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Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen K Tel: Fax: UI-benefits in various situations: Cyclical or seasonal unemployed Modern expansions of classical UI: –Short period between two jobs –Temporarily laid off –Newly graduated –UI-benefit at holidays (after unempl.)
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Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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The Role of Unemployment Insurance in Modern Labour Markets - Unemployment
Insurance and Flexicurity
Tallinn, February 2007
Thomas Mølsted JørgensenNational Directorate of Labour
Denmark
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Main functions of Unemployment Insurance
• Income security for unemployed
• Flexibility on labour Market
• Macro economic stability
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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UI-benefits in various situations:
• Cyclical or seasonal unemployed
• Modern expansions of classical UI:– Short period between two jobs– Temporarily laid off– Newly graduated – UI-benefit at holidays (after unempl.)
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Unemployed with benefits - and then ?
Goals of Modern Labour Market Policy
Return to previous / same type of job
OR
Achieve competence to new job ?
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Ways of Financing UI-benefits:
• Members fee (flat rate or other)• employers contributions or • general tax
Affects:Income distribution Wage increase (?)Macro economic situation
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Acceptance of Flexibility depends on:
• Easy access to UI-benefit• High replacement rate• Low fee / employees contribution to
Unemployment Insurance • Long duration possible
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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But easy access to high benefits could result in:
• Less incentives to work • Wage-inflation• Abuse of benefit-system• Black economy• High expenditures
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Some solutions:
• Strict rules on availability
• Active Labour Market Policy:– Right and duty to accept offers– Job offers and activation as test of availability
• Monitoring job seeking
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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More contribution to solutions:
• Realistic sanctions • Threat of loosing membership • High replacement rate only with
low wage• Often adjustments of schemes to
avoid unintended use
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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The Danish Flexicurity Triangle
Flexible labour market
Unem-ployment benefits
Active LMP
1. Low employment protection
2. Income security3. Employment security
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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The components of The Triangle• The Labour Market
– Easy hire-and-fire – low/no job protection– High flexibility and many job openings– High job and worker-mobility – Rapid structural changes
• Unemployment Insurance– High replacement-rate (but with max.)– Long duration – Individual benefit – no means test
• Active Labour Market Policy– Emphasis on upgrading skills– Strict rules on availability– Right and duty to accept offers– Activation as test of availability
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Labour Market Situation
Employment rate, 20-64 years, 2004
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
PL MT IT HU SK EL ES BE LU FR DE LT LV CZ SI EE AT IE FI PT NL UK CY SE DK
Source: LFS, Indicator 2
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Unemployment trap 2003(Total Marginal effective tax rate on labour income)
0
10
20
30
40
50
60
70
80
90
100
LT EE CY IT HU MT CZ UK SK IE PL AT EL ES SI FI FR NL LV PT LU SE DE BE DK
%
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Active/passive LMP expenditure as % of GDP
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
UK EL IT IE PT AT ESEU15 SE FR NL FI
DE BE DK
% o
f GD
P
Active Passive
Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Directorate of Labour, Stormgade 10, Postboks 1103, DK-1009 Copenhagen KTel: +45 38 10 60 11 Fax: +45 38 19 38 90 [email protected] www.adir.dk
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Summing up UI in Modern Labour Market - Flexicurity
• Unemployment Insurance must work together with ALMP
• Employability enhancement is the overall goal, achieved by both flexibility and education/training for unemployed and employed
• Flexibility and security for the employees are not necessarily contradictions. Requires enforced availability for work
• Flexicurity arrangements can strengthen overall institutional competitiveness by promoting structural change
• Regular review and revision of schemes etc. is necessary
• Flexicurity is not a simple recipe – nor a universal medicine
• It works in Denmark – but it requires many resources.
