Mutual Learning Programme

Mutual Learning Programme DG Employment, Social Affairs and Inclusion Peer Country Comments Paper- Denmark Prevention and integration The Danish approach to long-term unemployment Peer Review on Approaches to integrate long-term unemployed persons Germany 13-14 October 2016 Written by Thomas Bredgaard, Centre for Labour Market Research, Aalborg University, Denmark September 2016

EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Unit A1 Contact: Emilio Castrillejo E-mail: EMPL-A1-UNIT@ec.europa.eu Web site: http://ec.europa.eu/social/mlp European Commission B-1049 Brussels

EUROPEAN COMMISSION Mutual Learning Programme DG Employment, Social Affairs and Inclusion Directorate-General for Employment, Social Affairs and Inclusion Peer Review on Approaches to integrate long-term unemployed persons Berlin (Germany) 13-14 October 2016 September, 2016

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Table of Contents 1 Labour market situation in the peer country... 1 2 Assessment of the policy measure... 2 3 Assessment of the success factors and transferability... 5 4 Questions... 7 Annex 1: Example of relevant practice... 8 Annex 2: Summary table... 9

1 Labour market situation in the peer country This paper has been prepared for a Peer Review within the framework of the Mutual Learning Programme. It provides information on Denmark s comments on the policy example of the Host Country for the Peer Review. For information on the policy example, please refer to the Host Country Discussion Paper. The labour market situation in Denmark is improving after a long recession due to the global financial crisis. Employment rates are slowly recovering after a decline from 2008 to 2012. In 2013 and 2014, employment grew by 0.1 and 0.8 per cent respectively. The unemployment rate is slowly declining from 7.3 per cent of the active population in 2010 to 6.2 per cent in 2015 (compare to 9.4 per cent in EU28 in 2015 and 4.6 per cent in Germany). Denmark has a low incidence of long-term unemployment. In 2015, the long-term unemployment (LTU) rate was 1.7 per cent of the active population compared to 2.0 per cent in Germany. 27 per cent of the unemployed have been unemployed for more than 12 months in Denmark compared to 43 per cent in Germany (Eurostat, LFS Statistics). A contributing factor to low LTU rates in Denmark is the combination of flexible labour market regulation and active labour market policies. Employment protection regulation is relatively low and flexible which makes hiring and dismissal relatively easy for Danish employers. This creates a dynamic and flexible labour market with high voluntary job mobility and low job tenure. However, this also leads to higher separation and job destruction rates (cf. OECD, Employment Outlook, 2013: chapter 2). In Denmark a high proportion of the labour force experiences a short spell of unemployment every year (app. 15 per cent of the labour force) and many participate in active labour market programs for shorter or longer periods (2.6 per cent of the labour force in 2015). Denmark spends a high proportion of GDP on passive and active labour market policies. In 2014, the total expenditure on labour market policies was twice as high in Denmark as in Germany (3.2 per cent and 1.6 per cent of GDP respectively). The share of expenditure on active labour market policies was also higher in Denmark (44 per cent) than in Germany (19 per cent) (Eurostat, LFS statistics). Active labour market policies (ALMPs) are an important component in flexicurity. It compensates for generous unemployment benefits by requiring active job search and promotes labour market flexibility by improving the employability of jobseekers and efficient job matching. Despite relative success in preventing persons on unemployment insurance benefits from experiencing long-term unemployment, there remain a major challenge of integrating other long-term recipients on other types of income benefits in the ordinary labour market (cf. below). September,2016 1

2 Assessment of the policy measure Defining long-term unemployment (LTU): The host country paper illustrates that the definition and operationalization of long-term unemployment (LTU) is important for targeting effective active labour market policy interventions. In Denmark like in Germany, the statistical and institutional definition of LTU includes only formally job-ready unemployed, i.e. not the unemployed which are furthest away from the ordinary labour market. However, the definition of able to work seems to be more inclusive in Germany than in Denmark. In Germany a person is defined as able to work if he/she can work for at least three hours a day under the usual conditions of the labour market, thereby including many individuals with health problems and disabilities. In contrast, an individual is considered able to work (job-ready) in Denmark if he/she is able to take up an ordinary job and support him/herself within three months, thereby excluding many individuals with health problems and disabilities. Statistics Denmark defines long-term unemployment as persons who have been affected by gross unemployment within the last year. Gross unemployment includes recipients of unemployment benefits, social assistance, education benefits and participants in activation and wage subsidy schemes that are job ready (net unemployment). In 2015, the total number of gross unemployed was about 130.000 full-time persons and the number of LTU was about 30.000 full-time persons In Denmark, there are in total about 650.000 full-time persons (16-66 years) on various types of public income support or supported employment schemes (excluding early retirement benefits). Among these, less than 200.000 full-time persons are assessed job-ready. Everyone on unemployment insurance benefits are per definition considered job-ready (about 87.000 full-time persons in 2015). Among the jobready unemployed only about one in three becomes long-term unemployed, i.e. about 50.000 full-time individuals (cf. www.jobindsats.dk). Persons that are assessed not job ready by the jobcenters are not registered as longterm unemployed. A person is not job-ready if the person is not expected to be able to take an ordinary job within three months. The non-job ready include persons on other types of income support, like social assistance, education benefits, vocational rehabilitation, integration benefits, sickness and disability benefits, flex jobs, etc. In total, there were about 450.000 full-time persons assessed as not job-ready in 2015. The official target group for interventions on LTU is by implication rather small in Denmark. This is probably one of the reasons why ALMP has focussed on preventive rather than integrative measures (cf. below). Governance of employment services: There are also important similarities and differences in the governance of Danish and German employment services. From 2004 to 2009 Denmark operated a two-stringed governance structure similar to the current German set-up. ALMPs for insured and non-insured unemployed were either provided in municipal pilot-jobcenters (13 jobcenters) or in joint jobcenters (the remaining 81 jobcenters). In the joint jobcenters, the public employment service (PES) and the municipalities cooperated in providing services under the same roof. Although living together, the two systems were far from integrated. The joint jobcenters for instance operated with both a municipal and a state-appointed executive manager answering to either the local politicians or the national labour market authorities. In 2009, the government decided to abolish the joint jobcenters and transfer full responsibility for ALMPs for insured unemployed to the municipalities. The pilot-jobcenters in other words became the permanent solution. The current Danish governance of employment service is, therefore, different from the German. Local jobcenters function as one-stop-shops in every municipality and provide services for both the insured and the uninsured unemployed. However, even if employment services have been decentralised to municipalities, employment policies are still the responsibility of the Minister of Employment and the national labour market authorities. Municipalities have the September,2016 2

responsibility for other social and welfare services, such as social housing, social services, education programs, programs for vulnerable children and young people etc. Municipalities are by implication capable of providing integrated social and labour market services. Integration of social and employment services: But due to the rather narrow Danish definition of LTU mentioned above, the long-term unemployed are considered job-ready per definition and not supposed to have problems besides unemployment that qualifies them for social services. Instead, integrated labour market and social services are provided for the most disadvantaged unemployed (the non-job-ready ). Especially with the adoption of the disability pension reform in 2013 and the social assistance reform in 2014, municipalities have been implementing new integrated, individualised and coordinated services for long-term clients on income support. Participants are offered new resource trajectories ( ressourceforløb ) for up to 5 years and decisions are made in new rehabilitation teams where representatives of jobcenters meet with the client and the institutions relevant to the client s case (e.g. the health system, the education system, the social system). Prevention and integration of the long-term unemployed: Due to the fact that LTU has been and is relatively low, the approach in employment policies has been more preventive than integrative. The main objective has been to identify individuals at risk of LTU through profiling and early interventions. The target group is the job ready unemployed who have been unemployed for more than 12 months. The employment policy reform from 2015 and subsequent policies entailed four measures, which either directly or indirectly address LTU: 1) Intensified contact interviews: The interviews can be used to identify individuals at risk of long-term unemployment and implement early interventions. There are different types of interviews and the frequency of those varies depending on age and type of income support. Generally, those unemployed receiving unemployment insurance participate in six interviews with the jobcentre within the first 6 months of unemployment, and after that every third month. Unemployed on social assistance participate in the first meeting after one week and then each third month. The intensified contact regime build on evidence that interviews have a motivating and qualifying effect on job search and enhance employment probability. 2) Employer-based activation programs: ALMPs are increasingly taking place in ordinary workplaces, especially in the private sector, like private wage subsidies and job training programs. There is evidence to support that activation programs at local workplaces in the private sector are the most effective ALMP measure to reintegrate participants on the ordinary labour market, especially for the job-ready unemployed. 1 The financial compensation from the central government to local jobcenters rewards jobcenters that reduce the time unemployed spend on public income support and incentivise them to use employer-based activation programs. Jobcenters are, therefore, also identifying new measures and approaches to service the needs and demand of local employers and persuade more employers to participate in the delivery of ALMPs. 3) Intensified activation before expiry of Unemployment Insurance Benefits (UIB): UIB expires after 24 months, so the jobcenters make an intensified effort for persons that have been unemployed between 16-24 months in order to reintegrate them on the labour market. The program consists of an extra meeting in the jobcentre where a representative of the unemployment insurance fund also participates. After the meeting, a personal job broker may assist the unemployed and a special combination program with frequent meetings and a workplace-based activation 1 This finding is supported by international and Danish evaluations and reviews. See Bredgaard T. (2015): Evaluating what works for whom in active labour market policies, European Journal of Social Security, Vol. 17, no. 4, pp. 436-452. September,2016 3

program can commence. The program was implemented from January 2015 and evaluation results are not yet available. 4) Job bonus for LTU: The government has recently proposed a tax-free allowance up to DKR 45.000 (Euro 6.000) over two years to LTUs that enter into ordinary employment. The job bonus was proposed by the government in August 2016 in its 2025-plan but it is not yet enacted by law. If enacted, the job bonus will be in effect from 2017 to 2019. 150.000 persons are estimated to be eligible for the bonus and the total costs is estimated to be about 70 million Euro. The proposal builds on a similar job bonus targeted at long-term unemployed single breadwinners in 2011-2012. The target group and the job bonus were smaller (app. 14.000 persons and a tax-free allowance of up to DKR 600 per month). The outcome evaluation of the project showed significantly positive effects on subsequent employment rates (see www.star.dk report only available in Danish). The job bonus was estimated to improve the average employment rate of participants with 6 extra weeks per participant and increase employment with 450-900 full-time persons each year. A calculation of the cost and benefits of the program also showed positive results. September,2016 4

3 Assessment of the success factors and transferability Evaluations and evidence on the outcomes of the new approaches to integrate LTUs in Germany are limited and not yet available. It is, therefore, too early to assess whether the new approaches are best practice and cost-effective. Nevertheless, important lessons can be learned and discussed from the German experiences on integrating LTU s on the labour market. The caseload of employment counsellors is important for good quality case management and successful outcomes. There are not any legal regulations on the maximum caseloads for employment counsellors in Denmark. Germany has also experimented with intensified counselling and reduced caseloads (the Berlin-job offensive ) which showed significant and positive employment effects. Employees in Danish jobcenters often complain about under-staffing and insufficient time for client contact. Evaluations indicate that Danish employment officers sometimes spend up to two-thirds of the working day on administrative case management rather than client contact. There has also been political criticism that employees of the jobcenters have insufficient knowledge of and contacts with local employers and the labour market. This has raised a debate about administrative overload and how to reorient the jobcenters towards servicing the local labour market. Some municipalities are hiring more employees to reduce the time spend on income support of their clientele. The central PES has also allocated resources to upgrade the skills of case workers in the jobcenters and the unemployment insurance funds (around 20 million in the period 2015-2020). The idea of activation centres as an integrated provision of labour market and social services is particularly relevant in the Danish context. The German case illustrates the challenges of institutional coordination and integrated services for the hardest to place. The German experiences seem comparable to the Danish experiences in providing integrated, coordinated and individualised services to persons on long-term income support. In Denmark the new case management approach and individualised services are also provided in house rather than being bought from external service providers. The ESF program also has a number of features which are relevant in a Danish context: 1) Voluntary participation: The Danish Agency of Labour Market and Recruitment (STAR) has carried out a number of projects and experiments where participation of jobcenters and other stakeholders is voluntary and done by application. This creates higher commitment and project ownership. 2) Job hunters and on-the job coaching : There are debates in Denmark and little evidence about the most effective approach to contact employers and vacancy filling. One important lesson is that employment officers must know the needs and demands of local employers. Digital job databases are not sufficient. Local employers must experience the employment officers as service-mined and un-bureaucratic. Employers prefer to have one single point of contact. For hard to place unemployed, Denmark have good experience in using job mentors to improve the sustainability of job integration. The legislation allows for financial compensation of job mentors. Job mentors are ordinary employees of the workplaces in which the unemployed is working. The workplace is compensated for the time the job mentor spends on tutoring and assisting the unemployed. Current evaluations of job mentoring show mixed results, but indicates that especially young people benefit from mentoring. In contrast to the German regulations, the use of job mentors in Denmark is voluntary for jobcenters and unemployed individuals. 3) Generous wage subsidies: The wage subsidies in the German ESF program differ from Danish wage subsidies in being 1) digressive and 2) longer-term (up to 18 + 6 months). In Denmark, employers pay the participants the regular wage and working hours stipulated in the collective agreements. The employer receives a wage subsidy from the Jobcenter of DKR 75 per hour (around 65 per cent of the minimum wage). September,2016 5

In the public sector, the wage is fixed at DKR 123 and the wage subsidy is DKR 109 (89 per cent). The normal duration of the wage subsidy is 6 months in the private sector and 4 months in the public sector. Some specific target groups can participate for up to 12 months. In the Danish case, outcome evaluations show positive employment effects of wage subsidies in the private sector, but neutral, and sometimes even negative, results for wage subsidies in the public sector. September,2016 6

4 Questions Who are the participants in the networks for activation, counselling and opportunities? How are participants persuaded or incentivised to participate? What is the role of employers in the networks? What type of administrative burdens were associated with participation in the ESF program and made some (105) jobcenters abstain from participating in the program? What are the experiences with the digressive wage subsidy and the willingness of employers to participate in the program as well as hiring the participants after subsidies are exhausted? What are the plans for evaluating the ESF program with regard to effect on employment probability or other empirical evidence for further development? What are the plans to integrate the ESF programme into ordinary PES services when it expires? September,2016 7

Annex 1: Example of relevant practice Name of the practice: Job clubs for the long-term unemployed Year of implementation: 2015-2016 Coordinating authority: Danish Agency for Labour Market and Recruitment (STAR) Objectives: (1) To experiment with intensive job counselling in job clubs for the long term unemployed. (2) To collect evidence on effective implementation of job clubs and (possibly) contribute to run a randomised controlled trial (RCT) after the end of the project period. Main activities: The project provides funding for participating jobcenters to experiment with three different pathways to jobs: (1) Intensive job counselling in job clubs, (2) cooperation with temporary work agencies, and (3) targeted companyfocused activation for 8 weeks. There are three target groups for the project: (1) Young people with a formal education and more than 6 months of unemployment, (2) Unemployed between 30-49 years with more than 6 months unemployment, (3) Unemployed above 50 years. Participation of jobcenters is voluntary. The jobcenters are selected by STAR on the basis of an application. 27 jobcenters and 32 projects were selected by STAR. The minimum activities of the job clubs are group sessions, individual counselling, availability of competent job counsellors, a mixture of participants (gender, age, unemployment history etc.) and follow-up activities to monitor job search activities. Besides from these minimum requirements, there is a lot of variation between the jobcenters in their implementation of the job clubs (e.g. duration of the job club, number of meetings per week, internal or external location and cooperation with external providers). Nonetheless, halfway in the project two distinct job club models can be distinguished: (1) The intensive job club (characterised by frequent meetings, individual counselling and intensive job search activities) and (2) the reflexive job club (characterised by less frequent meetings, focus on progression between meetings and time to reflect on and optimise own job search strategy). Results so far: The preliminary results of the project have been collected in a midterm evaluation report by Rambøll Management Consulting from July 2016. Until June 2016, 896 individuals had participated in the job clubs and 634 individuals had completed the project. Among the 634 participants that have completed the job clubs, 226 were in ordinary jobs or education four weeks after the participation (35.6 per cent). This result is beyond the expectations that the jobcenters planned to achieve. To further improve the results of the job clubs, the jobcenters suggest that implementation should focus on: (1) targeting unemployed that are motivated to participate, (2) establishing (supplementary) open job clubs for the most disadvantaged unemployed, (3) implementing practical training on job applications and CV s early in the project, (4) identifying participants with problems besides unemployment in the referral process, (5) clear expressions of mutual expectations when local employers are invited to the job clubs. The lessons learned so far include: (1) That a feeling of unity and community improves motivation of participants, (2) that the mix between young, adult and senior individuals improves group dynamics and creates a good atmosphere, (3) that voluntary participation increases the motivation of participants, (4) that inclusion of local companies gives insights into the needs of companies, (5) that individual sessions are important so that participants experience that they are heard, (6) that homework ensures progress and small victories for the participants. September,2016 8

Annex 2: Summary table Labour market situation in the Peer Country Denmark is recovering from the global financial crisis Since 2012 employment has increased and unemployment is falling Denmark has a low incidence of long-term unemployment (1.7 per cent of the active population) Flexible labour market regulations and active labour market policies contribute to low long-term unemployment Assessment of the policy measure The national definition of long-term unemployed in Denmark only includes unemployed for more than 12 months that are assessed to be job-ready and (unlike in Germany) excludes many unemployed with health problems and disabilities. The governance of employment services is different in Denmark with a onestringed local implementation through municipal jobcenters. Due to this governance structure, municipalities are in a good position to provide integrated social and labour market programs to long-term unemployed with multiple problems besides unemployment. For the long-term unemployed that are job-ready the jobcenters implement a preventive and integrative approach Assessment of success factors and transferability Interesting lessons can be learned from the new German case, most importantly: That the caseload of employment counsellors is important for good quality case management and successful outcomes That there are opportunities and challenges in providing integrated, in-house activation services (activation centres in Germany) That there are pros and cons of voluntary participation in activation projects That innovative methods for vacancy filling and contacting employers should be applied Questions Who are the participants in the networks for activation, counselling and opportunities? How are participants persuaded or incentivised to participate? What is the role of employers in the networks? What type of administrative burdens were associated with participation in the ESF program and made some (105) jobcenters abstain from participating in the program? What are the experiences with the digressive wage subsidy and the willingness of employers to participate in the program as well as hiring the participants after subsidies are exhausted? What are the plans for evaluating the ESF program with regard to effect on employment probability or other empirical evidence for further development? What are the plans for integrating the ESF programme into ordinary PES services when it expires? September,2016 9