1. Labour market flexibility, risk and uncertainty: the role of social insurance Ágota Scharle agota.scharle@budapestinstitute.eu Budapest Institute for Policy Analysis Employment, poverty alleviation, migration and social inclusion, 26-27 March 2012, Xi’an

2. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

3. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

4.  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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

5. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

6. …with much variation across Europe www.budapestinstitute.eu 26-27 March 2012, Xi’an coverage intensity

7. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

8. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

9. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

10. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an

11. For more information please contact me at agota.scharle@budapestinstitute.eu Thank you for your attention www.budapestinstitute.eu 26-27 March 2012, Xi’an

12. Antecol (2000): An examination of cross-country differences in the gender gap in labor force participation rates, Labour Economics 7, no. 4, pp 409-426. Blau and Kahn (2011) Substitution between individual and cultural capital, mimeo http://www.sole-jole.org/12125.pdf http://www.sole-jole.org/12125.pdf Blundell (2012): Tax policy reform: the role of empirical evidence, J of European Economic Association,10(1) pp 43-77. Fernández (2008): Culture and Economics, in Steven N. Durlauf and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics, pp. 333-340. 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 www.budapestinstitute.eu 26-27 March 2012, Xi’an