Labor Market Reform...2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010...
Transcript of Labor Market Reform...2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010...
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Labor Market Reform
The Hartz Experience
Dr. Michael Jung, Brussels, June 15, 2013
CURRENTLY, IN EUROPE...
• Post-crisis depression, huge unemployment
• Debt consolidation vs. growth needs
• Declining returns of monetary easing
• Obvious limits of fiscal stimulus
• Emerging consensus: structural levers for growth!
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EUROPEAN LABOR MARKETS – HUGE DISPARITIES
SOURCE: Eurostat
1 Relative position of most countries from 2008 - 2012 stable
2 Vacancy rate = Number of job vacancies divided by total number of jobs
4
SOURCE: ESPON
EUROPEAN LABOR MARKETS – HUGE DISPARITIES
5
0.00
20.00
40.00
60.00
0.00
20.00
40.00
60.00
0.00
20.00
40.00
60.00
0.00
20.00
40.00
60.00
0.00
20.00
40.00
60.00
2000 2005 2010 2015 2000 2005 2010 2015
2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010 2015
Belgium Bulgaria Czech Denmark Germany
Estonia Ireland Greece Spain France
Italy Latvia Lithuania Hungary Netherlands
Austria Poland Portugal Slovenia Slovakia
Finland Sweden UK
SOURCE: Eurostat Labour Force Survey
YOUTH UNEMPLOYMENT IN EUROPE 2000 – 2012Share of Jobseekers
6
0.00
5.00
10.00
15.00
20.00
0.00
5.00
10.00
15.00
20.00
0.00
5.00
10.00
15.00
20.00
0.00
5.00
10.00
15.00
20.00
0.00
5.00
10.00
15.00
20.00
2000 2005 2010 2015 2000 2005 2010 2015
2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010 2015
Belgium Bulgaria Czech Denmark Germany
Estonia Ireland Greece Spain France
Italy Latvia Lithuania Hungary Netherlands
Austria Poland Portugal Slovenia Slovakia
Finland Sweden UK
yearSOURCE: Eurostat Labour Force Survey
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YOUTH UNEMPLOYMENT IN EUROPE 2000 – 2012Share of Age Cohort
HARTZ REFORMS – THE PREVAILING VIEW
Germany 2002: Amidst high and rising unemployment – „a national
crisis“ – the Schröder Government defines an ambitious reform
(Agenda 2010) for labor market policy
Germany 2005: Reform programs are implemented in 2003-2006.
Their impact is huge. Unemployment – after a 5 million peak in 2005 –
falls drastically.
Germany 2009: Despite a severe crisis-driven downturn, employment
proves resilient. And it continues its build-up, in stark contrast to
soaring unemployment across Europe.
Europe 2011: German Labor Market Reform is seen as a model for
strategies elsewhere – a supply side catalyst of growth in a context of
fiscal/financial consolidation
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... OR, IN MORE ARTICULATE WORDS, THE LRB OF JUNE 6:
„... the gigantic, unforeseen costs of unification brought Germany to a halt in the 1990s.
What followed changed the country and put down a marker for the rest of Europe. It was ... Gerhard Schröder, who as chancellor forced through a battery of brutally deregulatingreforms which downsized welfare payments and, above all, ‘liberalised the labour market’ – curtailing unemployment benefit, abolishing protection for the low-paid andencouraging employers to offer short-term jobs. Unemployment at first soared, thenbegan to fall steadily. Export industry recovered. Growth accelerated again.
The rich grew richer, while the lower working class – women especially – began toencounter a degree of poverty and job insecurity they had never known. The ‘partnership’ consensus which had marked the West German social model before 1989 had beenviolated, perhaps beyond repair.
...Agenda 2010 – the radical remodelling of postwar welfare states on neoliberal lines –should be copied all over Europe. Ronald Reagan did it, Thatcher and Tony Blair did it, Germany did it – so why can’t François Hollande do it?“
(NEIL ASCHERSON)
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SOURCE: Eurostat
5,000
4,000
3,000
2,000
Unemployment in Germany
(Thousands, Average/Year)
TURNAROUND GERMAN LABOR MARKET: EMPIRICAL EVIDENCE
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EUROPEAN LABOUR MARKET PERFORMANCE: COMPARISON
SOURCE: Eurostat
UK8.0
9.0
10.0
11.0Italy
Germany
France
5.0
6.0
7.0
Unemployment rate
%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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HARTZ PROGRAM PROFILE – „FORCE AND FACILITATE “
Hartz I: Job Creation (2003) Liberalizing temporary employment
Upgrading training programs
Hartz II: Job Flexibility (2003) Mini & Midi Jobs
Supporting self-employment
Hartz III: Service Quality (2004) Organization of public services &
processes
Service performance metrics &
monitoring
Hartz IV: Benefits Redesign (2005) Shorter insurance coverage (limit 12
months)
Thereafter: integration of
insurance & welfare
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REFORM IMPACT: SERIOUS PROGRESS...
Flexibility
- strong increase of temporary and part-time jobs- significant growth in participation rate
Budget transparency and efficiency
- micro-profiling of unemployment patterns (individual, context)- “productivity” of public intervention (e.g. training) – massive savings- service performance management
Mindsets
- positive influence: mobilization, less slack in frictional unemployment- critical/risky: public perception of „victim“ groups&milieus (“ghettos“)
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REFORM IMPACT: ... YET PROBABLY NOT KEY FACTOR IN
LABOUR MARKET TURNAROUND...
Critical trends vs. reform implementation
- exports
- labor cost
- German „country business model“
- favourable macro context
German business culture: continuity and change
Labor market parameters: proportions & statistics
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SOURCE: IHS Global Insight
400
600
800
900
1,000
1,100
1,200
1997 2005
0
500
700
2012
German Exports
EUR bn
Germany
France
2005
UK
25
20
30
1997
0
35
40
45
Italy
2012
European Exports – Share of GDP
%
GERMAN EXPORTS: STRONG MOMENTUM SINCE LATE 90‘S
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LABOR COSTS – GERMANY, EUROPE
SOURCE: Federal Statistical Office Germany; Eurostat; European Commission; Hans-Böckler-Stiftung
130
0
1997 20122005
110
100
120
Unit Labor Costs – Manufacturing, Germany
Nominal, 1991 = 100
140
150
160
170
Germany
2005
130
120
2012
France
UK
Italy
0
1997
110
Unit labor Costs – Overall
Nominal, 1990 = 100
20051997 2012
Wage Increases – Metal Workers, Germany
Nominal, %
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EMPLOYMENT PATTERNS: STRUCTURAL CHANGE
SOURCE: Eurostat; Federal Statistical Office Germany
22
4
5
23
0
3
2
1
25
24
20111997 2005
Germany: traditional vs.
“flexible” employment
Million
15
20
25
30
35
40
1997 20122005
0
10
Part-time vs. full-time
employment
Part-time in % of full-time
2012
68
1997 2005
64
72
76
60
0
Participation rates
%
Long-term employment
contracts
Part-time
Self-employed
TemporaryMarginal
employment
Germany
UK
France
Italy
UK
Germany
France
Italy
17
“COUNTRY BUSINESS MODELS”
SOURCE: IHS Global Insight
22
24
14
Italy
0
1997
21
France
Germany
19
17
16
18
20
2005 2012
12
10
UK
11
13
15
23
Share Manufacturing Sector
% of GDP
0
10
11
UK
Germany
Italy
France
14
1997 2005 2012
9
12
8
13
15
Financial & Building Sectors
% of GDP
18
Structural unemployment – prospects for
long-term jobless, and problem clusters
Training quality and impact –
elusive „effective intervention“
Polarizing labor market dynamics –
marginal jobs, eroding middle ground
Declining share of „break-even work lifes“ –
life income covering total cost of life
...STUBBORN PERSISTENCE OF „ETERNAL ISSUES“
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Crisis interventions aimed at key
macroeconomic outcomes:
debt, growth, employment.
Policy levers influence market
conduct (fiscal and monetary) and
structure (rules and governance)
A. Economic repair:
Implementing the right “technology”:
monetary, fiscal, structural
B. Societal choice:
Redesign and adaptation of
political, cultural, economic profiles
Economic performance is rooted in
complex background system:
“deep structures in context“
Targeted technical intervention is
successful when addressing pivotal
bottlenecks – only then.
POLITICAL ECONOMY: INTERVENTION PARADIGM?
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Politics &
Culture
Resources &
Assets
Economic
Profile
Context: Global &
Technology Dynamics
• Natural
• Human
• Financial&Material
• ‘Business Model‘ – Products, Markets
• Networks/Connectivity – Material/external
• Governance/Institutions/Values
• Mindset/Leadership/Ideas
• Trust & Values
• Institutional Capacity
• Convergence &
Leadership
• Expansive/contractive
• Stable/volatile�Stability
�Flexibility
�Energy
����Growth
„DEEP STRUCTURES IN CONTEXT“
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FUNDAMENTAL CHOICES, CHANGING ENVIRONMENT
1. Strategic paradigm?
− economic repair: testing the limits of
the social contract
− societal change: strategic
transformation of national profiles
2. Catalytic set-up?
− national, international, supranational
− contracts vs. contexts
3. Legitimacy and leadership?
− lacking narrative
− leadership topology
1. Resilience: cultures, institutions, habits
− capacity for change
− time horizons
2. Growth concerns
− future trendlines
− oxymoron growth-consolidation
3. Future labor markets:
− size and shape
− digital substitution (services)
− asymmetric plasticity
supply/demand
4. Demographic disequilibrium
Fundamental Policy Choices Change: Known Unknowns
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SOURCE: ESPON
EUROPEAN LABOR MARKETS – HUGE DISPARITIES
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OECDMAKING THE BELGIUM LABOUR
MARKET MORE INCLUSIVE
Brussels, 15 June 2013
By Jens Høj, OECD Economics Department
Based on the OECD Economic Surveys of Belgium 2011 and 2013.
A more inclusive labour market is a key to boost employment rates
2
0
10
20
30
40
50
6070
80
90
0
10
20
30
40
50
6070
80
90A. Total
TUR
HU
N
ITA
SVK
POL
CH
L
ESP
GR
C
ISR
MEX IR
L
EST
BEL
KOR
FRA
OEC
D
CZE LU
X
PRT
EU15
SVN
USA FI
N
JPN
GBR
DEU
CAN AU
T
NZL
AUS
SWE
DN
K
NLD
NO
R
CH
E
ISL
0
1020
30
40
50
60
70
8090
0
1020
30
40
50
60
70
8090
B. Men
HU
N
EST
ISR
IRL
SVK
POL
ESP
TUR
BEL IT
A
FRA
SVN
FIN
PRT
GR
C
USA
EU15
CH
L
OEC
D
LUX
CZE
KOR
CAN
SWE
GBR
DN
K
DEU AU
T
NO
R
NZL
MEX
AUS
JPN
NLD IS
L
CH
E
0
10
20
30
4050
60
70
80
90
0
10
20
30
4050
60
70
80
90C. Women
TUR
MEX IT
A
CH
L
GR
C
HU
N
SVK
KOR
ESP
POL
CZE IR
L
BEL
OEC
D
ISR
LUX
EU15
FRA
JPN
EST
PRT
USA
SVN
GBR
DEU AU
S
AUT
NZL FIN
CAN NLD
SWE
DN
K
CH
E
NO
R
ISL
The low employment rates are concentrated
among younger and older workers
Employment rate per age group
3
Youth have poor employment prospects after
leaving school
4
0
1
2
3
4
5
0
1
2
3
4
5Total Low-skilled²
TU
R
HU
N
GR
C
CZ
E
ITA
SV
K
PR
T
ME
X
BE
L
ES
P
OE
CD
US
A
LU
X
PO
L
NZ
L
SW
E
FIN
GB
R
FR
A
CA
N
DE
U
AU
T
CH
E
DN
K
ISL
AU
S
NLD
Expected number of years spent in employment during the five years after leaving school
Workers with immigrant background have low
employment rates, irrespective of education
5
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
Low skilled Medium skilled Highly skilled
National citizens
Other EU citizens
Non EU citizens
Open unemployment rates are not
particular high, but …..
6
0
10
20
30
40
50
0
10
20
30
40
50NL
D
CHE
JPN
AUT
DEU
NOR
KOR
MEX AU
S
ISR
CAN
DNK
ISL
SVN OE
…
LUX
NZL
USA
CHL
CZE
TUR
BEL
FIN
GBR
EU15
EST
FRA
SWE
POL
HUN
ITA
PRT
IRL
SVK
GRC
ESP
%%
A. Youth unemployment: age 15-24, 2011
0
5
10
15
20
25
0
5
10
15
20
25
NOR
KOR
CHE
AUT
NLD
JPN
LUX
AUS
MEX IS
R
DEU
NZL
CZE
ISL
CHL
BEL
CAN
SWE
DNK
FIN
GBR OE
…
SVN
ITA
USA
FRA
EU15
POL
TUR
HUN
EST
PRT
SVK
IRL
GRC
ESP
%%
B. Total unemployment, 2011
0
1
2
3
4
5
6
0
1
2
3
4
5
6
POL
PRT
NZL
USA
CAN
DNK
KOR
NOR
AUT
NLD
FRA
SVK
HUN
ESP
IRL
CHE
CZE
FIN
JPN
LUX
DEU
ITA
BEL
C. Share of employees on reduced working time schemes
2009 2007
Long-term unemployment is prevalent
7
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
2007Q32010Q4
A. Six months and over
ISL
NO
R
SW
E
DN
K
TUR
FIN
AU
T
SV
N
NLD
GB
R
PO
L
FRA
CH
E
EU
15
ES
P
ITA
DE
U
GR
C
BE
L
ES
T
CZE
PR
T
IRL
HU
N
SV
K
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
2007Q32010Q4
B. One year and over
NO
R
ISL
SW
E
DN
K
TUR
AU
T
SV
N
FIN
NLD
CH
E
GB
R
PO
L
FRA
ES
P
EU
15
CZE
GR
C
ITA
DE
U
ES
T
BE
L
HU
N
PR
T
IRL
SV
K
Is the labour market ready for the population ageing?
8The share of +65 over working age population
The low effective retirement age is part of the problem
Retirement ages
9
The early retirement reform improves
working incentives, but more must be done
• The 2012 reform raises the admission age and career requirements to enter early retirement or pre-pension schemes.
– This will increase the average retirement age.
– But older unemployed still have insufficient incentives to look for a job
• Tenure wage element push up reservation wages
10
Additional measures to increase
the effective retirement age
• Standard search obligations for older unemployed
• Introduce individual assessments of work capacity.
• Consider raising the legal retirement age to reflect past gains in life expectancy and then linking it to further longevity gains.
• Introduce a (larger) differential in the accumulation of pension entitlements between unemployed and employed.
11
The reform of unemployment benefits
strengthens job search incentives as:
• The unemployment benefits decline gradually over time
• The duration of the ”waiting allowance” is capped
• Job search monitoring is strengthened
12
However, labour demand is hampered by high tax wedges
13
And high statutory minimum wages
14
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
ME
X
JP
N
ES
P
CZ
E
TU
R
US
A
KO
R
LU
X
CA
N
NLD
OE
CD
PO
L
HU
N
PR
T
SV
K
GR
C
GB
R
IRL
AU
S
BE
L
NZ
L
FR
A
(as a percentage of the median wage)
And a wage formation process that has not prevented export market losses
Export market shares
15
Main recommendations for further labour market reforms
• Boost labour demand:
– reduce sectoral minimum wages to the legal level
– concentrate social security contributions cuts on low-wage workers
• The government and social partners should consider a new wage formation process to link wage developments more closely to domestic productivity developments
– As part of this reform, social partners should be encouraged to phase out the automatic wage indexation mechanism
16
• Abolish hourly restrictions on jobs.
• Phase-out youth minimum wages more gradually (or, introduce entry wages).
• Enhance language teaching to immigrants of all age groups.
• Postpone streaming in education and focus available educational resources
Measures to improve labour market access for youth and immigrants
17
• Thank you!• Dank u wel!• Merci!• Danke!• Mange tak!
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