Labor market policies: historical and comparative perspectives

1. 4 Labor market policies:historical and comparative perspectives Philippe Askenazy (Paris School of Economics) www.jourdan.ens.fr/~askenazy/laborpolicy.htm

2. 2000: Unemployment rate %. OECD

3. Altered paradigms Nordic countries: high wages/low inequality… and low unemployment/ high participation rates European commission: the Lisbon agenda = Flexsecurity + knowledge economy ILO: decent work OECD job study revision: mix of low labor market rigidities and low product market rigidities (very fragile evidence) US debate (still alive!) on the minimum wage: Reich versus Neumark

4. Flexsecurity • Flexibility • External numerical flexibility: lay-offs, fixed term contracts, temporary agency work. • Internal flexibility: working time flexibility, overtime. • Functional flexibility: flexibility within firm through multi-tasking, job rotation. • Wage flexibility, according to performance. • Security • Job security: dismissal protection, etc. • Employment security: employability (education, training). • Income security: unemployment benefits, social security. • Combination security: work-life balance.

5. Flexsecurity Consistent with high job/creation in the knowledge economy • High security feeling • But costly

6. Job insecurity and spending on labor market policies. OECD countries, 2000

7. Knowledge economy. R&D intensive countries in 1993

8. Knowledge economy. R&D intensive countries in 2002

9. Anglo-Saxon countries An increase of inequality and a decline of the labor share… Even dramatic

10. Anglo-Saxon countries UK: massive job creations in the public sector

11. Anglo-Saxon countries The (re-)introduction of the minimum wage • 1999: UK • 2000: Ireland • Or significant increases at the end of the 1990’s: Australia New-Zealand • Evaluations for the UK (see Low-pay Commission): no significant impact on employment, lower profit margin in low-skilled intensive services (cleaning…) • While Uk or Irish minimum were immediately high

12. Anglo-Saxon countries

13. Anglo-Saxon countries

14. A convergence of models or the application of the flexsecurity model? Ex: Germany • Hartz Reforms 2003 -2005: Getting the unemployed into jobs through • Self employment grant. • Personnel Service Agencies (PSA) providing temporary employment to unemployed. • Mini and Midi jobs, facilitating low-wage, short hours employment . • New benefit (ALG II) for long-term unemployed with strict take-up rules (any job is suitable), tight eligibility criteria, low benefits. • Limited training, decline number training places.

15. A convergence of models. Ex: Germany • More marginal, insecure and flexible employment. • Low wage work rise (about 20% of the workforce up from 12%)… especially for female • Global decline of real wages • Decline of the labor share • But high export competitivity • Very little evidence in favor of a positive impact on employment (See various IZA working papers) Because of a deprived internal market?

16. France 2002-2007: End of the reduction of working time process Chirac: Raffarin (Fillon), de Villepin Even reverse it? European Labour Force Survey:

17. France 2002-2007 Extension of the social contribution cuts ~ 8 billions euros • no significant impact on employment! (unpublished papers L’Horty et al. (2010), Kramarz et al. (2009, unpublished)

18. France 2002-2007 Again, “Enrich the labor content of growth” through niche job markets • “Chèque emploi service universel” (Borloo) • Probably a positive impact but no detailed evaluation • Complete social and fiscal exonerations in 100 special zones (Zones Franches Urbaines) • [2000 ; 10,000] job created. But unit cost in evaluated zones: about 70 Keuros! • CDD senior (short-term contracts for workers > 55) • 0 impact • Villepin: “Contrat Nouvelle Embauche” • Illegal! Thus removed in 2007…

19. France 2007-2011 “Working more for earning more” 2007: Very positive expectations • Rapid decrease of unemployment • Creation of “Pôle emploi” for improving the matching process and sanctions • The policy can favor overtime hours… • Labor offer: Revenu de Solidarité Active • And new entrepreneurs “Auto-entrepreneurs” Inconsistent with the crises?

20. Conclusion: the limits of modern labor policies Theories born 25 years ago Main principles fixed 20 years ago… Some (in)efficiency but unable to solve mass unemployment… or its return However, significant impacts on working poor, inequality or job (in)security, public deficits => Variety of “models”: see 4 next courses Since 2008, the specter of jobless growth

21. Harmonized unemployment rate, Nov., 2010

22. Harmonized youth unemployment rate, Nov., 2010