Labour market flexibility, risk and uncertainty: the role of social insurance

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Labour market flexibility, risk and uncertainty
the role of social insurance
Ágota Scharle agota.scharle_at_budapestinstitute.eu
Budapest Institute for Policy Analysis
Employment, poverty alleviation, migration and
social inclusion, 26-27 March 2012, Xian
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Outline

• how to respond to increased flexibility lessons
  from two earlier shocks
• insurance systems have broadened
• no clean solution to providing bothincome
  support and activation
• complex systems
• some implications for welfare reform

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26-27 March 2012, Xian
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How to respond to increased flexibility

• flexibility entails structural shifts
• shifts are abrubt
• oil price shock of 1970s
• transition from plan to market in 1990
• ? similar lessons

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26-27 March 2012, Xian
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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, Xian
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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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with much variation across Europe
intensity
coverage
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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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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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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, Xian
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Some implications for welfare reform

• services rather than administrationsocial
  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

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26-27 March 2012, Xian
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Thank you for your attention
For more information please contact me at
agota.scharle_at_budapestinstitute.eu
www.budapestinstitute.eu
26-27 March 2012, Xian
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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-W
eber (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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