Combining flexibility and security: the new labour market paradigm?

Labour market reforms and macro-economic policies in the Lisbon agenda

Brussels, 20-21 March 2006

Maarten Keune and Maria Jepsen

European Trade Union Institute for Research, Education and Health and Safety

http://www.etui-rehs.org

The rise of ‘flexicurity’ in Europe I

Since mid-1990s some Commission documents call for combining flexibility and security.

EES Guideline No 21: Promote flexibility combined with employment security and reduce labour market segmentation.

Vladimír Špidla underlined the importance of flexicurity strategies for employment and growth at Informal Ministerial Meeting, 20 January 2006.

Kok report: “Labour markets must be made more flexible while providing workers with appropriate levels of security.”

The rise of ‘flexicurity’ in Europe II

John Monks, General Secretary, ETUC

“The Lisbon Strategy will never work if policy-makers decide that economic policy should take precedence over social policy. … That has clearly not been the case in some outstanding European success story countries such as Denmark, Finland, Sweden and Austria. They have promoted “flexicurity”, a concept the ETUC supports. This promotes good standards which help growth and change.”

Therese de Liedekerke, UNICE Social Affairs Department:

“… our values can only be sustained if competitiveness is achieved and the issue of flexicurity is at the heart of efforts to restore a positive link between competitiveness and social protection.”

Flexicurity: reasons for its popularity.

Promises a solution for labour market promises that bridges the capital labour divide, a win-win strategy catering to the needs of employers and employees.

Attractive also as a way to move away from the singular flexibility-oriented discourse of the late 1980s and early 1990s.

Can create consensus among political opposites.

Is closely linked to country cases that are seen to be successful in labour market terms (NL, DK, AT).

Multiple possibilities to combine flexibility and security

Flexibility

External: lay-offs, temporary work, fixed term contracts.

Internal: adjustment of length of work (overtime, flexible scheduling of working time, working time accounts).

Functional: flexibility within firm through multi-tasking.

Financial: variation of pay, according to performance.

Security

Job: employment protection legislation, etc.

Employment: employability (education, training, ALMPs).

Income: protection of income through social security etc.

Combination: work-life balance.

Labour market: access to employment through high levels of employment.

Lack of consensus on what flexicurity is about

Wide spectrum of actors has embraced flexicurity as an abstract concept, but no consensus on:

what types of flexibility and security should be addressed and how.

how to achieve security.

how to reach a win-win situation.

what flexicurity can solve (insider-outsider, agg. employment).

Different focus

Commission: from job security to employment security; social security extended to atypical jobs.

Employers: flexibility is precondition for security.

Workers: security is precondition for flexibility.

Germany: Hartz reform I

Mainly about getting the unemployed into jobs through:

 Ich AG self employment grant.

Personnel Service Agencies (PSA) providing temporary employment to unemployed.

Mini and Midi jobs, facilitating low-wage, short hours employment .

New benefit (ALG II) for long-term unemployed with strict take-up rules (any job is suitable), tight eligibility criteria, low benefits.

Limited training, decline number training places.

Germany: Hartz reform II

Caters to employers’ flexibility demands (flexible employment and flexible employees) and expects this to lead to employment creation.

More marginal, insecure and flexible employment

Little attention to employability.

No attention for the creation of more regular employment

Unbalanced approach, focusing on external flexibility and with little improvement in security

France: reforms under present government

Increase overtime limits and working time flexibility

Easier dismissal (equirement to previously consult unions and negotiate working time reduction abolished)

Extra assistance re-employment (long term) unemployed

Tightening of (long term) unemployment benefit criteria

Some reduction non-wage labour costs (certain categories)

Individualises and strengthens re-employment assistance in SMEs (< 1000 employees) (already existed for large ones)

Higher unemployment benefit after economic firing (limited groups, about 10%).

More flexible contracts for small enterprises (CNE), young people (CPE) older workers (above 57)

increases mainly flexibility, some employment security

Denmark

Basic system:

Historically combines high social security with low employment protection.

Since mid-1990s strong individualised activation and ALMP, more adult education and some reduction benefit period (but still long!).

About 3% GDP on passive policies, about 1.5% GDP ALMPs.

more employment security, less income security

Recent trends:

Reduced public support for vocational training and education

Less personalised assistance, more standardization

Sanctions and availability and mobility rules tightened (work first)

reduction employment security

The Netherlands

Law on flexibility and security end 1990s

Reduction employment protection

Equal treatment part-time workers in law, social security

Flexibilisation TWA sector, more rights to TWA workers

Recent reforms:

Tightening disability benefit criteria

Employability agreement (in-company training, equal opportunities and job opportunities for disabled)

Disincentives early retirement

Government proposes easier dismissal, more working time flexibility, longer working hours, restricted access to unemployment benefits and improved access to vocational training.

Sweden

High levels of security and employment prevail.

Emphasis in debate is on providing security in moments of inevitable change.

During the 1990s some more flexibility by introduction temporary contracts, as well as trial periods, TWA.

In 2001 some modifications to re-employment rights, seniority rules, with both (minor) positive flexibility and security effects.

Opposition and employers demand changes to labour market policies, September elections.

United Kingdom

After profound deregulation of Thatcher era, since 1997 modest degree of re-regulation under New Labour, partially as effect EU Directives

Welfare-to-work: compulsory activation, training, placement employment security

Minimum wage income security

Right to request flexible working time arrangements and better maternity and other parental leave rights combination security, work-life balance through employee-oriented flexibility

Conclusions

Flexicurity is useful way to examine labour market reform

The emphasis of reforms is on increasing flexibility, with much less attention to security (exept SE).

Reforms focus on re-employment of the unemployed, not on the creation of more standard employment.

‘New’ security: (i) the vague notion of employment security, amounting to re-employment assistance; (ii) extension of rights to non-standard rights.

Few innovative initiatives, largely ‘old wine in new bottles’

Flexicurity obscures flex-flex trade offs

What about promoting growth and employment creation?