Balancing Activation and Protection Learning from Active Social Policies in the European Union and the United States

Transcription

1 uman evelopment conomics, urope and Central Asia Region Balancing Activation and Protection Learning from Active Social Policies in the uropean Union and the United States Arup Banerji Sofia, Bulgaria November 17, 2006 nhancing Job Opportunities in CA

2 uman evelopment conomics, urope and Central Asia Region Overview Why activation policies? istory and rationale building blocks of activation programs Results and caveats 2

3 uman evelopment conomics, urope and Central Asia Region Why Activation? istory and Rationale nhancing Job Opportunities in CA

4 uman evelopment conomics, urope and Central Asia Region Origins in the United States U.S. welfare policy always focused on sorting the deserving poor (eligible for public aid) from the undeserving poor (expected to work). first federal program was the Aid to ependent Children program (AC), created in 1911 AC was primarily for worthy white widows. All others, including African Americans, immigrants, Catholics, divorced, deserted, and unmarried were mostly considered "unfit" and dependent on the paid labor market Changed only in the 1950s and 1960s, with migration of African Americans to northern cities, the civil rights movement, and the welfare rights movement. In 1980s, President Reagan and US conservatives popularized concept of welfare queens as symbol for the need to reform welfare state and introduce responsibilities as well as rights President Clinton supported this, and introduced act to reform welfare in

5 uman evelopment conomics, urope and Central Asia Region Origins in the United States, cont. nding welfare as we know it consisted of: stating that welfare is no longer an entitlement to poor women and children women were now expected to fulfill work and other requirements to get aid Imposing time limits on aid two consecutive years, with five year lifetime limit States usually enacted harsher punishments than under federal law: In 37 states, the entire family loses aid if the adult violates work sanctions In 10 states, lifetime maximum is two years Most states adopted a strong work first strategy, which discourages education and training in favor of encouraging recipients to take any available job, even a low-wage job, in order to receive benefits. 5

6 uman evelopment conomics, urope and Central Asia Region Recent origins of activation in urope Western uropean welfare states were created or consolidated during the post War II full employment period. Social rights, including protection from effects of unemployment, sickness, and old age, were granted the status of property rights, and were not based on previous earnings or work performance. But from 1970s, economic situation worsened: Aging populations and generous benefits made social insurance systems increasingly unaffordable re was increased concern about long-term unemployment among vulnerable groups This led to a hybrid model, where employment is encouraged as a way to protection with disincentives to work attempted to be changed to incentives. 6

7 uman evelopment conomics, urope and Central Asia Region Recent origins of activation in urope, contd. This means: iscouraging early retirement and disability Reducing unemployment benefits Imposing work requirements on the long-term unemployed But (unlike in the United States): State has an obligation to try and help disadvantaged to find jobs Social benefits in urope have changed from being a right, to where obligations have to be fulfilled to receive these rights 7

8 uman evelopment conomics, urope and Central Asia Region Activation Policies in urope General Features uropean model of activation policies generally place employment integration as the very heart of social policy. This implies: Greater emphasis on work as a way to ensure that individuals in their prime age are not excluded from mainstream society Greater effort on behalf of the social and employment services in helping benefit recipients overcome the obstacles to entering into paid work Greater effort on behalf of the benefit recipients to enter or re-enter the job market 8

9 uman evelopment conomics, urope and Central Asia Region Activation is not just workfare Workfare is working in return for benefit aims at reducing dependency and cost of benefit provision by tightening the access to benefits Activation (as conceived in urope) involves a wider range of options - training, education, subsidized employment, work placement, group activities, language-learning skills, literacy, etc. aims at labor market and social integration through empowerment to increase competencies and skills 9

10 uman evelopment conomics, urope and Central Asia Region Good activation involves Improving personal, social and vocational skills and competencies and enabling to social integration Individual and flexible offer acknowledging diversity (age, experience) and relevant to the individual person s needs, wishes and priorities Involving the resources and strengths of the beneficiary Networking labor market services, social services, health services, housing sector, communities, etc. Cooperation and interaction between the beneficiary and the agency in activation s planning, design and implementation 10

11 uman evelopment conomics, urope and Central Asia Region Key Building Blocks nhancing Job Opportunities in CA

12 uman evelopment conomics, urope and Central Asia Region Key building blocks of activation programs 1. mutual obligations principle 2. Frequent and personalized/tailored interventions of agencies during individual s unemployment spell 3. Financial incentives to labor market re-integration 4. Stricter benefit eligibility criteria and benefit sanctions 5. Strong obligations to participate in labor market programs, community work or to try selfemployment 6. Changes in institutional arrangements and greater coordination across institutions 12

13 uman evelopment conomics, urope and Central Asia Region 1. mutual obligations principle Society invests more in helping beneficiaries in more effective ways. Beneficiaries are expected to respond accordingly Applied with varying degrees of effectiveness in assisting beneficiaries to find work Applied with varying degrees of compulsion on those out of work. right degree of pressure is a sensitive and controversial concept mutual obligations principle applies also to employers e.g., commitments (quotas) to employ disabled people (Belgium, Netherlands, Norway, Spain, Sweden); anti-discrimination commitments 13

14 uman evelopment conomics, urope and Central Asia Region 2. Tailored interventions during the unemployment spell Much more frequent contacts with the responsible labor or social office (most OC countries); contractbased obligations (UK New eal ) Profiling of job searchers/ individual action plans different categories of beneficiaries based on the amount of help needed to find a job / distance from the labor market (UK, enmark); different programs available to different categories (the Netherlands) Intensive interviews to adjust/redesign the individual action plan - at certain stage of unemployment Case management before and after starting the job (US) Combination of job search with education and training (most OC countries) 14

15 uman evelopment conomics, urope and Central Asia Region 3. Financial incentives for labor market reintegration Back to work bonus for long-term welfare beneficiaries who go back to work xamples: Ireland: Back-to-work allowance limited to 3 years and decreasing over time UK: Long-term unemployed receive a one-time bonus of 167 when accepting a new job Australia: mployment entry payment lump sum every 12 months 15

16 uman evelopment conomics, urope and Central Asia Region 3. Financial incentives for labor market reintegration (cont d) Increased earned income tax credit xamples: Netherlands: Subsidized workers receive 2,269 when moving to un-subsidized work for at least 6 months, financed through tax relief and paid over a period of 3 years (employment-conditional tax credit) France: Special subsidy targeted at low-income workers, state bonus proportional to earned income. Increases net wages, without increasing labor costs for employer US, UK and New Zealand: Family tax credit, administered through salary instead of the benefit system 16

17 uman evelopment conomics, urope and Central Asia Region 3. Financial incentives for labor market reintegration (cont d) igher earnings disregards xamples: France: Continue to receive minimum income benefits while getting paid up to 750 hours per year (lasting max. 12 months) Netherlands: Internship program for young unemployed, one-time remuneration of 450 euro for 3 months internship, while still receiving unemployment benefit Belgium: For the long-term unemployed and unemployed older than 45 years old, non-market work arranged by Local Work Agency to a maximum of 45 hours a month, net wage is set by municipality 17

18 uman evelopment conomics, urope and Central Asia Region 4. Stricter benefit eligibility criteria and benefit sanctions Shortened maximum duration of receiving a benefit (many U countries move in that direction) ecrease of the benefit with the length of unemployment spell, or even cancellation (enmark) Immediate job search is required, even before applying for benefit (many US states) Obligation for unemployed persons to increase the range of occupation within which work is sought and increase geographical radius of job search (Germany, Sweden) Obligation to accept all suitable work Means testing in Germany, the benefit that replaced unemployment assistance is means-tested against the income of the recipient, plus partner and/or housemates 18

19 uman evelopment conomics, urope and Central Asia Region 5. Participation in labor market programs, community work and self-employment Obligation of welfare recipients to work - paid or unpaid community service jobs (some states in the US), mandatory volunteer social work (enmark). In the US, even homeless assistance and programs for people with serious mental illness are testing work programs, but not as requirement Participation in municipal work or training projects obligatory for the long-term unemployed and those under age of 25 (Sweden) 19

20 uman evelopment conomics, urope and Central Asia Region 5. Participation in labor market programs, community work and self-employment (cont d) Promotion of self-employment xamples: Germany: Those unemployed for at least 4 weeks must set up a business plan to be judged by independent professionals. When the business plan is judged to be sound, they will switch from unemployment allowance to a Starters Allowance to be paid for 6 months Netherlands: Unemployment beneficiaries can be exempted for 3 months from searching a job, to set up their own business. If income is generated by the new business, this will be subtracted from unemployment benefit 20

21 uman evelopment conomics, urope and Central Asia Region 6. Changes in institutional arrangements and greater coordination across institutions One stop shops services provided in a location and premises convenient for the client; client-friendly environment / co-location of employment and welfare function - service centers located within 20 minutes of client residence (Belgium) Increased role of the private sector - employers have offices in the Job Center Plus (UK), job interviews carried out in the welfare offices; reintegration activities outsourced to the private sector (the Netherlands) IT systems integration and coordination of the back-office functions through IT systems with access to different parts of the social protection system (UK, Crossroads in Belgium) 21

22 uman evelopment conomics, urope and Central Asia Region Results and Caveats nhancing Job Opportunities in CA

23 uman evelopment conomics, urope and Central Asia Region Results Large drop in caseloads - in UK and US caseload number dropped by more than ½ compared to the peak level in mid-1990s, in Canada and the Netherlands by 1/3 and more, in Finland by ¼ More and better quality jobs - in the US, the majority of welfare program leavers are working, often full-time, and at wage rates that are close to those of similar groups in the labor force; in urope, workfare programs have had positive effects on earnings Increase in the employment rate data available for UK reveals that ½ of the 11% increase of employment of lone parents is due to the New eal for Lone Parents of

24 uman evelopment conomics, urope and Central Asia Region But conclusions are not all robust employment effect is not large (Fafo 2001) In France, only about 25 percent leave the workfare program due to employment. In the Netherlands, the net employment effect of the workfare program is about 18 percent. In Norway, neither the employment nor earnings of program participants significantly improved Those who benefit the most from workfare programs areusually those who would have been most likely to find jobs on their own. In France, enmark, the Netherlands and UK, those who are usually younger, with better education, and fewer social problems. In the USA, whites rather than African Americans or Latinos Total income gains from workfare are positive, but relatively low, leaving many recipients still in poverty In US, this may be because of the added costs of working, such as transportation and child care 24

25 uman evelopment conomics, urope and Central Asia Region Not all who exit welfare can move to employment Activation policies can only work when there are jobs that are available often not true in many astern uropean countries, especially in rural areas Reforms that succeed to move the majority of working-age ablebodied beneficiaries out of welfare, may worsen conditions of people for whom employment integration is more difficult US studies show that recipients who may be least able to succeed in the labor market are the most likely to be sanctioned. y have multiple employment barriers, including cognitive and health-related barriers, and difficult aspects of home life (e.g., lack of transportation, three or more children, child care problems, domestic violence) Former welfare recipients remain vulnerable at the work place with weaker skills and work experience, they are more likely to lose jobs 25

26 uman evelopment conomics, urope and Central Asia Region Conclusions Where is the balance between activation and protection? Activation policies can be successful: In lowering welfare costs because of people leaving welfare rolls For countries with generous benefits which encourages those with an ability to find jobs not to work In helping those for whom additional training or job search help is the barrier to employment 26

27 uman evelopment conomics, urope and Central Asia Region Conclusions Where is the balance between activation and protection? Contd But they may lower welfare and increase poverty if: re is a general lack of low-skill formal sector jobs (e.g., in rural areas) Many of those on welfare rolls are socially excluded Institutional capacity to do high quality social and case work is low 27