Labour market flexibility, risk and uncertainty: the role of social insurance Ágota Scharle Budapest Institute for Policy Analysis Employment, poverty alleviation, migration and social inclusion, March 2012, Xi’an

how to respond to increased flexibility: lessons from two earlier shocks insurance systems have broadened no clean solution to providing both income support and activation complex systems some implications for welfare reform Outline March 2012, Xi’an

flexibility entails structural shifts shifts are abrubt oil price shock of 1970s transition from plan to market in 1990  similar lessons How to respond to increased flexibility March 2012, Xi’an

 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) Same lessons from two earlier shocks March 2012, Xi’an

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 Insurance systems broadened March 2012, Xi’an

…with much variation across Europe March 2012, Xi’an coverage intensity

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 Activation vs income support March 2012, Xi’an

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) Activations tools March 2012, Xi’an

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 Variation by country and group March 2012, Xi’an

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 Some implications for welfare reform March 2012, Xi’an

For more information please contact me at Thank you for your attention March 2012, Xi’an

Antecol (2000): An examination of cross-country differences in the gender gap in labor force participation rates, Labour Economics 7, no. 4, pp Blau and Kahn (2011) Substitution between individual and cultural capital, mimeo Blundell (2012): Tax policy reform: the role of empirical evidence, J of European Economic Association,10(1) pp Fernández (2008): Culture and Economics, in Steven N. Durlauf and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics, pp Kluve-Card-Weber (2010) Active Labor Market Policy Evaluations: a Meta-Analysis, The Economic 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 References March 2012, Xi’an