Flexicurity, Training and the Jobs Crisis

1. Flexicurity, Training and the Jobs Crisis Jason Heyes University of Birmingham

2. Context • The worst economic crisis since the 1930s • Between the middle of 2008 and mid-2009 employment in the EU fell by 4.3 million (almost 2 per cent). • By August 2009, the unemployment rate in the Eurozone had reached 9.6 per cent, its highest rate since March 1999. • In November 2008, the European Commission adopted a European Economic Recovery Plan, which emphasised the need to ensure that ‘employment services are fully equipped and ready to provide people with personalised counselling and job search assistance, intensive (re)training, apprenticeships, subsidised employment schemes and grants for self employment and business start-ups’. • The European Commission has recommended that responses to the crisis be developed within a policy framework informed by the principles of flexicurity.

3. What is flexicurity? • References to ‘flexicurity’ are abundant in EU social policy • Partly inspired by the experience of Denmark and the Netherlands • Shift in focus from job security to security in the labour market • The EC (2007: 10) defines flexicurity as an ‘integrated strategy to enhance, at the same time, flexibility and security in the labour market’

4. Flexicurity – an ambiguous concept • Flexible and reliable contractual arrangements, achieved through legislation and collective agreements • Comprehensive lifelong learning • Effectiveactive labour market policies that help workers cope with change and reduce unemployment • Modernsocial security systems that provide adequate income support, encourage employmentand facilitate labour protection (EC 2007: 12)

5. Enduring Variety? • According to Hall and Soskice (2001), there is a correspondence between varieties of capitalism and types of welfare states and training systems • Liberal social policies encourage the flexible labour markets and general skills that firms in LMEs are said to require. • Stronger employment protections and superior unemployment benefits are said to encourage the investments higher-level industry-specific skills that firms in CMEs are said to require (Hall and Soskice 2001: 50-51). • Increased mobility of capital has supposedly enhanced the ability of firms in LMEs to pressure governments to deregulate markets. • In ‘coordinated market economies’, by contrast, ‘governments should be less sympathetic to deregulation because it threatens the nation’s comparative institutional advantages’.

6. Flexicurity as a manifestation of the ‘competition state’? • The EC argues that flexicurity is a means of adapting to the economic uncertainties presented by globalisation and technological change • Globalisation is a frequently invoked force for change • The rise of the ‘competition state’? (Cerny 1995) • The emergence of the neo-Schumpeterian welfare state? (Jessop 2002) • Convergence?

7. Dimension 1: Flexibility • Employment protection scores have converged. • The EPI scores for countries with relatively strong employment protection fell between 1990 and 2008 • The scores for those countries with weaker employment protection tended to increase somewhat. • The ranking of countries has, however, remained relatively consistent with Spain, Portugal and Greece ranking highest and the UK and Ireland lowest.

8. OECD employment protection scores

9. Spread of non-standard employment • Relaxation of restriction on fixed term contracts and TAWs has encouraged an increase in their use in many countries. • 14.7 per cent of employees in the EU-15 in the year 2006 had a contract of temporary duration (for example, fixed-term employment or agency work), up from 12 per cent in 1996. • Fifty per-cent of total employment growth in France during the period 1991-2001 was accounted for by a growth in temporary jobs. • In the Netherlands the corresponding percentage was 40 per cent while for Germany, Italy and Austria it was 100 per cent (Maurin and Postel-Vinay 2005: 231, OECD 2003).

10. Lifelong learning • The European Commission’s ambition was for the lifelong learning participation rate to reach 12.5 per cent in 2010. • The rate for the EU27 in 2008 was 9.6 per cent of people aged 25-64. Participation levels have hovered around this figure since 2004. • Participation rates also vary greatly across the EU. In 2008 they ranged from 1.4 per cent in Bulgaria to 30.2 per cent in Denmark. • Public expenditure on training also varies considerably

11. Public expenditure on training as a percentage of GDP

12. Expenditure on training per person (PPS)

13. Active labour market programmes • ALMPs include employment subsidies, job creation programmes and intensive, and possibly individually-tailored, assistance with job search, typically provided through public employment services (PESs). • Within the EU, Greece and the UK are countries that spend little on ALMPs while the Nordic countries and the Netherlands rank as the highest spenders (Auer et al. (008: 24). • Vocational training is a core element of ALMPs, yet as noted public expenditure on training had fallen in many EU member states and has failed to increase in others. • A possible explanation is the increasing tendency for European government to favour employment policies of a ‘work first’ nature

14. Social security • Pillar 4 of flexicurity is the existence of social security systems that provide ‘adequate support’ and ‘encourage employment’. • The Commission provides no clear guidance on how the term ‘adequate’ is to be understood or measured • The Commission implies that the two objectives of providing adequate support while encouraging employment can be simultaneously pursued. • Orthodox labour economists would tend to argue that higher replacement rates (i.e. the level of unemployment benefits relative to average earnings) reduce incentives for workers to seek employment. • From this perspective, pursuing the objective of ‘encouraging employment’ may require a reduction in replacement rates (i.e. a reduction in reservation wages) which, in the eyes of unemployed workers, is likely to mean a reduction in the ‘adequacy’ of benefits.

15. Gross replacement rates

16. Expenditure on out-of-work benefits per person seeking work (measured in PPS)

17. Maximum duration of unemployment benefit (at maximum benefit calculation rate), 1989-2006

18. Dimensions of the jobs crisis • Increases in unemployment. In some cases the increases have been massive. • Men have been disproportionately affected compared to women • Disproportionate impact on the low skilled • Increase in youth unemployment and NEETs • Those in temporary jobs have been heavily affected

19. Unemployment in OECD countries

20. Responding to the crisis • Governments have improved access to benefits • Measures have been introduced to maintain workers in their existing jobs, and encourage the creation of new jobs • Training measures have featured prominently • The European Commission (2009: 9) has advocated that ‘For men and women facing difficulties in gaining new employment, the “training first approach” should be considered. For the entire workforce, upskilling and re-skilling is crucial to ensure adaptability and employability in uncertain times’.

21. Change in employment and GDP for selected OECD countries, 2008-

22. Change in employment 2008-9 for selected OECD countries.

23. Training and the maintenance of employment • In a number of countries, short time working schemes have operated in conjunction with measures designed to encourage employers to provide additional training opportunities for partially-unemployed workers. • In the Netherlands, the Czech Republic and Slovenia, employers are obliged to enable partially-unemployed workers to participate in training. • In Austria and Poland, employers are entitled to receive a training subsidy if they provide training courses for partially-unemployed workers. • In Germany and the Czech Republic, firms that provide training can receive contributions from the government towards their social security costs.

24. Measures directed at unemployed workers • A number of training programmes have been targeted on vulnerable groups. • The Irish government has directed support to low-skilled construction workers and expanded free night class training from approximately 8,000 places to 24,000 places in 2009. • In Norway, increased funding has been made available to provide training for unemployed or marginally-employed immigrants. • A number of measures that have been introduced across Europe in an attempt to address the needs of young people. • The French government has attempted to encourage young people to acquire skills by offering a one-off payment of €1,000 to people under 26-years of age if they sign a contract to work and train in a small enterprise. • In 2009 the UK government launched a ‘Young Person’s Guarantee’ initiative which guarantees all 18-24 year olds who are NEET a place in employment, education or training.

25. Training related to anticipated future skill requirements. • The UK government has identified social care as a growth area (given the ageing population) and local authorities are being encouraged to create 50,000 additional jobs in this sector via the offer of subsidies. • In addition to creating new jobs in the social care sector, the UK government has also offered recruitment and training subsidies to private sector employers in the hope of creating a further 50,000 jobs for young people in sectors that are forecast to grow, such as hospitality, leisure, retail and tourism. • The German government has provided funding for older unemployed workers to retrain as nurses so as to meet future anticipated demands in the aged care sector, • In Austria there has been an expansion of training places so as to enable unemployed workers to train as skilled metalworkers, an occupation for which demand is anticipated to increase.

26. Measures for apprentices • In 2009 Germany introduced a training bonus for firms that offer additional apprenticeships. The bonus is also available to employers who take on apprentices who have lost their position as a result of insolvency. • In the UK a ‘clearing house’ system has been created to match apprentices who are due to be made redundant with employers that wish to hire staff. The construction sector’s training body, ConstructionSkills, has been provided £1 million of funding to support construction companies that take on apprentices who have been laid-off during the crisis.  The funding is being used to reinforce the Apprenticeship Matching Service (AMS). • The crisis has also led to a renewed emphasis on the importance of apprenticeship training in the UK. In response to the growing number of unemployed young people, the UK government has expanded the number of apprenticeship places for school and college leavers and launched a new government-funded National Apprenticeship Service • The government is considering using public procurement as a means of encouraging training activity by obliging suppliers to the government to employ apprentices (Australia has already taken similar steps).

27. Training, collective bargaining and social dialogue • In January 2009, French employers and trade unions signed a national inter-sectoral agreement on the development of training throughout the working life. The agreement has resulted in workers being granted the right to transfer their existing individual right to training should they lose their job as a result of either dismissal or redundancy • In France, a national framework agreement has been reached in the chemical sector, aimed at promoting the use of training programmes as a way of avoiding redundancies. • A framework agreement concluded in 2009 for the Swedish manufacturing sector allows for workers to be temporarily laid-off from work while keeping their job and at least 80 per cent of their normal salary. The agreement allows for training to be provided in place of time away from work. • Company-level agreements relating to training have been reached in some countries. In April 2009 an agreement relating to training and partial unemployment was concluded at Peugeot Citroën in France (Glassner and Keune 2009: 25).

28. Other developments • Stricter requirements relating to involvements in ALMPs • Stiffer penalties for refusing a job (Italy, Poland) • Intensification of ‘work first’? • Pressure to postpone/abandon plans to strengthen employment rights

29. Conclusions • Some convergence in European employment regimes, but not towards the Danish and Dutch employment and welfare regimes. • More flexibility, less security? • Responses to the jobs crisis reflect to some extent enduring differences in employment and welfare regimes • Implications of fiscal retrenchment for jobs, wages and benefits? • The crisis has served to call into question the benefits, attainability and affordability of flexicurity.