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1 Analyzing Labor-Market Policy Reforms in an Integrating Europe Radical Departure, Muddling Through or Self-Transformation? J.Timo Weishaupt, Ph.D.

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Presentation on theme: "1 Analyzing Labor-Market Policy Reforms in an Integrating Europe Radical Departure, Muddling Through or Self-Transformation? J.Timo Weishaupt, Ph.D."— Presentation transcript:

1 1 Analyzing Labor-Market Policy Reforms in an Integrating Europe Radical Departure, Muddling Through or Self-Transformation? J.Timo Weishaupt, Ph.D.

2 2 Background n Europe faces a set of common challenges & constraints (“input convergence”) u Acquis Communautaire u SGP, EMU, ECB u Demographic ageing, family structures u Etc. n EU members also receive same advice through EES & OECD (“paradigm convergence”) u Activation &Supply-side measures u EES and Lisbon targets

3 3 Central Research Questions 1. As EU Member States face a common set of challenges and receive a common set of recommendations, is there also a common policy response ? 2. If not, do their reform efforts systematically vary, and if so, how ? 3. Have these reform activities fundamentally transformed the institutional settings of national labor-market policy regimes, and if so, to what effect ?

4 4 Literature Review n Globalization Thesis u Cost containment main common concern u Leaner and meaner welfare state u Result: policy convergence n Path-dependency Thesis u Regime types face regime-typical pressures u Significant changes, but relative “distance” between regimes remains intact u Result: persistent policy diversity

5 5 Literature Review, II n Hybridization Thesis u EU member states deliberately “mix and match” various policies u Recalibration rather than retrenchment u Regime characteristics soften u Result: neo-convergence or neo-divergence

6 6 Analytical Grid: Four Dimensions 1. Ideational 2. Organizational 3. Financial  How are labor-market interventions financed?  How much are governments willing to invest? 4. Incentives (rules and policies)  How are jobseekers motivated to seek, be available for, and accept work?  What is the policy mix between compulsion and support?

7 7 Negative Incentives (financial) Negative Incentives (non-financial) Positive Incentives (financial) Positive Incentives (non-financial) n Short duration of benefits n Low reservation wage n Limited or no “exit options” (early retirement, disability) n Strict eligibility criteria n Broad definition of “suitability criteria” n Sanctions n In-work tax credits n Wage subsidies n Benefit top-up for participation in public work scheme n Self-employment startup subsidies n Job counseling and placement n Training (soft & occupational skills) n Childcare n Other support services (mobility, mental health, debt, substance abuse) Compulsion Support

8 Financial Dimension: Funding 20002006 Change in % Employee SSC Employer SSC Employee SSC Employer SSC Employee SSC Employer SSC Austria18.131.6318.128.860-2.77 Belgium13.134.713.134.7200.02 Denmark[1] a +8+3% AW0.6% AW8+3% AW0.6% AW[-1]0 Finland7.2267240.2-2.0 France13.5235.9513.641.050.085.1 Germany20.5 21.4 0.9 Greece15.927.9616.028.060.1 Ireland4.58.54.08.50.50 Italy9.1934.089.1932.080-2.0 Netherlands b 31.15+0.6%AW7.431.7+2.44%AW14.360.55+1.84%AW6.96 Portugal11.023.7511.023.7500 Spain6.430.66.430.600 Sweden7.032.927.032.280-0.64 UK1012.21112.81.00.6

9 Financial Dimension: Expenditures ALMP divided by number of unemployed persons 19961997199819992000200120022003200420052006 Austria0.100.11 0.15 0.160.14 0.12 0.15 Belgium0.140.120.14 0.160.180.15 0.160.13 Denmark0.260.310.360.390.45..0.470.35.. Finland0.11 0.10 0.09 0.100.11 0.12 France0.10 0.120.130.12 0.110.10 Germany0.150.110.120.15 0.140.130.110.090.08 Ireland0.100.120.140.180.220.240.190.160.150.14 Netherlands0.210.260.340.430.490.570.510.360.270.250.28 Portugal0.07 0.110.120.150.140.110.10 0.090.08 Spain0.02 0.030.050.060.070.06 0.070.080.10 Sweden0.230.210.290.310.300.330.300.210.180.170.19 UK0.030.04 0.050.070.060.090.10 0.08

10 10 Financial Dimension: Expenditures Normalized ALMP

11 Financial Dimension: Expenditures PLMP divided by number of unemployed persons 19961997199819992000200120022003200420052006 Austria0.350.31 0.330.310.300.270.260.220.24 Belgium0.180.170.15 0.170.19 0.20 0.180.17 Denmark0.420.460.400.330.350.36 0.350.37.. Finland0.220.210.190.180.16 0.17 0.180.17 France0.11 0.120.140.160.190.180.170.15 Germany0.260.250.240.250.24 0.220.20 Ireland0.180.160.170.180.160.170.18 0.190.18 Netherlands0.500.530.600.640.650.620.540.430.410.380.33 Portugal0.09 0.120.140.16 0.15 0.160.150.14 Spain0.100.09 0.100.13 0.120.130.150.16 Sweden0.210.190.200.22 0.200.190.200.190.150.14 UK0.080.07 0.06 0.05 0.04

12 12 Financial Dimension: Expenditures Normalized PLMP

13 13 Incentives Dimension: Negative, non-financial n Missing Data (Micro Data from European LFS) n Tightening of benefit regimes u Suitability criteria u Jobs search criteria u Monitoring, sign-ins etc. u Danish Finance Ministry shows common trend that benefits are less “freely” available

14 14 Incentives Dimension: Negative, financial n Average levels of initial UB have remained largely unchanged for low and medium incomes. n Slight cuts on average on high incomes, except Greece, Ireland and UK (all with flat rate systems, where increases are distributed across all recipient groups) n Average levels of long-term benefits have been somewhat reduced on average for low and medium incomes, and dropped – at times substantially – for high incomes

15 Average Net Replacement Rates for Long-term Unemployed Persons Different Earning Levels, 2001 and 2006 Ø 67% of AWØ 100% of AWØ 150% of AW 20012006Change20012006Change20012006Change Austria6762-55755-24736-11 Belgium7173258 04539-6 Denmark7977-263625242-10 Finland7673-36259-34839-9 France60 045443230-2 Germany7267-56353-106138-23 Greece18 015 01210-2 Ireland71765576254341-2 Italy20 017 01411-3 Netherlands71743535964039 Portugal50 038 02826-2 Spain474636352724-3 Sweden7269-35452-24235-7 United Kingdom62631495013734-4 Average605948473832-6

16 16 Changes in Maximum UB Duration for Prime-Aged Workers in Months mid-1990s to 2008 Anglophone EuropeNordic Europe Ireland (15)Denmark ( 108 → 48) UK (12 → 6)Finland (23) Sweden (28 → 14) Continental Europe (center)Continental Europe (south) Austria (9)Greece (12) Belgium (indefinite)Italy (6) France (23)Portugal (24) Germany (32 → 12)Spain (24) Netherlands (24)

17 17 Exit Options – early retirement n General trend to reduce or even completely phase out early retirement schemes (e.g. IE; SE) n Still some countries with rather generous use of these schemes (BE, FN) n AT as only country even increasing availability (until 2005)

18 18 Incentives Dimension: Positive, non-financial n Reorientation of Public Employment Services u customer focus u Improved matching services (new technologies) u “soft skills” n Mostly “negative” trend with respect to the provision of occupational skills u Exceptions include AT, (BE),(ES), PT, and UK u Most drastic cuts in DE, DK, FN, SE n Mostly “positive” trend with respect to the provision of childcare places, but significant differences remain u Laggards include AT, DE, GR, IT u Nordics plus BE & FR in the lead

19 19 Incentives Dimension: Positive, financial n Variations remain with regard to the taxation of (low-paid) work – slight trend toward tax reductions is identifiable n Differences with regard to existence and levels of statutory minimum wages remain n Variations in the use of wage subsidies remain u High spenders include BE, DK, ES, SE u (UK but also IE and NL use in-work tax credits) n Variations in the use of direct job creation remain u General trend to downsize DJC u High spenders include BE, FR and IE n Germany (plus ES) as outliers in investing large resources in business start-ups for the unemployed

20 20 Conclusions n No overall retrenchment, yet substantial changes have occurred in some, but not all identified areas n Financial Dimension u Persistent differences in sources of funding u Some convergence with respect to spending on ALMP (high-spending countries spend less, low- spending ones spend more) u Common downward trend in PLMP (with exception of ES, FR & PT)

21 21 Conclusions, II n Incentives Dimension u Convergence on positive and negative non-financial incentives u Persistent diversity on financial incentives, especially with regard to benefit levels and “make work pay strategies”. F (But there are common reductions in the benefit levels for higher incomes and modest attempts to reduce overall taxation on labor) n Overall conclusion: u Historical legacies do matter u Regime typologies becomes less relevant – but not irrelevant –as countries become hybrids u “Social-liberal” reform agendas, recombination of elements of the Nordic and the liberal worlds (from Bismarck to Beveridge) u Contingent neo-convergence

22 22 n Thank you very much for your attention and interest.

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