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

Labour market flexibility, risk and uncertainty: the role of social insurance. Ágota Scharle agota.scharle@budapestinstitute.eu. Budapest Institute for Policy Analysis. Employment, p overty a lleviation , migration and s ocial i nclusion , 26-27 March 2012, Xi’an. Outline.

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

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  1. Labour market flexibility, risk and uncertainty: the role of social insurance Ágota Scharle agota.scharle@budapestinstitute.eu Budapest Institute for Policy Analysis Employment, povertyalleviation, migration and socialinclusion, 26-27 March 2012, Xi’an

  2. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  3. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  4. 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) www.budapestinstitute.eu 26-27 March 2012, Xi’an

  5. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  6. …with much variation across Europe intensity coverage www.budapestinstitute.eu 26-27 March 2012, Xi’an

  7. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  8. 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) www.budapestinstitute.eu 26-27 March 2012, Xi’an

  9. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  10. Some implications for welfare reform services rather than administration:social 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

  11. Thank you for your attention For more information please contact me at agota.scharle@budapestinstitute.eu www.budapestinstitute.eu 26-27 March 2012, Xi’an

  12. References Antecol (2000): An examination of cross-country differences in the gender gap in labor force participationrates,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-Weber (2010) Active Labor Market Policy Evaluations: a Meta-Analysis, TheEconomic 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

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