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Timo Weishaupt, Ph.D.

Small Country, Big Role Model? What EU Member States Could Learn from Austria about Activation Policy and Flexicurity. Timo Weishaupt, Ph.D. Introduction. Activation and Flexicurity as “buzz words” Example of Denmark and Netherlands dominate discourse

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Timo Weishaupt, Ph.D.

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  1. Small Country, Big Role Model? What EU Member States Could Learn from Austria about Activation Policy and Flexicurity Timo Weishaupt, Ph.D.

  2. Introduction • Activation and Flexicurity as “buzz words” • Example of Denmark and Netherlands dominate discourse • EU and OECD encourage to identify alternatives • Most potential to reform Continental welfare states in a flexicure way (Sapir) • Austria is one of Europe’s employment success stories (Auer)

  3. Austria a Model State? • Why? • What flexicure mix? • What can be learned? • Model for Germany?

  4. Outline of Talk • Situating Austria: • Economic performance • Institutional set up • Innovative reforms and non-governmental, security-enhancing institutions • Transferability to Germany • Conclusions

  5. Economic Performance • Gross Domestic Product (GDP) per capita in PPS among the highest in Europe • Public debt around European average • Low unemployment throughout post-war period (especially also long-term variant) • High and rising levels of employment (expect older workers) • Low income inequality • (High implicit tax rate on labor)

  6. Institutional set up • Employment Security • Modern PES • Increasing expenditures on ALMP • Focus on training (50% plus) • But: High-level of activation & tight benefits regime

  7. Expenditures on ALMP as % of GDP per 1% unemployment (2006)

  8. Institutional set up • Income Security • Relative short duration of UB (9 months) • Replacement rates just below EU average • But: indefinite UA; most generous in Europe for particular groups (low income family with children)

  9. Institutional set up • Flexible wage-setting system through highly coordinated bargaining system • Plus national net minimum wage of 1,000 Euro • Relatively flexible labor market regulation • Plus back-back principle

  10. Intermediate Conclusions • Austria has medium to high external flexibility • Flexible wage-setting • Medium levels of income security • Medium levels of employment security

  11. Additional Institutions – a Contribution to a more Balanced Flexicurity Mix • Employment Foundations • Social Economy Firms • New Severance Pay System

  12. Employment Foundations • Outplacement Foundations (1980s) • Steel companies • Privatization and Restructuring • Implacement Foundations (1990s) • Skills shortages • Funding • Firms • State governments • AMS • ESF

  13. WAFF • Workers Support Foundation of Vienna • Founded 1995 • Union initiative • Manages and streamlines varies foundations • Outplacement (sectoral, firm, and regional foundations) • 2000 • Open Foundation of Vienna • Implacement Cluster Support Program • Mid 2000s additional services & job broker • From 5 to 250 staff • Reduction of time from 3-6 months to a couple of days • 5000 Euro

  14. Social-Economy Firms (SÖB) • 1980s “experimental labor market policy” of Minister Dallinger (SPÖ) • Growth of social-economy firms • Second wave after accession to EU (ESF money and general expansion of ALMP budget) • SÖBs are financed through AMS, ESF, and own profits

  15. Social-Economy Firms (SÖB) • Permanent basis • Engaged in producing & selling goods/services • Launched by individuals rather than municipalities, church groups, NGOs • Interest representation through BDV (national umbrella organization for SÖBs) • Goal is reintegration of long-term unemployed • Work experience, plus training, plus councelling, pedagocial support and job search assistance • SÖBs need to create profits (20%) • AMS is gatekeeper – referral of candidates (barely any SA recipients)

  16. Old Severance Payment • Traditionally, workers in large firms receive severance payments in cases of a firms rationalization efforts • Low coverage rate • Expensive (especially for SMEs) • Potential for inefficiency

  17. New Severance Payment • 2002 introdcution of Abfertigung Neu • Employers pay 1.53% into savings account • Portable • Workers can cash out when loss of job • If not, functions as additional private pensions pillar • Predictable • More flexible (firms and workers) • Universal coverage • But: Loss of lay-off tax elements!

  18. Lessons for Germany, Part I • Employment Foundations • Transfer Societies(Transfergesellschaft) • Necessary pre-conditions: • Firm needs to employ at least 20 workers • Operating workers council • High bureaucratic burden and expensive • Set up when firms go bankrupt; mass lay-offs • Problems that Austria faced 20 years ago! • Area for union-based initative during these times of crisis?

  19. Lessons for Germany, Part II • Social Economy Firms • German has 700 integration firms, employing 26,000 workers (50% with special needs) • Potential demand for up to 400,000 such jobs (long-term unemployment remains massive problem in Gemany) • There are two umbrella organizations for integration firms • Job Perspektive – new instrument to subsidize newly created jobs for LTU • Use money that goes to One-Euro Jobs • Foundation to build on! • Need start-up capital and legal basis • Potential to create a social economy scene like in Austria, especially during times of crisis!

  20. Lessons for Germany, Part III • Severance Payment • Pre-conditions NOT met • Government already introduced much stronger private pension pillar • Social partnership diametrically oppossed • No coalition pushing such reforms

  21. Conclusions • Literature does not identify Austria as a model state for flexicurity • If at all, only Severance Payment is mentioned, which however is difficult to transpose to other countries • BUT: Flexicurity mix can be balanced through additional, non-governmental institutions • Employment Foundations • SÖBs • During times of crisis, these instruments could provide additional securities, create new jobs, and prepare workers for times of recovery

  22. Pragmatic, normative conclusions • New instrument for union movement to make positive contribution • New instrument for Social Democrats to strengthen their socio-political profile • Ways to reconcile disgruntlement between unions and SPD • Employers support foundations (corporate responsiblity and skills preservation and creation) • Employers may support SÖBs as they are instruments of the second, rather then third labor market

  23. Thank you for your interest and attention!

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