Timo Weishaupt, Ph.D.

1. Small Country, Big Role Model? What EU Member States Could Learn from Austria about Activation Policy and Flexicurity Timo Weishaupt, Ph.D.

2. Introduction • Activation and Flexicurity as “buzz words” • Example of Denmark and Netherlands dominate discourse • EU and OECD encourage to identify alternatives • Most potential to reform Continental welfare states in a flexicure way (Sapir) • Austria is one of Europe’s employment success stories (Auer)

3. Austria a Model State? • Why? • What flexicure mix? • What can be learned? • Model for Germany?

4. Outline of Talk • Situating Austria: • Economic performance • Institutional set up • Innovative reforms and non-governmental, security-enhancing institutions • Transferability to Germany • Conclusions

5. Economic Performance • Gross Domestic Product (GDP) per capita in PPS among the highest in Europe • Public debt around European average • Low unemployment throughout post-war period (especially also long-term variant) • High and rising levels of employment (expect older workers) • Low income inequality • (High implicit tax rate on labor)

6. Institutional set up • Employment Security • Modern PES • Increasing expenditures on ALMP • Focus on training (50% plus) • But: High-level of activation & tight benefits regime

7. Expenditures on ALMP as % of GDP per 1% unemployment (2006)

8. Institutional set up • Income Security • Relative short duration of UB (9 months) • Replacement rates just below EU average • But: indefinite UA; most generous in Europe for particular groups (low income family with children)

9. Institutional set up • Flexible wage-setting system through highly coordinated bargaining system • Plus national net minimum wage of 1,000 Euro • Relatively flexible labor market regulation • Plus back-back principle

10. Intermediate Conclusions • Austria has medium to high external flexibility • Flexible wage-setting • Medium levels of income security • Medium levels of employment security

11. Additional Institutions – a Contribution to a more Balanced Flexicurity Mix • Employment Foundations • Social Economy Firms • New Severance Pay System

12. Employment Foundations • Outplacement Foundations (1980s) • Steel companies • Privatization and Restructuring • Implacement Foundations (1990s) • Skills shortages • Funding • Firms • State governments • AMS • ESF

13. WAFF • Workers Support Foundation of Vienna • Founded 1995 • Union initiative • Manages and streamlines varies foundations • Outplacement (sectoral, firm, and regional foundations) • 2000 • Open Foundation of Vienna • Implacement Cluster Support Program • Mid 2000s additional services & job broker • From 5 to 250 staff • Reduction of time from 3-6 months to a couple of days • 5000 Euro

14. Social-Economy Firms (SÖB) • 1980s “experimental labor market policy” of Minister Dallinger (SPÖ) • Growth of social-economy firms • Second wave after accession to EU (ESF money and general expansion of ALMP budget) • SÖBs are financed through AMS, ESF, and own profits

15. Social-Economy Firms (SÖB) • Permanent basis • Engaged in producing & selling goods/services • Launched by individuals rather than municipalities, church groups, NGOs • Interest representation through BDV (national umbrella organization for SÖBs) • Goal is reintegration of long-term unemployed • Work experience, plus training, plus councelling, pedagocial support and job search assistance • SÖBs need to create profits (20%) • AMS is gatekeeper – referral of candidates (barely any SA recipients)

16. Old Severance Payment • Traditionally, workers in large firms receive severance payments in cases of a firms rationalization efforts • Low coverage rate • Expensive (especially for SMEs) • Potential for inefficiency

17. New Severance Payment • 2002 introdcution of Abfertigung Neu • Employers pay 1.53% into savings account • Portable • Workers can cash out when loss of job • If not, functions as additional private pensions pillar • Predictable • More flexible (firms and workers) • Universal coverage • But: Loss of lay-off tax elements!

18. Lessons for Germany, Part I • Employment Foundations • Transfer Societies(Transfergesellschaft) • Necessary pre-conditions: • Firm needs to employ at least 20 workers • Operating workers council • High bureaucratic burden and expensive • Set up when firms go bankrupt; mass lay-offs • Problems that Austria faced 20 years ago! • Area for union-based initative during these times of crisis?

19. Lessons for Germany, Part II • Social Economy Firms • German has 700 integration firms, employing 26,000 workers (50% with special needs) • Potential demand for up to 400,000 such jobs (long-term unemployment remains massive problem in Gemany) • There are two umbrella organizations for integration firms • Job Perspektive – new instrument to subsidize newly created jobs for LTU • Use money that goes to One-Euro Jobs • Foundation to build on! • Need start-up capital and legal basis • Potential to create a social economy scene like in Austria, especially during times of crisis!

20. Lessons for Germany, Part III • Severance Payment • Pre-conditions NOT met • Government already introduced much stronger private pension pillar • Social partnership diametrically oppossed • No coalition pushing such reforms

21. Conclusions • Literature does not identify Austria as a model state for flexicurity • If at all, only Severance Payment is mentioned, which however is difficult to transpose to other countries • BUT: Flexicurity mix can be balanced through additional, non-governmental institutions • Employment Foundations • SÖBs • During times of crisis, these instruments could provide additional securities, create new jobs, and prepare workers for times of recovery

22. Pragmatic, normative conclusions • New instrument for union movement to make positive contribution • New instrument for Social Democrats to strengthen their socio-political profile • Ways to reconcile disgruntlement between unions and SPD • Employers support foundations (corporate responsiblity and skills preservation and creation) • Employers may support SÖBs as they are instruments of the second, rather then third labor market

23. Thank you for your interest and attention!