"Reforming Danish ALMP - an assessment from a flexicurity perspective" Per Kongshøj Madsen Centre for Labour Market Research (CARMA) Aalborg University, Denmark www.carma.aau.dk OECD Employment, Labour and Social Affairs Seminar March 3, 2014

Per Kongshøj Madsen Professor at CARMA, Aalborg University and Research Fellow at IZA Chairman of the Economic Council of the Labour Movement Member of the Koch-Commission

What’s to come The background: Danish flexicurity and the crisis The criticism of ALMP The tasks of the expert group Proposals for reform What are the next steps?

The Danish version of flexicurity   Low EPL High mobility Adaption to globalization The social contract Flexible labour market Support from welfare state institutions Educational policy and more! Unemploy-ment ínsurance ALMP Employment security Income security

Danish flexicurity – against the wind The overall development on the labour market: Steep decline in employment in 2008-2009 Then stagnation in employment and unemployment A remarkable decline in the workforce The reactions to the crisis (figure 8) The stress on Danish flexicurity ”classic” (figure 9) Still shelter from the storm! Demolition of Danish flexicurity or gradual reforms?

Stylized facts

Decline i GDP

Elasticity of employment with respect to GDP

Flexicurity under stress?   Call for more job security Can the social partners keep the balance? Flexible labour market Fewer public resources) Educational policy and more! Unemploy-ment ínsurance ALMP Under pressure from the crisis Less generosity

LTU in the EU Unemployed for more than 12 months as a share of total unemployment: Source: Eurostat

Source: Eurobarometer:Monitoring the social impact of the crisis Wave 6, Flash EB No. 338, April 2012.

Falling apart or minor cracks in the building? Per Kongshøj Madsen (2013): “Shelter from the storm?” - Danish flexicurity and the crisis in: IZA Journal of European Labor Studies, Vol. 2, No. 6,

What’s to come The background: Danish flexicurity and the crisis The criticism of ALMP The tasks of the expert group Proposals for reform What are the next steps?

The calls for reform Inefficient and ”meaningsless” activation Disappointing results from many evaluations of effects and costs of ALMP, especially of ”education”

The calls for reform Too much control Of the unemployed by the jobcentres Of the work of the job-centres by the national authorities Dissatisfaction with the functioning of the job-centres: Too small to fit with the regional labour markets Too small to care for groups with special needs (e.g. academics) The governance system (lack of cooperation between the jobcentres, the weaker role of regions, the regional boards and the social partners)

The calls for reform Overlapping activities of the jobcentres and the UI-funds. Not sufficient contact between the jobcentres and the employers Dissatisfaction with the IT-platforms of the jobcentres The shortening of the duration of unemployment benefits from four to two years from January 1, 2013, makes it more urgent to make an effective effort to get the unemployed back to work.

The tasks of the Koch-commitee To make proposals for reforms that: Lead to lasting employment for the unemployed Implies an upgrading of qualifications if relevant Are based on more on confidence and less on control with the unemployed (empowerment) Strengthen the link between the job-centres and the employers Make the instruments used more cost-effective that at present Do not imply extra costs for the public budgets A tripartite process

The proposals: Five pillars New, individual and job-focused effort for the individual unemployed Targeted training and education of unemployed Enhanced focus on the needs of businesses Stronger economic incentives for the job-centres and less bureaucracy and process requirements New regional organization and stronger stakeholder involvement

Pillar A: Individual support Assistance already in the dismissal phase Job search phase with frequent counseling in the first six months Activation after 6 months with job-training measures for the unemployed over 30 years (after 3 months for young unemployed under 30 years of age) Elimination of repeated mandatory activation Initial profiling and stricter requirements to support to high-risk groups Low risk-groups may choose to complete the first six months of counseling in the unemployment insurance funds

Pillar A: More individual support Booking of interviews and job search support activities in the first six months Training of managers and employees in UI-funds and job centres in counselling Requirement for ongoing documentation of intensive, comprehensive and realistic search in a Job Log New possibilities of sanctioning for lack of job-search Harmonisation of public and private sector wage subsidies

Pillar B: Education Upgrading of skills should be targeted at motivated unemployed Right to training for unemployed with a job-offer Right to basic courses in literacy, numeracy and writing Right to 6 weeks of training after 6 months of unemployment, in agreement with the job center Right to education for unskilled unemployed over 30 years with reduced benefit and a credit facility No need to be available for work, if taking part in education

Pillar C: Contact with employers Systematic contact from job centers to employers based on knowledge of the labor market Better means of job centers to facilitate recruitment of manpower and skills-upgrading of existing employees Strengthened cooperation across municipalities Establish fewer entry-points for large companies with recruitment needs Monitoring of current and future infrastructure projects and other major construction projects

Pillar D: Economic framework Reduction of process requirements for jobcentres A reformed system of economic incentives for municipalities (the same reimbursement for all activities and reduces reimbursement over time for the individual unemployed)

Pillar E: A new regional structure The current 94 local employment councils and 4 regional employment regions should be reorganized into 8-12 new regional councils, which better reflects the regional labour markets The new councils will support cooperation between municipalities, between municipalities and unemployment funds, as well as between job centers, educational institutions and the regional growth fora. The new councils will have representatives from social partners and other stakeholders The new councils will administer funds for education and training

Still hard work ahead! Carsten Koch Michael Rosholm, Aarhus University Vibeke Jensen Aarhus Municipality Per Kongshøj Madsen Aalborg University

Next steps Draft report dealing with reform of ALMP the insured unemployed ready for comment from social partners: January 2014 Report presented to the Government: February 25, 2014 New report on the non-insured unemployed and other groups at the margin of the labour market to be prepared during 2014 Prepare mandate for a new commission dealing with the UI-system 2014-2015

Thank you for your attention Towards a brighther future!