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ASPEN , ETUI-REHS Brno 20.03.2009 Beyond work first activation The German Welfare Reform in a comparative view Regina D - Institute for Employment Research (IAB) Overview Need for redesign of national unemployment protection in post industrial labour markets

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ASPEN , ETUI-REHS Brno 20.03.2009

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aspen etui rehs brno 20 03 2009



Beyond work first activation

The German Welfare Reform in a

comparative view

Regina Konle-Seidl@iab.deD - Institute for Employment Research (IAB)

  • Need for redesign of national unemployment protection in post industrial labour markets
  • The German welfare reform (Hartz IV): a prime example of UE protection adaptation?
  • Preliminary outcomes of the new system

Changing the regulation framework

  • Need for a new model for regulating joblessness in Europe?
    • unemployment insurance as well as social assistance

increasingly ill suited

    • adaptation of working-age benefit schemes to post-industrial labour markets
changing profile of lm risks
Changing profile of LM risks
  • Post-industrial LMs are characterized by
    • expanding service sector
    • skill-biased technological change

→need for skill adaptation

    • increase of atypical work
    • low end and high end jobs
    • problems of UI coverage
    • limits of status maintenance
    • increase and persistence of LTU
    • poverty traps
    • make work pay
patterns of adaptation
Patterns of adaptation
  • unemployment support homogenisation
  • activation of benefits
  • co-ordination of unemployment protection

→ redesign of national income support systems

unemployment support homogenisation
Unemployment support homogenisation
  • standardisation of entitlements and eligibility across individuals with very different employment histories
  • access during periods of joblessness independent of work history
  • making insurance benefits less status confirming
  • converting last resort systems into “activating unemployment support systems”
  • varying benefit levels : possible “upward” or “downward” generalization
  • including more financial incentives (“make work pay”) to take up work for low earners

- by in-work benefits /earnings disregard clauses/ wage supplements


Unemployment support homogenisation

  • blurring boundaries between

insurance and assistance and UI and other forms of non-employment benefits

  • shift from contribution based funding (non- wage labour costs) to general tax revenues (esp. in Bismarckian welfare states)
  • towards a single working-age benefit? (Gregg-Report 2008)
benefit reforms are linked to
Benefit reforms are linked to …
  • New Welfare Governance
    • Unemployment policy co-ordination at the interface of labour market and social policy
  • ■horizontal co-ordination
    • integration of income support and re-integration services
    • one-stop shops, single gateways
  • ■vertical co-ordination
    • between different layers of government
    • networks and external providers
and activating interventions
..and activating interventions
  • demanding instruments
    • individual activity requirements
    • stricter suitability criteria to take up jobs and sanctioning clauses

enabling instruments

    • ALMP to improve employability and re-integration
    • specific support measures (social services)
  • “contingent convergence” of activation strategies across EU


    • activation as a moving target over time
    • similar repertoire of instruments in a work first environment
    • trend towards widening the scope of activation (to all non- employed
    • convergence of conditionality and generosity)
d hartz iv 2005 as a prime example
D: Hartz IV (2005) as a prime example?
  • ■ fundamental benefit reform
  • Dual aim: prevent poverty and (by) enhancing integration into gainful employment
    • introduction of means-tested, flat-rate “basic income support” for able-bodied jobseekers” (UB II) and dependent HH members (social allowance)
    • administrative (“need-oriented”) poverty threshold
    • shortening of duration of UI benefit entitlement

→ shift from status protection to basic income support

  • ■ activation of UB II recipients (Fordern und Fördern)
    • focus on work: extensive definition of “acceptable work”
    • in-work-benefits for low-paid work (“Aufstocker”)
    • work activities (“1 € Jobs”)
    • employability measures
  • ■ changes in the institutional setting
    • Creation of joint jobcentres (consortia of PES and municipal offices) as “one-stop shops” for welfare (but not insurance) clients
    • 69 opting municipalities as a “time-limited institutional experiment”
d w orking age r ecipients of main income support schemes

inability to work

social assistance

2004: UA: unemployment assistance2005: UB II

2004: UB

2005: UB I

D: Working-age recipients of main income support schemes

Source: Federal Statistical Office Germany, Federal Employment Agency Germany (2005), Federation of German Pension Insurance Institutes

s imilar trends of policy adaptation in other eu countries
Similar trends of policy adaptation in other EU countries
  • …. but less encompassing/ more incremental
    • UK

- benefit reforms 1996 (JSA) , 2008 (ESA)

  • - “welfare-to work”: work first activation

- Jobcentre Plus 2002

    • France
  • - benefit reform: 2008/09 (RSA)

- PARE, extending and reinforcement of activation measures?

- 2008/09 (Pole emploi)

    • Netherlands

- benefit reforms 2004 (WWB) and 2006 (WIA)

- work first at municipal level

- SUWI (2001); merging of CWI and UWV (2009)

… also partial reforms in Denmark, Sweden, Austria …

  • ,
preliminary outcomes of the new system
Preliminary outcomes of the new system
  • Benefit receipt
  • strong increase between 2005 and mid-2006
    • welfare take-up rates increased (decrease of hidden poor)
    • decrease of housing benefits by > 50%
    • improved fringe benefits (full medical coverage, pension and care insurance)
    • more generous earning and asset limits compared to former SA
    • in-work UB II benefits esp. among part-time and

mini- jobbers

    • just 1/3 of total BIS and 50% of able-bodied UB II recipients are registered as unemployed
    • after 24 months: 48% of households left UB II benefit rolls
    • 40% back within one year
preliminary outcomes
Preliminary outcomes

LM participation

  • marginal effects on labour supply; negative for lone mothers
  • evidence on increased search intensity and reduced reservation wages
  • unemployment generally down by 30% (end of 2008)

(open UE - 33%, hidden UE – 35%)

  • reintegration rate 27% p. a. among UB II recipients
preliminary outcomes of the new system16
Preliminary outcomes of the new system
  • Public expenditures
    • general shift of financial resources from employment related contributions to general tax revenues
    • UI contribution rate down from 6,4% in 2005 to 2,8% but (unexpected) increase in public expenditures financed out of tax revenues
preliminary outcomes of the new system17
Preliminary outcomes of the new system
  • Social inclusion
    • UB II standard payment is higher than in former social assistance but lower than in former unemployment assistance (lone parents gain, singles loose)
    • redistributive effect: 20% on the lower end gain, 20% on the upper end loose
    • not “poverty by law” rather poverty preventing
    • However: deprivation indices: higher poverty risk for singles 35-49 years and lone parents

Detailed results: (IAB-Bibliothek 315)

evaluation of an institutional experiment
Evaluation of an “institutional experiment”
  • who performs better and why?

- ARGE jobcentres of the ARGE or opting municipalities

    • evaluation by comparing activating interventions

in terms of

    • termination of need (BIS receipt)
    • reintegration rates into employment

- into employment which terminates neediness

- into unsubsidized employment

    • improvement of employability and social stabilizing
who performs better centralized vs decentralized service delivery
Who performs better? Centralized vs. decentralized service delivery
  • Impact on individual and aggregate level
    • ARGE : faster reintegration into jobs which end benefit receipt (25%)
    • estimated fiscal effects: difference of 3,1 billion € p.a.
    • municipal jobcentres:

- higher reintegration rates into jobs which do not end neediness/UB II receipt (15%)

- advantages in the improvement of employability (measured by a multidimensional indicators)

  • However: existing performance differences between models are statistically not significant
who performs better centralized vs decentralized service delivery20
Who performs better? Centralized vs. decentralized service delivery
  • Driving forces
    • generalized rather than specialized case-management
    • workload
    • quick (work first) and intensive assistance
    • consequent sanctioning
    • job training measures
    • availability of child care facilities

→ not models but implementation strategies make the difference

  • however: no political solution concerning centralized or decentralized service delivery; problem of interlocking federalism

Results in detail:

concluding remarks
Concluding remarks
  • Basic income allowance of growing relevance regarding the structure of unemployment protection in Germany
  • Beyond activation: convergence of patterns established in more liberal market economies (minimum standards, flat rate) but also in Scandinavian welfare states (detachment of entitlement and financing)
  • Modelfor post-industrial risk regulation despite several shortcomings?
  • What happens in times of crisis? Possible reversal of policy trends?
Thank you for your attention!