Balancing Activation and Protection Experience from Active Social Policies in the European Union and

1
Balancing Activation and Protection Experience
from Active Social Policies in the European Union
and the United States and Implications for Roma
Employment Policy

• Christian Bodewig
• The World Bank
• Sofia, Bulgaria
• May 10, 2007

2
Overview

• Why activation policies? History and rationale
• The building blocks of activation programs
• Results, caveats and implications for Roma
  employment policy

3
Why Activation? History and Rationale
4
Origins in the United States

• U.S. welfare policy always focused on sorting the
  deserving poor (eligible for public aid) from
  the undeserving poor (expected to work).
• The first federal program was the Aid to
  Dependent Children program (ADC), created in 1911
  
• ADC was primarily for worthy white widows. All
  others, including African Americans, immigrants,
  Catholics, divorced, deserted, and unmarried were
  mostly considered "unfit" and dependent on the
  paid labor market
• Changed only in the 1950s and 1960s, with
  migration of African Americans to northern
  cities, the civil rights movement, and the
  welfare rights movement.
• In 1980s, President Reagan and US conservatives
  popularized concept of welfare queens as symbol
  for the need to reform welfare state and
  introduce responsibilities as well as rights
• President Clinton supported this, and introduced
  act to reform welfare in 1996

5
Origins in the United States, cont.

• Ending welfare as we know it consisted of
• stating that welfare is no longer an entitlement
  to poor women and children
• women were now expected to fulfill work and other
  requirements to get aid
• Imposing time limits on aid two consecutive
  years, with five year lifetime limit
• States usually enacted harsher punishments than
  under federal law
• In 37 states, the entire family loses aid if the
  adult violates work sanctions
• In 10 states, lifetime maximum is two years
• Most states adopted a strong work first
  strategy, which discourages education and
  training in favor of encouraging recipients to
  take any available job, even a low-wage job, in
  order to receive benefits.

6
Recent origins of activation in Europe

• Western European welfare states were created or
  consolidated during the post World War II full
  employment period.
• Social rights, including protection from effects
  of unemployment, sickness, and old age, were
  granted the status of property rights, and were
  not based on previous earnings or work
  performance.
• But from 1970s, economic situation worsened
• Aging populations and generous benefits made
  social insurance systems increasingly
  unaffordable
• There was increased concern about long-term
  unemployment among vulnerable groups
• This led to a hybrid model, where employment is
  encouraged as a way to protection with
  disincentives to work attempted to be changed to
  incentives.

7
Recent origins of activation in Europe

• This means
• Discouraging early retirement
• Reducing unemployment benefits
• Imposing work requirements on the long-term
  unemployed
• But (unlike in the United States)
• State has an obligation to try and help
  disadvantaged to find jobs
• Social benefits in Europe have changed from being
  a right, to where obligations have to be
  fulfilled to receive these rights

8
Activation Policies in Europe General Features

• The European model of activation policies
  generally place employment integration as the
  very heart of social policy.
• This implies
• Greater emphasis on work as a way to ensure that
  individuals in their prime age are not excluded
  from mainstream society
• Greater effort on behalf of the social and
  employment services in helping benefit recipients
  overcome the obstacles to entering into paid work
  
• Greater effort on behalf of the benefit
  recipients to enter or re-enter the job market

9
Activation is not just workfare

• Workfare
• is working in return for benefit
• aims at reducing dependency and cost of benefit
  provision by tightening the access to benefits
• Activation (as conceived in Europe)
• involves a wider range of options - training,
  education, subsidized employment, work placement,
  group activities, language-learning skills,
  literacy, etc.
• aims at labor market and social integration
  through empowerment to increase competencies and
  skills

10
Good activation involves

• Improving personal, social and vocational skills
  and competencies and enabling to social
  integration
• Individual and flexible offer acknowledging
  diversity (age, experience) and relevant to the
  individual persons needs, wishes and priorities
• Involving the resources and strengths of the
  beneficiary
• Networking labor market services, social
  services, health services, housing sector,
  communities, etc.
• Cooperation and interaction between the
  beneficiary and the agency in activations
  planning, design and implementation

11
Key Building Blocks
12
Key building blocks of activation programs

• The mutual obligations principle
• Frequent and personalized/tailored interventions
  of agencies during individuals unemployment
  spell
• Financial incentives to labor market
  re-integration
• Stricter benefit eligibility criteria and benefit
  sanctions
• Strong obligations to participate in labor market
  programs, community work or to try
  self-employment
• Changes in institutional arrangements and greater
  coordination across institutions and partnerships
  with civil society organizations and private
  sector

13
1. The mutual obligations principle

• Society invests more in helping beneficiaries in
  more effective ways. Beneficiaries are expected
  to respond accordingly
• Applied with varying degrees of effectiveness in
  assisting beneficiaries to find work
• Applied with varying degrees of compulsion on
  those out of work. The right degree of pressure
  is a sensitive and controversial concept
• The mutual obligations principle applies also to
  employers e.g., commitments (quotas) to employ
  disabled people (Belgium, Netherlands, Norway,
  Spain, Sweden) anti-discrimination commitments

14
2. Tailored interventions during the
unemployment spell

• Much more frequent contacts with the responsible
  labor or social office (most OECD countries)
  contract- based obligations (UK New Deal)
• Profiling of job searchers/individual action
  plans different categories of beneficiaries
  based on the amount of help needed to find a job
  /distance from the labor market (UK, Denmark)
  different programs available to different
  categories (the Netherlands)
• Intensive interviews to adjust/redesign the
  individual action plan - at certain stage of
  unemployment
• Case management before and after starting the job
  (US)
• Combination of job search with education and
  training (most OECD countries)

15
3. Financial incentives for labor market
re-integration

• Back to work bonus for long-term welfare
  beneficiaries who go back to work
• Examples
• Ireland Back-to-work allowance limited to 3
  years and decreasing over time
• UK Long-term unemployed receive a one-time bonus
  of 167 when accepting a new job
• Australia Employment entry payment lump sum
  every 12 months

16
3. Financial incentives for labor market
re-integration (contd)

• Increased earned income tax credit
• Examples
• Netherlands Subsidized workers receive 2,269
  when moving to un-subsidized work for at least 6
  months, financed through tax relief and paid over
  a period of 3 years (employment-conditional tax
  credit)
• France Special subsidy targeted at low-income
  workers, state bonus proportional to earned
  income. Increases net wages, without increasing
  labor costs for employer
• US, UK and New Zealand Family tax credit,
  administered through salary instead of the
  benefit system

17
3. Financial incentives for labor market
re-integration (contd)

• Higher earnings disregards
• Examples
• France Continue to receive minimum income
  benefits while getting paid up to 750 hours per
  year (lasting max. 12 months)
• Netherlands Internship program for young
  unemployed, one-time remuneration of 450 euro for
  3 months internship, while still receiving
  unemployment benefit
• Belgium For the long-term unemployed and
  unemployed older than 45 years old, non-market
  work arranged by Local Work Agency to a maximum
  of 45 hours a month, net wage is set by
  municipality

18
4. Stricter benefit eligibility criteria and
benefit sanctions

• Shortened maximum duration of receiving a benefit
  (many EU countries move in that direction)
• Decrease of the benefit with the length of
  unemployment spell, or even cancellation
  (Denmark)
• Immediate job search is required, even before
  applying for benefit (many US states)
• Obligation for unemployed persons to increase the
  range of occupation within which work is sought
  and increase geographical radius of job search
  (Germany, Sweden)
• Obligation to accept all suitable work
• Means testing in Germany, the benefit that
  replaced unemployment assistance is means-tested
  against the income of the recipient, plus partner
  and/or housemates

19
5. Participation in labor market programs,
community work and self-employment

• Obligation of welfare recipients to work - paid
  or unpaid community service jobs (some states in
  the US), mandatory volunteer social work
  (Denmark). In the US, even homeless assistance
  and programs for people with serious mental
  illness are testing work programs, but not as
  requirement
• Participation in municipal work or training
  projects obligatory for the long-term unemployed
  and those under age of 25 (Sweden)

20
5. Participation in labor market programs,
community work and self-employment (contd)

• Promotion of self-employment
• Examples
• Germany Those unemployed for at least 4 weeks
  must set up a business plan to be judged by
  independent professionals.
• When the business plan is judged to be sound,
  they will switch from unemployment allowance to a
  Starters Allowance to be paid for 6 months
• The Netherlands Unemployment beneficiaries can
  be exempted for 3 months from searching a job, to
  set up their own business. If income is generated
  by the new business, this will be subtracted from
  unemployment benefit

21
6. Changes in institutional arrangements and
greater coordination across institutions

• One stop shops services provided in a location
  and premises convenient for the client
  client-friendly environment / co-location of
  employment and welfare function - service centers
  located within 20 minutes of client residence
  (Belgium)
• Increased role of the private sector - employers
  have offices in the Job Center Plus (UK), job
  interviews carried out in the welfare offices
  reintegration activities outsourced to the
  private sector (the Netherlands)
• IT systems integration and coordination of the
  back-office functions through IT systems with
  access to different parts of the social
  protection system (UK, Crossroads Bank in Belgium)

22
Results, Caveats and Implications for Roma
Employment Policy
23
Results

• Large drop in caseloads - in UK and US caseload
  number dropped by more than ½ compared to the
  peak level in mid-1990s, in Canada and the
  Netherlands by 1/3 and more, in Finland by ¼
• More and better quality jobs - in the US, the
  majority of welfare program leavers are working,
  often full-time, and at wage rates that are close
  to those of similar groups in the labor force in
  Europe, workfare programs have had positive
  effects on earnings
• Increase in the employment rate data available
  for UK reveals that ½ of the 11 increase of
  employment of lone parents is due to the New
  Deal for Lone Parents of 1998

24
But conclusions are not all robust

• The employment effect is not large (Fafo 2001)
• In France, only about 25 percent leave the
  workfare program due to employment.
• In the Netherlands, the net employment effect of
  the workfare program is about 18 percent (it is
  uncertain where the remaining share went).
• In Norway, neither the employment nor earnings of
  program participants significantly improved
• Those who benefit the most from workfare programs
  areusually those who would have been most likely
  to find jobs on their own.
• In France, Denmark, the Netherlands and UK, those
  who are usually younger, with better education,
  and fewer social problems.
• In the USA, whites rather than African Americans
  or Latinos
• Total income gains from workfare are positive,
  but relatively low, leaving many recipients still
  in poverty
• In US, this may be because of the added costs of
  working, such as transportation and child care

25
Not all who exit welfare can move to employment

• Activation policies can only work when there are
  jobs that are available often not true in many
  Eastern European countries, especially in rural
  areas
• Reforms that succeed to move the majority of
  working-age able-bodied beneficiaries out of
  welfare, may worsen conditions of people for whom
  employment integration is more difficult
• US studies show that recipients who may be least
  able to succeed in the labor market are the most
  likely to be sanctioned.
• They have multiple employment barriers, including
  cognitive and health-related barriers, and
  difficult aspects of home life (e.g., lack of
  transportation, three or more children, child
  care problems, domestic violence)
• Former welfare recipients remain vulnerable at
  the work place with weaker skills and work
  experience, they are more likely to lose jobs

26
Conclusions Where is the balance between
activation and protection?

• Activation policies can be successful
• In lowering welfare costs because of people
  leaving welfare rolls
• For countries with generous benefits which
  encourages those with an ability to find jobs not
  to work
• In helping those for whom additional training or
  job search help is the barrier to employment

27
Conclusions Where is the balance between
activation and protection? Contd

• But they may lower welfare and increase poverty
  if
• There is a general lack of low-skill formal
  sector jobs (e.g., in rural areas)
• Many of those on welfare rolls are socially
  excluded
• Institutional capacity to do high quality social
  and case work is low

28
Conclusions Implications for Roma employment
policy

• Activation policies without specific sensitivity
  to the complex nature of Roma exclusion may fail
  Roma and have opposite effect
• Obligation of the state promote access to the
  labor market through very client-focused and
  individually tailored approach
• Outreach partner with Roma civil society
  organizations to bring unemployed and employment
  agency together
• Is the employment agency equipped to adequately
  deal with Roma employment promotion? Need for
  training, incentives, case work capacity
• Think of Roma employment needs when reforming the
  employment services