Labour market flexibility, risk and uncertainty:
the role of social insurance
Ágota Scharle
[email protected]
Budapest Institute for Policy Analysis
Employment, poverty alleviation, migration and social inclusion, 26-27 March 2012, Xi’an
Outline
how to respond to increased flexibility:
lessons from two earlier shocks
insurance systems have broadened
no clean solution to providing both
income support and activation
complex systems
some implications for welfare reform
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26-27 March 2012, Xi’an
How to respond to increased
flexibility
80
75
flexibility entails
structural shifts
70
shifts are abrubt
65
oil price shock of
1970s
60
Denmark
55
France
50
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
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transition from plan
to market in 1990
 similar lessons
26-27 March 2012, Xi’an
Same lessons from two earlier
shocks

reducing labour supply will reduce long
term employment as well

protecting jobs will reduce productivity

both are costly / unsustainable
(Layard et al 1991, Balla et al 2006)
income support + activation (flexicurity)
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26-27 March 2012, Xi’an
Insurance systems broadened
welfare states’ response to fragmented
work histories and families
traditionally:
insurance for the male bread winner
new trend:
- insurance based and social benefits
become similar (Clasen-Clegg 2011)
- activation extended to all working age
benefit recipients
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26-27 March 2012, Xi’an
100
…with much variation across
Europe
EE
LU
DE
80
SK
CZ
GR
LT
SE
UK
PL
IS
60
40 intensity
CY
AT
PT
FR
HU
SI
DK
FI
NL
LV
BE
NO
20
IT
0
10
20
Hatókör
30
40
coverage
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26-27 March 2012, Xi’an
50
Activation vs income support
income support reduces labour supply
activation meant to increase it
 no clean solution
minimum income scheme with
- complex rules to reduce welfare trap
- job search obligations and sanctions
- active labour market measures
- personalised measures, case workers
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26-27 March 2012, Xi’an
Activations tools
financial: negative taxation, earnings
disregard, gradual phasing out,
reapplying made easier
behavioural: benefit conditional on active
job search, taking up job offer,
monitoring + sanctions (Kluve et al 2010)
services:
- personalised, small scale
- often combined with training
- counselling (PES to PES Dialogue)
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26-27 March 2012, Xi’an
Variation by country and group
Labour supply response may vary
by gender (Mincer 1984, Antecol 2000)
by life cycle: studies, children, retirement
(Blundell 2012)
by culture (Antecol 2000, Blau-Kahn 2011)
 good
benefit design reflects this
 requires empirical research
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26-27 March 2012, Xi’an
Some implications for welfare
reform
services rather than administration:
social workers, psychologist,
rehabilitation experts -- not clerks
need empirical research, best if based on
controlled experiments e.g. J-PAL
individual level administrative data can
reduce cost of experiments/ system
www.budapestinstitute.eu
26-27 March 2012, Xi’an
Thank you for your attention
For more information please contact me at
[email protected]
www.budapestinstitute.eu
26-27 March 2012, Xi’an
References
Antecol (2000): An examination of cross-country differences in the gender gap in
labor force participation rates, Labour Economics 7, no. 4, pp 409-426.
Blau and Kahn (2011) Substitution between individual and cultural capital, mimeo
http://www.sole-jole.org/12125.pdf
Blundell (2012): Tax policy reform: the role of empirical evidence, J of European
Economic Association,10(1) pp 43-77.
Fernández (2008): Culture and Economics, in Steven N. Durlauf and Lawrence E.
Blume, eds., The New Palgrave Dictionary of Economics, pp. 333-340.
Kluve-Card-Weber (2010) Active Labor Market Policy Evaluations: a Meta-Analysis,
The Economic Journal 2010, 120, F452-F477)
Layard, Nickell, Jackman (1991): Unemployment: Macroeconomic performance and
the labour market, Oxford University Press
Mincer (1984) Inter-Country Comparisons of Labor Force Trends and of Related
Developments: An Overview, NBER No.1438
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26-27 March 2012, Xi’an