  the  2017 
Financial  Equalisation  Law  contained 
several more ambitious initiatives that still 
need to be implemented. 

to 

Austria  has  made 
addressing CSR 2: 

some  progress 

in 

  Rationalise  and  streamline  competencies  across 
the  various  layers  of  government  and  align  their 
financing and spending responsibilities. 

CSR 2: Improve labour market outcomes for women 
through,  inter  alia,  the  provision  of  full-time  care 
services.  Improve  the  educational  achievements  of 
disadvantaged young people, in particular those from 
a  migrant  background.  Foster  investment  in  the 
services  sector  by  reducing  administrative  and 
regulatory  barriers,  easing  market  entry  and 
facilitating company growth. 

43 

 
 
 
A. Overview table 

  Some  progress 

improving 

labour 
in 
market  outcomes  for  women  but  there  is 
still  a  high  proportion  of  women  in  part-
time work, and a high gender pay gap. 

is  still  below 

  Limited progress in improving child care 
services.  Despite  increasing  child  care 
the 
provision  Austria 
Barcelona criteria for the age under 3 years 
old.  In  addition  there  are  considerable 
regional differences in child care provision 
and the quality of the child care provision 
does not allow parents to work longer due 
to opening hours of child care facilities. 

in 

 Limited  progress 
the 
educational  achievements  of  disadvantaged 
young  people,  in  particular  those  from  a 
migrant background 

improving 

Trade 

Licence 

trade  exercised  beyond 

  Some progress. Austria adopted a revision 
of 
the 
Act 
in  July  2017.  The 
(Gewerbeordnung) 
revision  removes  access  barriers  for  19 
trades  (Teilgewerbe),  abolishes  the  initial 
registration fee and increases the scope for 
performing  side  activities  without  an 
additional  licence  (15-30 %  instead  of 
around 10 % currently). However, the high 
number of regulated trades (reglementierte 
Gewerbe) remains largely unchanged (two 
trades  were  liberalised).  The  law  still 
requires  separate  licence  entries  for  each 
additional 
the 
in  Section  3.4 
Nebenrechte  described 
above.  Austria  has  also  simplified  the 
procedure  for  authorising  installations  on 
business premises (Betriebsanlagen). Low-
installations  will  benefit  from  a 
risk 
simplified 
for 
granting  authorisations  will  be  shortened 
and  publication 
requirements  will  be 
reduced.  A  one-stop  shop  has  been 
introduced for federal-level permits but the 
plan  to  also  integrate  federal  state-level 
permits  was  not  adopted.  For  other 
restrictions  on  access  to  and  exercise  of 
regulated professions only relatively minor 
changes  have  been  implemented.  This 
included a reform of the law on economic 

procedure, 

deadlines 

 

Improve labour market outcomes for women 

 

through, inter alia, the provision of full-time care 
services. 

 

the 

educational 

Improve 
achievements  of 
disadvantaged  young  people,  in  particular  those 
from a migrant background. 

  Foster  investment  in  the  services  sector  by 
reducing  administrative  and  regulatory  barriers, 
easing  market  entry  and  facilitating  company 
growth. 

44 

 
 
 
 
 
 
 
A. Overview table 

trustees (Wirtschaftstreuhandberufsgesetz), 
where 
requirements  were 
simplified. 

education 

The  labour  market  performance  is  improving 
and  Austria's  employment  rate  has  reached 
75.3  %  in  Q3  of  2017,  thus  reaching  the 
Europe 2020 target. Given the current trend in 
the  Austrian  employment  rate,  the  country  is 
on track to meet the national target of 77-78 % 
by 2020. 

R&D  intensity  reached  3.09%  of  GDP  in 
2016. It is expected to reach 3.14% of GDP in 
2017,  according  to  estimates  from  Statistics 
Austria (April 2017). 

Austria  is  also  among  the  EU  countries  with 
the  strongest  increase  in  R&D  intensity  since 
2000.  This  resulted  from  increases  in  both 
business and public R&D expenditure (though 
progress has slowed in recent years especially 
for  public  expenditure).  However,  without 
additional  efforts  and  faster  progress,  the 
ambitious  3.76 %  target  for  2020  will  not  be 
reached. 

According  to  the  latest  national  projections 
submitted to the Commission, and taking into 
account existing measures, Austria is expected 
to  reduce  its  emissions  by  14%  compared  to 
2005. 

Consequently,  Austria  will  fall  short  of  its 
target by 2 pps.  

Non-ETS  emissions  in  2016:  a  reduction  of 
12 % compared to 2005. 

Austria  achieved  its  interim  target  of  10  % 
reduction for 2016. 

Austria  is  well  on  track,  and  close  (2016 
Eurostat-SHARES  official  data:  33.5 %)  to 
attaining its renewable energy target for 2020. 

Effective  and  continuous  implementation  of 
the  Energy  Efficiency  Law  (adopted  in  July 

Europe 2020 (national targets and progress) 

Employment rate target: 77-78 % 

R&D target: 3.76 % of GDP 

National greenhouse gas (GHG) emissions target: 

-16 %  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading system) 

2020 renewable energy target: 34 % 

Energy efficiency target: 

45 

 
 
 
 
A. Overview table 

Austria’s  2020  energy  efficiency  target  is  31.5 Mtoe 
expressed in primary energy consumption (25.1 Mtoe 
expressed in final energy consumption) 

Early school/training leaving target: 9.5 % 

Tertiary  education  target:  38 %  of  population  aged 
30-34 

Risk of poverty or social exclusion target: -235 000 

2014  to  transpose  the  Energy  Efficiency 
Directive) remains key for decreasing primary 
and  final  energy  consumption  in  view  of 
reaching the 2020 targets.  

Primary  energy  consumption  in  2016:  31.84 
Mtoe. 

Final  energy  consumption  in  2016:  28.13 
Mtoe. 

ESL is at 6.9% both below the national target 
of 9.5% and the EU target. While the rate fell 
also  for  foreign-born  students  they  are  still 
twice as likely to leave school early. 

Tertiary  education  attainment  has  at  40.1% 
surpassed  the  EU  average  and  the  national 
target. 

In  the  baseline  year  2008,  the  number  of 
people at risk of poverty and social exclusion 
was  1  699  000.  The  respective  number  for 
2015  was  1  542  000,  i.e.  157  000  less, 
requiring additional efforts to meet the target. 

46 

 
 
ANNEX B: MACROECONOMIC IMBALANCE PROCEDURE  

SCOREBOARD 

Table B.1: 

The MIP Scoreboard for Austria (AMR 2018) 

1)  This table provides data as published under the Alert Mechanism Report 2018, which reports data as of 24 Oct 2017. 
Please note that figures reported in this table may therefore differ from more recent data elsewhere in this document. .  
2) Figures highlighted are those falling outside the threshold established in the European Commission's Alert Mechanism 
Report. 
Source: European Commission 2017, Statistical Annex to the Alert Mechanism Report 2018, SWD(2017) 661. . 

47 

Thresholds201120122013201420152016Current account balance, % of GDP 3 year average-4%/6%2.4 2.0 1.7 2.0 2.1 2.2 Net international investment position% of GDP-35%-1.9 -3.2 1.3 3.4 2.5 5.6 Real effective exchange rate - 42 trading partners, HICP deflator3 year % change±5% (EA) ±11% (Non-EA)-1.8 -4.7 0.7 1.9 1.5 1.0 Export market share - % of world exports5 year % change-6%-12.3 -21.4 -18.1 -15.4 -9.0 -4.0 Nominal unit labour cost index (2010=100)3 year % change9% (EA) 12% (Non-EA)5.8 3.8 6.4 7.8 6.2 5.8 House price index (2015=100), deflated 1 year % change6%2.9 4.9 3.0 1.4 3.4 7.2 Private sector credit flow, consolidated% of GDP14%3.0 1.2 1.0 0.9 2.3 3.2 Private sector debt, consolidated% of GDP133%129.4 128.2 127.1 124.9 123.9 124.0 General government gross debt% of GDP60%82.2 81.7 81.0 83.8 84.3 83.6 Unemployment rate3 year average10%4.9 4.8 5.0 5.3 5.6 5.8 Total financial sector liabilities, non-consolidated1 year % change16.5%1.5 0.4 -3.2 -0.8 -0.1 -2.4 Activity rate - % of total population aged 15-643 year change in pp-0.2 pp0.7 0.8 1.1 0.8 0.4 0.7 Long-term unemployment rate - % of active population aged 15-743 year change in pp0.5 pp0.2 0.0 0.1 0.3 0.5 0.6 Youth unemployment rate - % of active population aged 15-243 year change in pp2 pp0.4 -1.3 0.2 1.4 1.2 1.5 External imbalances and competitivenessInternal imbalancesEmployment indicators 
 
 
 
 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2017. Includes not only banks but all monetary financial institutions excluding central banks 
(2) Latest data Q2 2017. 
(3) As per ECB definition of gross non-performing debt instruments 
(4) Quarterly values are not annualised 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

48 

201220132014201520162017Total assets of the banking sector (% of GDP)(1)305.9282.1263.0248.0238.8224.8Share of assets of the five largest banks (% of total assets)36.536.736.835.834.5-Foreign ownership of banking system (% of total assets)(2)27.227.630.431.923.923.2Financial soundness indicators:2)              - non-performing loans (% of total loans)(3)4.34.26.25.54.23.5              - capital adequacy ratio (%)14.215.415.616.218.218.5              - return on equity (%)(4)4.1-0.71.17.67.14.6Bank loans to the private sector (year-on-year % change)(1)0.8-1.00.50.62.23.4Lending for house purchase (year-on-year % change)(1)2.62.23.04.34.44.2Loan to deposit ratio(1)107.4103.4100.599.695.996.6Central Bank liquidity as % of liabilities--1.82.11.83.1Private debt (% of GDP)128.2127.1124.9123.9124.0-Gross external debt (% of GDP)(2) - public60.966.474.169.166.560.4    - private39.833.034.836.438.036.3Long-term interest rate spread versus Bund (basis points)*87.844.032.425.028.727.1Credit default swap spreads for sovereign securities (5-year)*78.919.820.116.418.011.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

† The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States 
performance. The indicators "participants in active labour market policies per 100 persons wanting to work" and 
"compensation of employees per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible 
alternatives will be discussed in the relevant Committees. 
(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2018.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2017 for the employment rate and gender employment gap.. 
Source: Eurostat. 

49 

201220132014201520162017 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)7.87.57.07.36.9:Gender employment gap (pps)9.79.18.28.27.87.8Income inequality, measured as quintile share ratio (S80/S20)4.24.14.14.04.1:At-risk-of-poverty or social exclusion rate1 (AROPE)18.518.819.218.318.0:Young people neither in employment nor in education and training (% of population aged 15-24)6.87.37.77.57.7:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)74.474.674.274.374.875.3Unemployment rate2 (15-74 years)4.95.45.65.76.05.5Gross disposable income of households in real terms per capita3 (Index 2008=100) ::95.995.496.6:Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction444.244.444.545.746.4:Children aged less than 3 years in formal childcare14.017.016.022.320.6:Self-reported unmet need for medical care0.30.40.10.10.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):::64.065.067.0 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.   
(5) Average of first three quarters of 2017, unless for the youth unemployment rate (annual figure). 
Source: Eurostat, OECD. 

50 

Labour market indicators201220132014201520162017 5Activity rate (15-64)75.175.575.475.576.2:Employment in current job by durationFrom 0 to 11 months14.013.913.414.014.3:From 12 to 23 months9.59.49.39.09.5:From 24 to 59 months16.216.316.616.916.6:60 months or over60.360.460.760.159.6:Employment growth* (% change from previous year)1.00.31.00.61.21.7Employment rate of women(% of female population aged 20-64)69.670.070.170.270.971.4Employment rate of men (% of male population aged 20-64)79.379.178.378.478.779.2Employment rate of older workers* (% of population aged 55-64)41.643.845.146.349.250.8Part-time employment* (% of total employment, aged 15-64)25.226.026.927.327.827.9Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)9.39.29.29.19.09.3Transition rate from temporary to permanent employment(3-year average)44.545.847.945.9::Long-term unemployment rate1 (% of labour force)1.21.31.51.71.91.9Youth unemployment rate (% active population aged 15-24)9.49.710.310.611.29.7Gender gap in part-time employment36.636.136.737.036.636.6Gender pay gap2 (in undadjusted form)22.922.322.221.7::Education and training indicators201220132014201520162017Adult participation in learning(% of people aged 25-64 participating in education and  training)14.214.114.314.414.9:Underachievement in education318.7::21.8::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)26.127.140.038.740.1:Variation in performance explained by students' socio-economic status415.8::15.9:: 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

*  Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard . 
Source: Eurostat, OECD. 

51 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7.37.37.37.4::Disability2.12.12.01.9::Old age and survivors14.214.514.714.6::Family/children2.82.82.72.8::Unemployment1.51.61.61.6::Housing0.10.10.10.1::Social exclusion n.e.c.0.40.40.50.5::Total28.428.829.029.0::of which: means-tested benefits2.32.42.52.6::General government expenditure by function (% of GDP, COFOG)Social protection20.921.321.521.421.6:Health7.77.87.87.98.0:Education5.05.04.94.94.9:Out-of-pocket expenditure on healthcare (% of total health expenditure)17.818.218.117.9::Children at risk of poverty or social exclusion (% of people aged 0-17)*20.922.923.322.320.0:At-risk-of-poverty  rate1 (% of total population)14.414.414.113.914.1:In-work at-risk-of-poverty rate (% of persons employed)8.17.97.27.98.3:Severe material deprivation rate2  (% of total population)4.04.24.03.63.0:Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan1.01.41.20.70.6:Tenant, rent at market price9.49.510.010.09.3:Proportion of people living in low work intensity households4 (% of people aged 0-59)7.77.89.18.28.1:Poverty thresholds, expressed in national currency at constant prices*1173011576119201177411898:Healthy life years (at the age of 65)Females9.58.87.77.7::Males8.98.98.47.9::Aggregate replacement ratio for pensions5 (at the age of 65)0.60.60.60.60.6:Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::50.857.961.463.5GINI coefficient before taxes and transfers*49.749.549.949.849.9:GINI coefficient after taxes and transfers*27.627.027.627.227.2: 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

(1) The methodologies, including the assumptions, for this indicator are shown in detail at : 
http://www.doingbusiness.org/methodology.  
(2) Average of the answer to question Q7B_a. '[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?'. Answers were scored as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or if the outcome is not known. 
(3) Percentage population aged 15-64 having completed tertiary education. 
(4) Percentage population aged 20-24 having attained at least upper secondary education. 
(5) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at:  http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm 
(6) Aggregate OECD indicators of regulation in energy, transport and communications. 
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

52 

Performance indicators2010201120122013201420152016Labour productivity (real, per person employed, year-on-year % change)Labour productivity in industry5.383.901.371.681.560.410.91Labour productivity in construction-4.59-1.96-1.340.70-2.03-1.09-1.12Labour productivity in market services0.741.45-0.45-0.260.973.25-1.28Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in industry-5.12-0.243.431.301.061.542.28ULC in construction4.844.154.503.396.123.992.90ULC in market services0.801.114.064.071.790.952.70Business environment2010201120122013201420152016Time needed to enforce contracts(1) (days)397.0397.0397.0397.0397.0397.0397.0Time needed to start a business(1) (days)25.025.025.025.022.022.021.0Outcome of applications by SMEs for bank loans(2)0.230.240.230.350.410.490.31Research and innovation2010201120122013201420152016R&D intensity2.732.672.912.953.073.053.09General government expenditure on education as % of GDP5.105.005.005.004.904.904.90Persons with tertiary education and/or employed in science and technology as % of total employment37383941464748Population having completed tertiary education(3)16161718272829Young people with upper secondary level education(4)86858687908990Trade balance of high technology products as % of GDP-0.10-0.030.130.190.500.09naProduct and service markets and competition200320082013OECD product market regulation (PMR)(5), overall1.611.371.19OECD PMR(5), retail3.503.302.40OECD PMR(5), professional services3.213.082.71OECD PMR(5), network industries(6)2.471.841.55 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

53 

 
 
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
          Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP   
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change) 
Real unit energy cost: real energy costs as % of total value added for the economy 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions 
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels 
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels 
* European Commission and European Environment Agency 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

54 

Green growth performance201120122013201420152016MacroeconomicEnergy intensity kgoe / €0.110.110.110.110.110.11Carbon intensity kg / €0.270.260.260.250.25-Resource intensity (reciprocal of resource productivity)kg / €0.630.620.600.600.580.59Waste intensity kg / €-0.16-0.18--Energy balance of trade % GDP-3.7-3.9-3.5-3.0-2.3-Weighting of energy in HICP%8.899.099.419.758.868.42Difference between energy price change and inflation %2.21.1-0.1-1.8-3.0-2.8Real unit of energy cost% of value added13.714.113.712.6--Ratio of environmental taxes to labour taxesratio0.100.100.100.100.10-Environmental taxes% GDP2.42.42.42.42.42.4Sectoral Industry energy intensity kgoe / € 0.150.150.150.140.140.14Real unit energy cost for manufacturing industry excl. refining% of value added14.113.713.112.7--Share of energy-intensive industries in the economy% GDP10.9410.8411.1011.1711.1611.07Electricity prices for medium-sized industrial users€ / kWh0.110.110.110.110.100.10Gas prices for medium-sized industrial users€ / kWh0.040.040.040.040.040.03Public R&D for energy % GDP0.010.010.020.020.030.02Public R&D for environmental protection% GDP0.020.020.020.010.010.01Municipal waste recycling rate%56.757.757.756.356.957.6Share of GHG emissions covered by ETS*%39.337.837.336.837.436.6Transport energy intensitykgoe / €0.570.570.590.580.590.60Transport carbon intensitykg / €1.461.451.531.471.49-Security of energy supplyEnergy import dependency%70.364.461.365.860.562.4Aggregated supplier concentration indexHHI34.640.525.236.323.2-Diversification of energy mixHHI0.260.270.270.270.270.27 
 
 
 
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