"Reforming Danish ALMP - an assessment from a flexicurity perspective"

1. "Reforming Danish ALMP - an assessment from a flexicurity perspective" Per Kongshøj Madsen Centre for Labour Market Research (CARMA) Aalborg University, Denmark www.carma.aau.dk OECD Employment, Labour and Social Affairs Seminar March 3, 2014

2. Per Kongshøj Madsen Professor at CARMA, Aalborg University and Research Fellow at IZA Chairman of the EconomicCouncil of the Labour Movement Member of the Koch-Commission

3. What’s to come • The background: Danish flexicurity and the crisis • The criticism of ALMP • The tasks of the expertgroup • Proposals for reform • Whatare the next steps?

4. The Danish version of flexicurity Low EPL Highmobility Adaption to globalization The social contract Flexible labour market Support from welfarestate institutions Educational policy and more! Unemploy-mentínsurance ALMP Employment security Income security

5. Danish flexicurity – against the wind • The overall developmenton the labour market: • Steepdecline in employment in 2008-2009 • Then stagnation in employment and unemployment • A remarkable decline in the workforce • The reactions to the crisis (figure 8) • The stress on Danish flexicurity ”classic” (figure 9) • Still shelter from the storm! • Demolition of Danish flexicurity orgradual reforms?

6. Stylized facts

7. Decline i GDP

8. Elasticity of employmentwithrespect to GDP

11. Flexicurity under stress? Call for more job security Can the social partners keep the balance? Flexible labour market Fewer public resources) Educational policy and more! Unemploy-mentínsurance ALMP Under pressure from the crisis Lessgenerosity

12. LTU in the EU Unemployed for more than 12 months as a share of total unemployment: Source: Eurostat

13. Source: Eurobarometer:Monitoring the social impact of the crisis Wave 6, Flash EB No. 338, April 2012.

14. Falling apartorminor cracks in the building? Per Kongshøj Madsen (2013): “Shelter from the storm?” - Danish flexicurity and the crisis in: IZA Journal of European Labor Studies, Vol. 2, No. 6,

15. What’s to come • The background: Danish flexicurity and the crisis • The criticism of ALMP • The tasks of the expertgroup • Proposals for reform • Whatare the next steps?

16. The calls for reform • Inefficient and ”meaningsless” activation • Disappointingresults from manyevaluations of effects and costs of ALMP, especially of ”education”

17. The calls for reform • Toomuchcontrol • Of the unemployed by the jobcentres • Of the work of the job-centres by the national authorities • Dissatisfactionwith the functioning of the job-centres: • Too small to fitwith the regional labour markets • Too small to care for groupswithspecialneeds (e.g. academics) • The governance system (lack of cooperationbetween the jobcentres, the weakerrole of regions, the regional boards and the social partners)

18. The calls for reform • Overlappingactivities of the jobcentres and the UI-funds. • Not sufficient contactbetween the jobcentres and the employers • Dissatisfactionwith the IT-platforms of the jobcentres • The shortening of the duration of unemploymentbenefits from four to twoyears from January 1, 2013, makes it more urgent to make an effectiveeffort to get the unemployed back to work.

19. The tasks of the Koch-commitee • To makeproposals for reforms that: • Lead to lasting employmentfor the unemployed • Implies an upgrading of qualificationsif relevant • Arebasedon more onconfidence and lessoncontrolwith the unemployed (empowerment) • Strengthen the link between the job-centres and the employers • Make the instruments used more cost-effectivethat at present • Do not implyextracostsfor the public budgets • A tripartiteprocess

20. The proposals: Fivepillars • New, individual and job-focused effort for the individual unemployed • Targeted training and education of unemployed • Enhanced focus on the needs of businesses • Stronger economic incentives for the job-centres and less bureaucracy and process requirements • New regional organization and stronger stakeholder involvement

21. Pillar A: Individual support • Assistance already in the dismissal phase • Job search phase with frequent counseling in the first six months • Activation after 6 months with job-training measures for the unemployed over 30 years (after 3 months for young unemployed under 30 years of age) • Elimination of repeated mandatory activation • Initial profiling and stricter requirements to support to high-risk groups • Low risk-groups may choose to complete the first six months of counseling in the unemployment insurance funds

22. Pillar A: More individual support • Booking of interviews and job search support activities in the first six months • Training of managers and employees in UI-funds and job centres in counselling • Requirement for ongoing documentation of intensive, comprehensive and realistic search in a Job Log • New possibilities of sanctioning for lack of job-search • Harmonisation of public and private sector wage subsidies

23. Pillar B: Education • Upgrading of skills should be targeted at motivated unemployed • Right to training for unemployed with a job-offer • Right to basic courses in literacy, numeracy and writing • Right to 6 weeks of training after 6 months of unemployment, in agreement with the job center • Right to education for unskilled unemployed over 30 years with reduced benefit and a credit facility • No need to be available for work, if taking part in education

24. Pillar C: Contactwithemployers • Systematic contact from job centers to employers based on knowledge of the labor market • Better means of job centers to facilitate recruitment of manpower and skills-upgrading of existing employees • Strengthened cooperation across municipalities • Establish fewer entry-points for large companies with recruitment needs • Monitoring of current and future infrastructure projects and other major construction projects

25. Pillar D: Economicframework • Reduction of process requirements for jobcentres • A reformed system of economic incentives for municipalities (the same reimbursement for all activities and reduces reimbursement over time for the individual unemployed)

26. Pillar E: A new regional structure • The current 94 local employment councils and 4 regional employment regions should be reorganized into 8-12 new regional councils, which better reflects the regional labour markets • The new councils will support cooperation between municipalities, between municipalities and unemployment funds, as well as between job centers, educational institutions and the regional growth fora. • The new councils will have representatives from social partners and other stakeholders • The new councils will administer funds for education and training

27. Still hardworkahead! Carsten Koch Michael Rosholm, Aarhus University Vibeke Jensen Aarhus Municipality Per Kongshøj Madsen Aalborg University

28. Next steps • Draftreportdealingwith reform of ALMP the insuredunemployedready for comment from social partners: January 2014 • Reportpresented to the Government: February 25, 2014 • New reporton the non-insuredunemployed and othergroups at the margin of the labour market to bepreparedduring 2014 • Preparemandate for a new commissiondealingwith the UI-system 2014-2015

29. Thankyou for your attention Towards a brighther future!