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Modernising and activating benefit and social protection systems to promote employment


The Thematic Review seminar ‚Modernising and activating benefit and social protection systems to promote employment‚ held in Brussels on 28 March 2007 opened the spring semester of the Mutual Learning Programme of the European Employment Strategy under the heading of Œattracting more people to the labour market‚. A large majority of Member States are making efforts to modernise benefit and social protection systems, reinforcing the incentives to take up a job and remain in work longer, as well as offering personalised support to those furthest away from the labour market. In order to reach the employment targets of the Lisbon Strategy for Jobs and Growth, it is necessary to mobilise a larger share of benefit recipients in the working-age population, many of them currently outside the labour market. The seminar which was hosted by the European Commission (DG Employment, Social Affairs and Equal Opportunities ˆ DG EMPL) and attended by government delegates, national and European stakeholders and social partners from EU member states and Norway, explored the interactions between different aspects of social protection systems and investigated pathways to modernise and promote activation policies in order to broaden labour market participation.

The seminar was opened by Xavier Prats Monné, Director for Employment, Lisbon Strategy and International Affairs, DG EMPL. He stressed that, considering the various aspects and wordings used in different Member States and on EC level when it comes to describing benefit and social protection schemes, it was all the more important to agree on a common view on what was discussed. One very important aspect to be considered in the given context was the Œflexicurity‚ theme. Flexibility and security were not a matter of compromise but should be mutually reinforcing each other. Social protection and social inclusion formed the core of the European Social Model. However, one of the key matters was the administrative capacity and ability to implement policies and meet the challenges ahead. Through the Mutual Learning Programme the EC set a framework on what we could learn from each other, though it was not an issue of mere copying, which was impossible given different history and national contexts.

Bruno Coquet, Chair of the Employment Committee Ad Hoc Group, stressed two objectives for employment policy: to raise the employment rate and to raise productivity. Since 2000 the employment rate at EU level has risen by 1.2 % and particular success was achieved among women and the elderly. EMCO is working on three axes: 1) to make work pay; 2) Integration of people at the margins of the labour market into employment; 3) ŒFlexicurity‚. ŒTo make work pay‚ required a global strategy, adapted to national and local priorities and contexts. It also meant to encourage at the same time the supply and demand side of employment, which referred e.g. to the quality and attractiveness of work. In order to integrate people who are further away from the labour market, target groups should be kept in touch with the labour market and receive direct and indirect incentives. Labour costs should be high enough to make work attractive but low enough for companies to be competitive. The Œflexicurity‚ principle should facilitate moves from one job to another. Flexibility and security should be combined at a reasonable cost and the principle of rights and duties should be strengthened.

Elise Willame, Chair of the Social Protection Committee, pointed out that there was a common objective to raise the rate of citizens active in the labour market, while at the same time having a high employment rate. However, these objectives should not compromise the common European ambition to ensure adequate social protection, which was an important characteristic of the European Social Model. Thus it was important to pursue the goal of Œactive social inclusion‚. While employment represented an important means to reduce the probability of being exposed to the risk of poverty and social exclusion, it was not a viable solution for all. Thus the question that remained was how to ensure that the society protected its weakest members, while encouraging those who were able to work to take up employment. Granting social allowances without conditions attached to them might have a perverse effect on employment; however, universal allowances were not in themselves a disincentive to work, but could be expensive. She concluded that, in order to make significant progress in the fight against poverty and social exclusion, it was crucial to combine the three strands of Œactive inclusion‚: employment, adequate minimum resources and improved access to services.

Relationship between different types of benefits

Thematic expert Ides Nicaise, K.U. Leuven, focused on the interaction between different types of benefits. He stressed the need to address not only unemployment, abut also various kinds of inactivity (the latter includes sickness, disability, early retirement, household or care work, education). Not all forms of inactivity (or non-employment) are unproductive. Many people outside the formal labour market are in fact investing in their own future employability or the employability of their dependents. In this context, Ides Nicaise presented an extended Œtransitional labour markets‚ model in which different states of non-employment are made explicit. From this perspective the role of policies is to facilitate returns of Œinactive‚ individuals into employment, to discourage exits from employment and to avoid transition from unemployment to inactivity. He advocated the Œcapabilities approach‚ which sees social protection as an investment in the individual‚s capabilities.

Country examples

As of 1 January 2005, under the reforms known as ŒHartz IV‚, unemployment assistance and social assistance for persons who are capable of working were merged into one benefit, the basic jobseekers allowance (unemployment benefit II), which is a tax-financed, needs-based and means-tested public benefit. Eligible are employable individuals in need of support and other members of their joint household. The beneficiaries have to accept any kind of reasonable work, unless prevented by special factors (e.g. care of relatives). Unemployment benefit II is a standard benefit to secure the recipients‚ subsistence and includes a monthly allowance for non-recurring and recurring needs as well as housing and heating allowances and additional allowances for certain extra expenses not covered by the standard monthly allowance.

In 2006 Slovenia reformed the social transfer system with the aim to establish a simpler, more motivating and fairer system. The measures taken were organised into 5 sub-groups: 1. Setting up a central database about social transfers; 2. Creating a single point of decision making (Œone stop shop‚); 3. Unifying the main elements having an impact on decisions on social rights; 4. Unifying valorisation/indexation mechanisms; 5. Modifying conditions for social assistance in order to stimulate work. Advantages of the reform include a higher payment for active workers as an incentive to work, easier monitoring and more transparency regarding social transfers. The estimated savings include the reduction of administrative procedures, less possibility of abuse, limitations on redundancy payments and greater sustainability of public finances.

Interactions between benefits and active labour market policies

The afternoon session was opened by thematic expert Marjolein Peters, ECORYS-NEI, who focused on the increased interaction between tax/benefit systems and active labour market policies (ALMPs). First she gave a short overview on the design, organisation and implementation of benefit systems and their relationship with ALMPs. She then elaborated on different labour market transitions placing emphasis on specific traps (such as the so-called unemployment, low wage and inactivity traps) with a particular focus on disadvantaged groups. In the past, the main focus of active labour market policy was on unemployed job seekers. However, the inactivity rate is much higher than the unemployment rate. Consequently, the largest group for additional labour supply are not the unemployed but the non-working population. The renewed Lisbon strategy redirected activation efforts towards this target group, notably women with care responsibilities, handicapped and older people. For these groups, facilitating services to reduce the obstacles of labour market entry are needed.

Country examples

The Danish Welfare Agreement (WA) from 2006 focuses on the welfare society in the longer run and consequently looks at issues such as how to tackle the ageing society, educational problems and current short-term problems on the labour market. The WA includes several measures to strengthen the efforts to reduce unemployment. The aim is to enhance job search and job matching e.g. by involving the unemployment insurance funds more actively and by a more intensive follow-up on non-successful job matching. Furthermore, greater obligations are put on the unemployed with respect to job search, such as a weekly online reporting to the job centre and more requent Œavailability-for-work‚ talks.

During 2005 and 2006 two important laws came into force in Lithuania: the law on the promotion of employment and the law on unemployment social insurance. The goals of the former are full employment, to reduce social exclusion and to strengthen social cohesion and thus to better match labour supply with demand and to increase the employability of job-seekers through measures such as information services, counselling, job-search assistance and individual employment action plans. Active labour market measures include vocational and educational training, subsidised employment, support for job creation and job rotation. The law on unemployment social insurance regulates the entitlement to unemployment benefits, its duration and termination. Thus, for instance, unemployment insurance benefit is only paid to unemployed people who are actively seeking employment.

David Grubb, OECD, focused on active labour market policies at different benefit replacement rates. Countries with net replacement rates of up to 65% seem able to keep unemployment low using the relatively cheap Œinterventions in the unemployment spell‚, whereas countries with higher replacement rates often spend much more on ALMPs as well as passive measures. In this light, he made some recommendations for active policy in high-replacement-rate countries, including the need to minimise Œprogramme dependency‚, which arises when some unemployed stay in long-term ALMP participation; and the need to keep open unemployment low and to adjust the activation strategy according to the labour market situation.

Views of the European social partners

Representatives from Business Europe, the Social Platform and ETUC focused on the following three questions: 1) How should transitions from employment into non-employment be prevented? 2) How can the reintegration of the non-employed into jobs be fostered? 3) How/to what extend should transitions from unemployment into inactivity be avoided? Steven D‚Haeseleer, Business Europe, said that the focus should be placed on the improvement of the employment rate of older workers, through measures such as qualification, discouragement of early retirement, pension system reforms, flexible retirement schemes and part-time work. Furthermore, labour costs should be reduced and there should be a focus on skills improvement and active labour market measures. With respect to the third question he referred to the Œflexicurity‚ concept and a modernisation of labour laws. Claire Champeix, Social Platform, stated that measures for people experiencing problems with the integration into the labour market should always be discussed with the people concerned. She challenged the vision that the increase of the employment rate was the most important objective and ALMP the best tool to achieve this objective. For some people work was not an option and the rights and dignity of those people should be respected instead of pushing them further into social exclusion and poverty. For the reintegration of the non-employed she referred to tailor-made models of flexibility and activation and said that entitlements could have positive effects on the mobility into work. Józef Niemiec, ETUC, said that ETUC was actively participating in the debate about modernising and activating benefit and social protection systems. The key objective was to guarantee an income and employment was the best way to achieve this. He challenged the view that a high level of benefits equalled a high level of inactivity. Key issues to be addressed included Œflexicurity‚, life-long learning, ALMP, reconciling family and work life, etc. More focus should be put on social dialogue and the investment in human capital and training.

Concluding remarks

The seminar was closed by Robert Strauss, DG EMPL, Head of Unit on European Employment Strategy, CSR, Local Development. He stressed that benefit and social security policies were closely linked to the Œflexicurity‚ concept. Important issues to be addressed included, among other things, life-long learning and the modernisation of labour laws. Mutual learning, as for instance provided by this seminar, was an important means to address common challenges. He emphasised that the modernisation and activation of benefit and social protection systems should not only be discussed from an economic but also a social perspective in view of the European Social Model. He encouraged Member States to enhance social dialogue and the involvement of social partners in the debate.

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