seem to have low employment impact?

Transcription

1 Simo Aho, FIN-33014, Finland Activation in Finland: why good measures es seem to have low employment impact? Or what can be achieved with active labour market policy Activation of social protection: an European comparison Paris September 2012

2 Activation in Finland: pre-history Labour market training and subsidised employment developed and increasing Goal: to decrease unemployment and increase the employability of the unemployed (not activation) 2

3 Employment guarantee It is the responsibility of the state t to provide the citizens of Finland the opportunity to work = if work in the open labour market (or a proper place in education etc.) was not found, municipality was obliged to arrange employment for six months to all who had been unemployed for 12 months This right to work became impossible when unemployment four-folded folded with the recession of the early 1990 s employment obligation removed

4 Workfare reforms the state pursues to realise the right to work by facilitating the proper p functioning of the labour market Danish model? (mainly rethoric) Activation: implementation of individual job search plans, rights and obligations of the unemployment defined, entitlement to unemployment benefits tightened 4

5 Development since the turn to activation : services for the needy The problem: about 40% of the stock of the unemployed is difficult to employ, whatever you do Services and measures to this segment have been increased and improved continuously Already since 1998, several reforms later: higher subsidy and longer subsidised period for the least employable. This has created a small industry of (often highly qualified) subsidised employment providers in the third sector (no real evaluation but not much impact to employability of participants to the open labour market; welfare impact much better) A major reform: introduction ti of specialised labour force service centres (joint effort of PES + municipalities) for the least employable in they cover still only a clear minority of the target group (evaluation soon after implementation: low impact if any, no later evaluation) 5

6 Development since the turn to activation II: more dicipline Continous pursuits to improve individual id activation plans and targeting of measures (low impact if any; majority of plans are considered as a pure formality, many of the clients did not actually know that they have made a plan) Nowadays plans are increasingly serious (?) but often not updated d when situation ti changes 2008 reform removed unemployment benefits from those long term unemployed who do not participate in activation when offered (evaluation: no employment impact) Difference to Danish model: emphasis on long term flat rate benefit receivers, not on insurance benefit receivers 6

7 Unemployment benefits in Finland Insurance benefit: in average 60% of previous wage, duration max 2 years, covers about 45% of the unemployed Basic benefit : flat rate benefit like insurance benefit for those who fulfill employment condition (10 months during last 18 months) but are not members of unemployment funds / unions. Receivers about 5% of the unemployed. Labour market support : flat rate benefit for those who have not qualified for insurance benefit or received the maximum; unlimited duration; since 2008 can be removed because of denial to participate to activation. Covers about 50% of the unemployed. LMS level l is too low: about half of the LMS receivers receive also additional (means tested) municipal social assistance 7

8 ALMP in Finland placement to state placement to private sector job rotation ordinary education placement to municipality on the job training rehabilitative work activity labour market training 8

9 Activation rates in selected Denmark 51 France 42 Germany 29 Finland 24 UK 2 EU countries 2009 Eurostat: Regular activation per 100 persons wanting to work 9

10 Low impact? Evaluation studies generally show that micro level average net impact of ALMP on later employment of participants is typically quite small or sometimes even negative. Especially widely implemented measures show typically y rather small average increase in employability. 10

11 Alternative explanations to low impact Quality of measures is generally low? No, majority of participants evaluate quality positively in surveys Impact measurement methods are inadequate? Nowadays advanced evaluation methods are used, although evaluations typically cover only part of participation (repetitive participation not evaluated) Measures are often targeted inaccurately! 11

12 Crucial determinant of the impact of activation is targeting From the point of view of impact, ALMP can be targeted to three groups 1 accurate target t group benefiting from participation i 2 deadweight, participants do not need the measure 3 Insufficient i measure in relation to the need 12

13 Accurate targeting: In the initial employability of the participant there is something missing in relation to the actual labour market demand. The measure is relevant to this missing factor, so that it actually increases employability. The probability of job-finding increases clearly because of participation. 13

14 Dead weight : The initial iti employability of the participant i t is relatively high and the measure cannot significantly improve it. Highly probable that the participant would have found employment sooner or later without participation. Lock-in effect: participants give up job search during participation, which leads to postponed re-employment 14

15 Insufficient measure in relation to the need Initial employability is low and the measure is not sufficient to increase it enough in order to overcome the employment threshold. 15

16 Average impact depends on targenting Average impact depends on relation: those who benefited / those who did not: If all participants belong to group 1, impact is 100% If most participants belong to group 3, impact is near to 0% If group 1 < group 2, impact is negative, in spite of the size of group 1 16

17 Why the activation measures are often poorly targeted? - Numeric goals to be fulfilled (EES: 20% activation rate) - Creaming / selection of the least employable - Targeting according to motivation - Targeting is difficult! Insufficient resources for targeting? - General activation goals / obligations 17

18 Why ALMP is implemented so widely? Volume variation between countries and periods seem not to depend on need? Additional (somtimes hidden or inofficial) goals not only to increase employability => too much measures 18

19 Various goals of ALMP to reduce the number of openly unemployed, to reduce ( = interrupt) continuous long-term employment, to counteract business cycle downturns = to increase demand / decrease supply in the sense of Keynesianism to prevent deterioration of qualifications of the participants, to prevent poverty and social exclusion, to provide an opportunity to gain or regain a right to earnings-based unemployment insurance benefits, to provide a motivation test in order to prevent undeserved utilisation of unemployment compensation benefits, to show that the government is seriously trying to decrease unemployment and is committed to helping those suffering from it, to keep up the values and norms of the work society (benefits must be earned ), and to prevent social and political unrest. 19

20 ALMP as social policy Prevention of social exclusion A way to qualify for unemployment insurance? Or to postpone the exhaustion of the right to insurance benefit Intermediate labour market as a long-term / permanent solution? Finland: subsidised jobs for least employable, emphasis on preventing social exclusion: recently 45% of all wage subsidy receivers, employer often third sector actor specialised in activation of this target group Finland: rehabilitative work activity for social assistance receivers 20

21 ALMP as discipline Motivation impact : activation as a threat to be escaped by finding a job Controlling ability / availability to employment Finland: activation of LMS 2006 (long term receivers of minimum benefit obliged to participation) resiprocity = right to benefit must be earned Contradiction: increasing motivation impact and imcreasing employability is not possible at the same time 21

22 Conclusion: why the average employment impact is low? In the conditions of nearly universal participation, the measurement of net average employment impact of ALMP necessarily show low impact there is no proper control group and targeting can not be very selective If ALMP is widely provided, near to zero average net impact is a good result? = employability of participants is in average near to that of comparable job-seekers that have not participated recently. 22

23 ALMP vs. no ALMP? ALMP increases labour reserve and keeps it in shape while waiting for better times In the conditions of mass / structural unemployment, ALMP increases equality among job-seekers ALMP helps to remove labour shortages ALMP is good social policy? 23

24 How unemployment careers end: Points of departure It is very common that t several unemployment spells follow each other with shorter or longer intervals of temporary employment and / or activation measures Participation and repetitive participation to activation measures is very common and almost universal if unemployment continues for long or is repeated Focus at the whole periods of individual unemployment careers (UC) from first incidence of unemployment to the final end of the problem 24

25 Unemployment careers that started 1995 / 1998 / 2001 in Finland Analysis includes all individuals id who start (at least) one unemployment or activation spell during the year 1995 (n=12,675), 1998, or 2001, and who have not been unemployed or participated ALMP measures during gpreceding 24 months End of unemployment career = end of unemployment spell that is not followed by a new spell during the following 24 months Data allowed ending dates before the beginning of 2005 can be updated 25

26 Duration of unemployment careers that started in 1995 / 1998 / Year of first unemployment <6 months 6 m-1 year 1-1,5 1, ,5 2, ,5 3, ,5 4, ,5 5, ,5 6, ,5 7, ,5 8, ,5 years Duration of unemployment career 26

27 100 % ALMP participation and repetitive participation during unemployment career by duration of the career all starting UC in % 60 % 40 % kaksi toimea S kaksi toimea E yksi toimi ei toimia 20 % 0 %

28 Activity proceeding the end of unemployment career that started in 1995 by its duration 0 % 20 % 40 % 60 % 80 % 100 % <6 months 6-12 months 1-2 years 3-4 years 5+ years total steady employment empl & out of LF studies continued unempl child care out of LF retirement t 28

29 Chronic unemployment (Finland) 40% of the stock of unemployment is chronic = no employment at the open labour market for several years 20% of inflow into unemployment become chronic Continuously new inflow into chronic unemployment. About half of the inflow have a work history and the other half has never been able to get strong foothold in employment. Inflow includes also a share of young and educated. About a half of the unemployment careers end with a steady job sooner or later, the rest with exit from labour force (retirement, starting of studies, etc.) Of inflow into unemployment 10% stay in unemployment career for a very long time and never find a steady employment. 29

30 Chronic unemployment and activation If the unemployment continues or is repeated, almost all are activated, repeatedly if needed 40% of activation spells are in the long run targeted to those 10% who never find employment at the open labour market. Only a rather small proportion of activation is targeted to those, whose unemployment career ends with exit from labour force relatively soon 30

31 Causes of structural unemployment possible impacts of ALMP Problem from the point of view of labour demand labour supply recruitment very expensive incentive trap wage level l / incentives lowering of employers labour expenses ALMP: subsidised jobs decrease improvement of earnings / benefits relation ALMP: participation sanctions recruitment risk / compensate = motivation impact productivity gap at individual level qualification / matching low productivity jobs disappear subsidies for selected types of shortage of qualified labour increase of qualifications jobs ALMP: tailored jobs to fit to the qualifications that are available? supply creates demand? d? ALMP: provision of training and/or increased work experience = qualification i impact 31

32 Concluding remarks The high h volume and specific structure t of ALMP helps societies to adjust into structural unemployment. Far less ALMP provides effective ways to increase employment. The relative e volume and structure of ALMP as well as principles regulating participation vary a lot between countries. Do the impacts and functions also vary? 32