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The Active Social Policy Agenda: An OECD Perspective Paper for the European Regional Meeting of the International Social Security Association , Oslo, 15 - 16 May 2007. Peter Whiteford Social Policy Division, OECD [email protected] Outline. Why is active social policy on the agenda?

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slide1

The Active Social Policy Agenda: An OECD PerspectivePaper for the European Regional Meeting of the International Social Security Association, Oslo, 15 - 16 May 2007

Peter Whiteford

Social Policy Division, OECD

[email protected]

outline
Outline
  • Why is active social policy on the agenda?
  • Problems and challenges
  • Older workers:
    • Policy responses
  • People with disabilities:
    • Policy responses
  • Annex:
    • Families with children
why is active social policy on the agenda
Why is active social policy on the agenda?
  • Mix of economic and social concerns:
    • Population ageing and implications for labour force growth and economic growth and levels of public spending.
    • Equity concerns, including child poverty, women’s poverty in retirement and gender equity.
    • In particular, the jobless are the most disadvantaged, and the most disadvantaged are most likely to be jobless.
    • Fertility concerns
  • Emerging concerns – widening market income inequality, increasing evidence that early experiences of children have profound effects on future life chances.
  • All these factors suggest that OECD countries should encourage greater employment, particularly among those who are not participating in the labour force.
  • But, if countries should aim to encourage higher labour force participation, then policies need to support individuals and families in staying attached to or re-entering the labour force.
the challenges of population change
The challenges of population change
  • People are living longer and fertility has declined, particularly in Germany and Southern Europe.
  • The large “baby boom” generation – born 1946 to 1964 - has started to enter pre-retirement and retirement years.
  • These developments have significant implications for social programmes and for the future labour force.
  • Over the next 50 years, the share of the population aged 65 years and over will roughly double in most OECD countries.
  • There is also an earlier effect of the baby boom generation on the size of the population of older workers – a person born in 1946 reached 55 years in 2001.
population ageing is likely to result in
Population ageing is likely to result in:
  • A sharp slowdown in labour force growth
  • Labour shortages
  • Slower economic growth
  • Higher public expenditures and higher taxes, or cuts in benefits
ageing and the labour market possible responses
Ageing and the labour market – possible responses
  • Higher productivity.
  • Longer working hours.
  • Immigration.
  • Promoting the employment of older workers.
  • Increasing the labour force participation of women.
  • (Re)Integrating persons with disabilities in the labour market.
  • Reducing unemployment and receipt of social assistance.
  • In the longer run, maintaining or increasing fertility.
slide8

A further complicating factor – widening market income inequalities mean the welfare state has to work more effectivelyGini coefficient for household earnings

active social policy
Active Social Policy
  • Aims to address root causes of widening market income inequality.
  • Reorient towards investment in children, youth.
  • Put heavy emphasis on employment.
  • It is also necessary to take a comprehensive and co-ordinated perspective on these challenges and policy responses – it is not much use to reduce early retirement if people move onto disability benefits instead.
slide11
The potentially mobilisable labour force varies in sizeExcess inactivity and unemployment as % of population 15 to 64, except students
slide12

The potentially mobilisable labour force varies in compositionExcess inactivity and unemployment as % of population 15 to 64, except students

unemployment is only part of the problem
Unemployment is only part of the problem
  • Some 35% of the OECD working-age population (i.e. 265 million people in 2005) do not have a job.
  • The bulk of them (almost 230 million) are not unemployed.
  • They mainly consist of students, women, early retirees and the disabled, many of whom rely on welfare benefits.
slide14

Reliance on benefits has increased% of working age population in receipt of income replacement benefits, full-time equivalents, 1980 and 2004

slide15

More than one in five persons of working age are reliant on benefits in many European countries% of working age population in receipt of income replacement benefits, full-time equivalents, 2004

slide16
Unemployment benefitsare a relatively small share of total benefit receiptShare of unemployment benefits in total benefit receipt, 2004
the jobless are the most disadvantaged
The jobless are the most disadvantaged…
  • For example, jobless lone parents on average have incomes about 45% of those of all families with children – and this under 40% in Hungary, Ireland, Italy, Poland, Portugal and Spain.
  • Jobless households with children in OECD countries are less than 6% of all households, but more than 30% of poor households – a poverty risk of more than 5 to 1.
and the most disadvantaged are most likely to be jobless
…and the most disadvantaged are most likely to be jobless.
  • Persons not having finished upper secondary schooling account for over half of non-employment in OECD countries.
  • In 2001, the employment rate for persons not having completed upper secondary schooling was a little below 50% for the OECD area as a whole, as compared with over 80% for working-age persons with a university or tertiary degree.
  • 45% of working-age persons in the low-education group were neither working nor looking for a job in 2001, as compared to 24% of their medium educated counterparts and 15% of high-educated individuals.
  • The proportion of low-educated individuals who are inactive is over 50% in Central and Eastern European member countries, Belgium and Italy. At the other extreme, it is under 20% in Iceland, and also relatively low in Portugal (29%).
slide20
Trends in receipt of early retirement benefits are diverseProportion of working age population receiving retirement pensions, 1980 to 2004
slide21

If living longer means working longer, how to achieve this?

  • OECD has carried out a major study of Ageing and Employment Policies:
  • 21 separate country reports
    • Identifying work disincentives and barriers to employment of older people
    • Setting out policy recommendations
  • Synthesis report, Live Longer, Work Longer
slide22

Key barriers to working at older ages

  • Financial disincentives
  • Employer reluctance to hire and retain older workers
  • Weak employability
key policy directions to encourage work at an older age
Key policy directions to encourage work at an older age

Reward work

Pension reform to cut implicit tax on working Restrict other early retirement pathways Better options for phased retirement

Change employer practices

GOVERNMENT EMPLOYERSUNIONSNGOs

Improve employability

Suitable training opportunities at all agesBetter help for older jobseekersSafe & healthy working conditions

Tackle age discriminationAlign labour costs with productivity Protect employment opportunities not jobs

reward work
Reward work

Ensure greater neutrality in work-retirement choices

  • Moving towards actuarial neutrality
  • Taking account of rising life expectancy

Reduce early retirement options

  • Raising pension age
  • Phasing out formal early retirement schemes
  • Ensuring that other welfare benefits are not used as early retirement pathways

Beyond neutrality – actively promote participation

  • Increasing pension rights with age
  • Part-time pensions
  • Combining work and pensions
reward work1
Reward work

Key issues:

  • Actuarial neutrality raises difficult issues concerning initial age, equity and adequacy of benefits.
  • Are measures to promote later retirement sufficiently targeted?
  • How to increase the flexibility of work-retirement decisions while discouraging early retirement?
  • How to deal with the stock of older people already on long-term benefits?
direction of oecd pension reforms
Direction of OECD pension reforms
  • Higher pension eligibility age
    • for men and women (11 countries; e.g. Italy, US) or for women alone (6 countries; e.g. UK)
  • Improved incentives to delay retirement
    • 10 countries; e.g. France, Germany, Italy, UK, US
  • Tighter qualifying conditions for retirement
    • 9 countries; e.g. France, Italy
  • Links to life expectancy or financial sustainability
    • in earnings-related schemes (Germany, Japan)
    • in qualifying conditions (France)
    • through notional accounts (Italy, Poland, Sweden)
    • through defined-contribution schemes (Australia, Hungary, Mexico, Poland, Slovakia, Sweden)
  • Direct cuts in generosity rare
    • lower accrual rates (Austria, Japan, Korea)
change employer practices
Change employer practices

Tackle negative employer attitudes

  • Through age discrimination legislation
  • And through information campaigns and guidelines

Align labour costs closer to productivity

  • Link earnings more closely to individual performance
  • Avoid wage subsidies that are simply targeted by age

Focus on enhancing employability of older workers rather than on job protection

  • Reassess impact of job protection rules on labour mobility and hiring of older workers
change employer practices1
Change employer practices

Key issues:

  • Age discrimination legislation is no panacea.
  • Should wage subsidies go to employers or to older workers via an earnings top-up?
  • Important role for non-governmental organisations.
  • How can good practices be promoted among SMEs?
improve employability
Improve employability

Ensure older unemployed are actively seeking work in exchange for better employment services

  • General exemptions from looking for work should be abolished
  • More resources should be devoted to helping older job seekers

Encourage greater take-up of training

  • More flexible courses
  • Better opportunities for lifelong learning

Improve the work environment

  • Greater flexibility in work hours
  • Adapting working conditions
improve employability1
Improve employability

Key issues:

  • For older workers, returns to training may not be high, thus need to invest more in lifelong learning. But how to do this?
    • Who should pay for training and how can the more disadvantaged groups be encouraged to train?
  • How best to encourage public and private employment agencies to give more priority to helping older jobseekers find jobs?
  • How can employers – especially SMEs – be encouraged to improve working conditions for workers at all ages?
older workers conclusions
Older workers - conclusions
  • If work at an older age is rewarded and encouraged, we can all look forward to both living longer and greater prosperity
  • This also means taking a lifecycle perspective in terms of promoting women’s employment, better working conditions and greater opportunities for lifelong learning.
  • Implementing this agenda will require the co-operation of government, employers, trade unions and civil society
key challenges for disability policies
Key challenges for disability policies
  • Population ageing, leading to increased incidence in health conditions but also future labour supply shortages
  • Changes in the work environment and rising labour market requirements
  • Low employment rates of disabled people and high benefit dependence
  • Lower resources and higher poverty risks of households with disabled people
  • Co-ordination of different social protection and employment schemes and reforms
  • High and often increasing sickness and disability-related public spending
disability and disability pensions
Disability and disability pensions
  • The prevalence of disability for people aged 50 to 64 years is nearly twice as high as for the working-age population generally
  • Employment rates for people with disabilities are only around 40%—45%
  • Older disabled people have lower employment rates than younger people with disabilities
  • Across OECD countries benefit recipiency rates average 5.5%, but are close to 8-9% in Denmark, Norway, Sweden and the Netherlands
  • Roughly one in four persons who are not employed receive disability benefits
  • People over 45 are 70-90% of the stock of disability beneficiaries, and similar proportions of inflow to benefits
high public cash spending
High public cash spending

Public incapacity- and unemployment-related cash spending in % of GDP, 2003

Source: : OECD (2007, forthcoming), Social Expenditure Database, Paris (www.oecd.org/els/social/expenditure)

high disability benefit recipiency
High disability benefit recipiency

Disability benefit recipients in % of the working-age population

Source: : OECD (2003, 2006 and 2007, forthcoming)

slide38

Growth in numbers of people receiving disability benefits has been worryingly rapidTrends in receipt of disability benefits, OECD countries, 1980 = 100

slide39
Disability benefit receipt traps people outside mainstream society

Annual rates of outflow from disability benefits, 1999 (percentages)

disability benefit receipt traps people outside mainstream society
Disability benefit receipt traps people outside mainstream society
  • Employment rates for working-age disabled people are significantly lower than for non-disabled.
  • For the 19 countries for which data are available, the employment rate for persons who assess themselves as having a disability was 27 percentage points lower than for persons saying that they were not disabled (employment to population ratios of 44% and 71%, respectively).
  • In more than half of OECD countries, the employment rate of disabled people varies between 40 and 50%. In Switzerland and Norway, the rate is over 60%, while relatively few working-age people with disabilities are in work in Poland and Spain (21% and 22%, respectively).
  • On average, the disabled account for 21% of non-employment in the working-age population, but there is a large overlap between the disabled and older groups because disability incidence rises strongly with age (OECD, 2003a).
slide41

Trends in disability policies in the OECD areaA generalised change in “philosophy” – but country approaches and implementations differ greatly

  • Move from benefit to integration orientation
  • Tightening of access to disability benefits
    • reduction in benefit levels
    • stricter medical and/or legal assessment procedures
    • emphasis on temporary benefits
    • new ways of dealing with partial disability
  • Promotion of employment integration
    • introduction/fostering of anti-discrimination legislation
    • increase of employers’ obligations towards disabled people
    • stream-lining of administration and individualisation of case management
    • measures to increase work incentives for disabled people
examples of recent disability reforms
Examples of recent disability reforms
  • Luxembourg - since 2002 only individuals with assessed continued work incapacity remain on sickness benefit. Those no longer entitled to sickness benefits provided with job-search support, with clearly defined redeployment procedure to support access to employment. Successfully redeployed person receives permanent payment to compensate for difference between previous and new earnings. Person waiting to be redeployed classified as unemployed but receives waiting allowance - increased unemployment benefit set at higher level of disability benefits.
  • Denmark - disability scheme reformed in 2003. Disability assessment about what a person can do and not loss of capacity. Authorities assess extent to which person able to carry out subsidised job (so-called “flex-job”). Suppression of partial benefits granted to those with at least 50% reduced work capacity. Disability benefit now only granted to people whose capacity is permanently reduced and not able to carry out flex-job, even after participation in activation or rehabilitation programmes. Unemployed people with partially-reduced work capacity only able to perform flex-job receive special unemployment benefits, set at the same level as disability benefits. Permanent wage subsidy paid to employers of people on a flex-job to compensate for reduced work capacity, while flex-job workers receive standard wage.
examples of recent disability reforms1
Examples of recent disability reforms
  • Netherlands - Since 2006, entirely new disability benefit system in place. New scheme has two components: permanent disability benefit for people who cannot work any more and another benefit for persons whose disability is either partial or not permanent. Fine grid of partial disability benefits, with seven steps in line with the reduced capacity abolished. First category comprises permanently disabled workers with at least 80% reduction of earnings capacity, who receive a disability benefit at a level of 75% of their last wage. Workers with earnings capacity reduction of 15-34% can no longer receive a disability benefit. Instead, employment relationship is maintained (if possible) and employer has to adapt the workplace if necessary. In case of job loss, after exhaustion of sickness benefits, treated like unemployed. Workers with incapacity of 35-79% and those fully but not permanently disabled entitled to a benefit that is higher if worker is working for at least 50% of the remaining capacity. After five years, benefit will be reduced to a flat-rate payment if the worker is not utilising that capacity.
  • Switzerland – Reform in 2004, keeping 50% and 25% disability benefits, and adding new 75% benefit for people with 60-69% earnings incapacity. Aimed at reducing further the share of people on a full disability benefit, thereby raising incentives to return to the labour market on a part-time basis
slide44
Further reform is needed Transform the disability benefit schemeinto a flexible labour market programme
  • Assess needs and, if necessary, intervene earlier: Avoid disability benefit inflow through job search measures, training, rehabilitation and prevention
  • Disentangle eligibility for support from work ability and work status: Make cash benefits a flexible (in-work) tool that covers extra costs and the labour market disadvantage
  • Ensure that work for disabled people is financially attractive and sustainable
slide45

Further reform

  • Break the link from temporary sickness to permanent disability
  • Implement a “mutual obligations” approach
  • Strengthen individualised, tailor-made pre- and post-placement support
  • Integrate employers into the process, and design proper balance between obligations and financial incentives for them
  • Monitor outcomes carefully
summary and conclusions1
Summary and conclusions
  • Across OECD countries, there are strong economic and equity reasons for arguing for policies to encourage increased employment, particularly for older workers and people with disabilities and women.
  • But this requires shift towards more supportive public policies, changed employer practices and changes in family responsibilities.
  • Different countries have different starting points and different challenges. There can be no “one size fits all” solutions.
oecd analysis of work family balance
OECD analysis of work-family balance
  • Promoting parental employment options, and balancing work and care commitments are key policy challenges
    • Parental labour market outcomes
    • Family outcomes
  • Babies and Bosses addresses the wide range of factors that affect the parental work and care choice.
  • Reviews cover 13 OECD countries in all (Australia, Denmark, Netherlands, Japan, Austria, Ireland, New Zealand, Portugal, Switzerland, Canada, Finland, Sweden and United Kingdom).
  • www.oecd.org/els/social/familyfriendly
raising women s employment rates could help to face the demographic challenge
Raising women’s employment rates could help to face the demographic challenge
  • In virtually all OECD countries women represent more than 60% of the total number of non-employed persons aged 25-54, and this proportion is often close to 70% or higher.
  • Since prime age women (25-54), together with older workers (55-64), constitute one of the largest demographic groups of non-employed persons who could be mobilised, raising participation among women is key.
higher employment rates can advance equity and social inclusion goals
Higher employment rates can advance equity and social inclusion goals
  • A significant proportion of non-active women state that they would like to have a job (more than 17% of non-active women aged 25-54 in 2001, on average over 19 European countries).
  • Non-employment among lone mothers leads very often to poverty and child poverty.
  • Periods of non-employment can result in poverty in old age.
behind women s non employment
Behind women’s non-employment:
  • Non-participation more than unemployment :
    • Most non-employed women are not in the paid labour force. In many OECD countries, 80% or more of non-employed women are not looking for a job. Usual policies aimed at fighting unemployment are not enough to increase significantly women’s employment rate.
    • On average over 19 European countries, more than 50% of non-active women aged 25-54 in 2001, stated that they were not searching for a job because of personal and family reasons (proportion close to 60% among women aged 25-44).
  • Educational attainment:
    • Various studies have shown that having a low level of education and having held a precarious or unstable job seem to lower the chances of returning to work after having a child.Low educational attainment increases the probability of being non-employed, for women as well as for men. But there are more inequalities related to education and training in the female labour market.
    • In the OECD, on average 82% of women with university or tertiary education are in employment compared to 56% of women with less than upper secondary education.
slide53

Child poverty is an increasing problem in Europe % of children in households with incomes less than 50% of equivalent medianPreliminary figures

slide54

Worklessness among families with children is a particular problem in some countriesJobless households as percentage of all households with children

slide55
Non-employment significantly increases poverty risksRatio of child poverty rates, working and non-working lone parent families, 2000
joblessness and poverty what are the links
Joblessness and poverty – what are the links?
  • Jobless families are the most disadvantaged families
    • The average incomes of jobless families is about half that of all families with children.
    • They are everywhere at a high risk of child poverty (five times higher than their population share, on average).
  • But, on average only one-third of poor families in OECD countries are jobless (ranging from 4% in Greece to 70% in Norway).
  • But, in all countries with low child poverty (<5%), joblessness is also low (although Norway has 7% joblessness).
  • Countries with high child poverty mostly tend to have low joblessness (except UK and Ireland).
slide57

Higher female employment is key to reducing child poverty Percentage point reduction in child poverty rate through reforms to reduce joblessness and increase share of two-earner couples to level of third-best performing countries

the policy challenges
The policy challenges
  • Increasing female employment, therefore, can improve sustainability of social protection and maintain labour force growth. Properly designed, it can also contribute to reductions in child and family poverty.
  • But it is necessary to ensure that increased employment is not simply an extra burden on mothers, who are primarily responsible for care of children (and dependent older people).
    • Analysis of time-use surveys, 11 OECD countries, 1986 to 1997, shows burden heaviest for women working full-time – on average they put twice as many hours into child care as men (range from 1.4 times to 2.7 times). In total, spend about 10% more hours in paid and unpaid work, with range from equality to 30% more.
  • What policies are consistent with maintaining or increasing fertility?
  • There are also questions about the best interests of children.
  • What about choice?
slide59

Policy approaches: the mix of policy objectives on which family-friendly policy is based

  • Supporting work/life choices of individuals
  • Promote gender equity and autonomy
  • Reduce non-employment among families
  • Child development
  • (Future) labour supply concerns
policy instruments
Policy instruments
  • Tax-benefit systems and disincentives to participate in the labour market.
  • Maternity and parental leave and the responsibilities of fathers.
  • Child care.
  • Working time and the role of employers.
the relationship between fertility and female employment across nations reversed in recent decades
The relationship between fertility and female employment across nations reversedin recent decades
slide62
In nearly all OECD countries women represent more than 60% of the total number of non-employed persons aged 25-54, and this proportion is often close to 70%.

Prime age women (25-54), and older workers (55-64), constitute the largest demographic groups of non-employed persons who could be mobilised. Raising their participation is of key importance.

A significant proportion of non-active women say they would like to have a job (more than 17% of non-active women aged 25-54 in 2001, on average over 19 European countries).

In many OECD countries, 80% or more of non-employed women are not actively looking for a job. Standard policies aimed at fighting unemployment are not enough to increase significantly women’s employment rate.

Low educational attainment increases the probability of being non-employed, for women as well as for men. But there are more inequalities related to education in the female labour market.

In Germany 79% of women with university or tertiary education are in employment compared to 43% of women with less than upper secondary education. The education/employment gap relative to men is twice as wide for low skilled women as for highly educated women (18% and 8%).

Non-employment, particularly among lone mothers leads very often to poverty and child poverty.

Non-employment can contribute to poverty in old age.

Raising women’s employment rates could help to meet demographic challenges and improve social outcomes
reduce disincentives to work in the tax benefit system
Reduce disincentives to work in the tax-benefit system
  • Tax/benefit systems should be so designed to given both parents in couple families equally strong financial incentives to work.
  • Analysis of tax-benefit models across OECD countries finds that income-testing of family benefits is the most important source of disincentives for barriers to second earners and is more important than the choice of family tax unit.
  • Potential disincentives for second earners are strongest for the low paid, mainly because of the withdrawal of income-related benefits; and incentives are strongest when the primary earner is well paid and the second earner is working full-time (i.e. when needed least).
  • To reduce the risk of long term benefit dependency and poverty among sole parents and their children and jobless couples and their children a comprehensive strategy of active and early interventions in labour market re-integration is needed.
  • It is important to ensure that benefit recipients do not expect to remain unattached to the labour force for extensive periods because of parental care responsibilities. Once employment and childcare support is available on a comprehensive basis, it would be reasonable to oblige parents on income support to make use of it.
offer low cost high quality child care services 1
Offer low-cost, high-quality child-care services (1)
  • There is a positive relationship between mother’s participation rates and the availability of formal child-care.
  • Funding of childcare investment should follow parental choices, and use could be made of a mixture of financing tools. Direct (supply-side) subsidies should be made towards capital investment, providers in deprived and/or scarcely populated areas, or for the provision of services to children with special needs. In addition, earmarked support (or vouchers) could be awarded to parents in order to improve: efficiency through competition; and, choice in terms of providers and types of care, including out-of-school-hours care.
  • Financial support for formal childcare should be strictly tied to providers adhering to pre-set quality standards (e.g. rules on the number and qualifications of certified staff among personnel, staff-to-child ratios, but also on parental involvement in childcare provision, etc.).
offer low cost high quality child care services 2
Offer low-cost, high-quality child-care services (2)
  • Fee support for childcare can be made on an income-tested basis to achieve an equitable allocation of public resources, and, when linked to working hours, to pursue employment policy objectives.
  • To contribute to the long-term financial viability of childcare systems, maintain where possible, the role of family day-care, as such services are less costly than centre-based care services.
  • Out-of-school-hours care for school children is a key policy weakness in most OECD countries (except for Denmark, Sweden and perhaps the Canadian province of Québec). Investment in such policies should be extended, also by exploring options to make better use of existing education facilities for the provision of such care.
parental leave useful but under certain conditions
Parental leave: useful, but under certain conditions
  • Paid maternity leave with a job guarantee increases women’s attachment to the labour market when not too long (5-6 months). Long paid parental leave is particularly attractive to less skilled women and women in precarious job situations who subsequently find it most difficult to return to work. Allowances that enable mothers to stop work for a considerable time without job protection can have a negative impact on employment trajectories.
  • Give parents choice in their return-to-work decision, by allowing flexibility in taking leave payments, e.g. allow a parent to return to work after a shorter period, possibly on a part-time basis, without loss of overall entitlements.
  • To give employers due notice on the return of their employees consider appropriate notice periods for those on parental leave.
  • Take measures aimed at reducing the differences in the use of parental leave between men and women, for example, by granting a bonus to parents who equally share parental leave entitlements, increasing the duration of paid leave entitlements that are non-transferable between the parents, and increasing information to both parents about fathers’ rights to parental leave.
slide67

Flexible workplace practices need to be enhanced

  • Legislation that grants working parents the right to ask for flexible workplace practices may increase labour costs, but makes the employee and management carefully consider the nature of existing workplace practices, and can support parents in meeting family commitments.
  • Governments can also enhance the family-friendly nature of workplaces, for example, through the introduction of subsidies to employers for participating in assessment processes that give enterprises advice on family-friendly measures tailored to workplace needs. Such initiatives are most effective when through ongoing monitoring they generate long-term commitment of enterprises to family-friendly workplace practices.
slide68

There is no single model that fits all countries. Key elements include:

  • Ensure that there is a continuum of care for young children
  • Remove barriers to employment for parents
  • Workplaces need to be more family-friendly, so that parents can realistically plan their work and family commitments and employers can be reasonably certain about whether and when employees will return to work.
  • Target public support first at low-income families as return on investment is potentially very high
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