Employment challenges in the future

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Employment challenges in the future

By Nina Røhr Rimmer

Associate Professor, MSc Econ

University College Northern Denmark – Business

March 2013

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THE BACKGROUND for EU problems

• Long term situation

• Demographic change – ageing workforce

• Globalisation and competitive pressures

• New economy: knowledge; services

• Climate changes

• But how does the crisis influence this trend?

• Does it alter the labour market fundamentally?

• What sort of structural impacts?

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LABOUR SUPPLY

• Emphasis on quantity and quality

• Moving beyond employability

• A necessity is long term supply

• Raising employment rates of specific groups

• Women

• Youths and older workers

• More contentiously: immigrants

• Enhancing human capital

• Life Long Learning

• Basic and transferable skills

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LABOUR DEMAND

• Link to macro circumstances

• Seeking to maintain employment levels

• Possibilities for forms of job sharing

• Stimulating demand in ‘new’ sectors

• Such as ‘green’ jobs

• Demand for specific segments of Labour Force

• Mainstreaming atypical contracts

• Getting rid of the term “atypical”

• Labour cost considerations

• Including tax systems

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INSTITUTIONS

• Matching supply and demand

• Delivering quality employment services

• The components of flexicurity

• Facilitating adaptability

• Making transitions pay

• Burden sharing

• Reviewing employment protection laws

• Diminishing insider-outsider conflicts

• Especially a problem with immigrants

• both EU and non-EU

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QUALITY

• Focus on wider aspects of employment

• Fairness in the labour market

• Equality

• Gender

• Other dimensions

• Over the life-course

• Work-life balance

• Working conditions

• Avoidance of low wage traps etc.

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The European Society – Can we agree on one model?

• Free-market capitalist society and a welfare society inspired by the socialism project

• Social spending is high as a percentage of GDP (education, health)

• A substantial part of income is redistributed through taxation and social protection

• Eastern + Central Europe with no or little

strategies. They need to invent/adapt to the rest

of Europe

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Can we agree on one model? Cont.

• There seems to be a large consensus among

European leaders in politics, trade-unions or social partners on the point that there is a European Social Model (ESM), and that it needs to be maintained and developed. But what ESM?

• Can the ESM survive in a global world?

• The answer will be positive only if social protection is not a handicap but also a factor of productivity and

competitiveness. Job stability must be an incentive for companies to invest in workers and for workers to

invest in their company

• How do we overcome potential corruption?

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EU = 4 models of „Welfare Capitalism“

• The Anglo-Saxon or Liberal Model

• The Continental or Social Insurance Model

• The Mediterranean or Family-oriented Model

• The Scandinavian or Universalistic Model

• +

• The lack of model in Eastern + Central Europe

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EUROFRAME-EFN Special Topic Report, Autumn 2007

Anglo-Saxon Model

• Pre-dominant role of markets, minimal role of the State

• Low degree of regulation

• High competition, sophisticated regulation of utilities

• Selective social transfers; i.e. means tested benefits

• Private insurances

• Welfare-to-work strategies

• Public health system and publicly-financed schools

• Anglo-Saxon Europe: United Kingdom, Ireland

• Anglo-Saxon Model Overseas: USA, Canada, Australia, New Zealand

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Continental Model

• Social protection organised on occupational basis

• Income-related transfers with low minimum standards

• High employment protection, generous unemployment allowances

• Employment rates rather low

• Contribution-based social insurance system for pensions, and unemployment

• Low re-distributive efforts, regressive tax structure (low wealth taxation, high taxes on labour and consumption)

• Co-operative industrial relations and coordinated wage bargaining

• Germany, France, Belgium, Netherlands, Austria, Switzerland

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Mediterranean Model

• Important role of supportive family networks

• Low transfers, but generous old-age benefits

• High gender inequality, low female participation rate

• High job protection but low replacement rate

• Some traits of paternalistic society remained

• Italy, Spain, Portugal, Greece

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• Based on equality, social inclusion, universality

• Low job protection

• High level of social services, affordable and of high quality

• High employment rates and emphasis on gender equality

• Tax financed health system and unemployment benefits (partly)

• Progressive taxation, taxes on property and bequests

• Low taxes for business

• High minimum wages, high replacement rates, pensions with high minimum standards & income-related elements

• Cooperation between social partners

• business, unions and government

• Trade unions operates unemployment insurance and training

• Sweden, Norway, Finland, Denmark

Scandinavian Model

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Flexible labour market

Unem- ployment benefits

Active LMP

• Low employment protection

• High job mobility

Income security

Educational policy etc.

• Focus on better qualifications

• Right and duty to accept job offers

• High degree of compensation

• Min. 2 years in the insurance system

The Danish flexicurity triangle

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Flexicurity Model

• = a combination of easy hiring and firing

(flexibility for employers) and high benefits (= security) for the unemployed

• High mobility in the labour market

• Permanent employments

• Rather high level of security

• Equal opportunities (and high employment rates for both men and women + elderly)

• Strong organisation on both sides of the labour market – very few conflicts

• High level of unionisation (80 %)

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Salary in Denmark

• Relatively high salaries

• But high level of tax

• marginal tax rate of 51,5%

• Ca. 35% for income up to 55,000 Euro

• Collective agreements:

• for example 15 euro per hour for unskilled work

• Private negotiation and employment contract

• Other examples:

• Electrician 30 Euro/hour 4,500 p.m.)

• Nurse 4,000 per month

• Engineer 6,500 per month

• Spec. Doctor 10,500 per month

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• 37 hrs./week

• Paid holidays – min. 5-6 weeks per year

• + 9 public holidays

• High salaries

• Flexibility concerning illness, child birth, family benefits

• Work-scheme pension contributions

The Danish Labour Market

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Working culture

• Informal atmosphere

• Flat hierarchy

• responsibility is delegated

• Team work

• Professional development – rewarding

• Working language - English or Danish

• Effectiveness and efficiency

• Wide use of technology

• Social events and activities

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An example

Annual payment to Union 400 euro

Annual payment to unemployment scheme 400 euro amounts are tax-deductable

80-90% of all employees are members Should you get unemployed….

2 years of unemployment payment ca. 26,500/yr (previously 7 years then 4 years...)

Plus re-training programme

Should you not get a job you may still receive social benefit,

although dependant on your assets and your spouses income, you can still receive 20-24,000 euro per year, free childcare, housing subsidy etc.

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Job Satisfaction

Per cent of employed, 2006

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The lowest unemployment rate in 30 years 1985-2000 = approx. 10%

2008 = 1,7% 2013 = 4.7%

Source: Statistical Yearbook 2008, Statistics Denmark

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Key elements of a New Welfare State Architecture

• Child-centred and women-friendly social investments Thus fostering fertility rates

• Higher investment in human capital The higher the qualification, the higher are activity rates

• Restructuring from transfers to social services From passive to activation in case of unemployment, invalidity etc.

• “Flexicurity” or managed and balanced flexibility Jobs with high security and flexible jobs with inadequate protection

• Active anti-cyclical macro-economic strategy

• Growth and best technologies are preconditions for welfare

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Eastern and central Europe challenges regarding labourmarket policies

• Lack of trust in the public sector

• Have experienced significant changes in their financial situation due to:

• Reduction of up to 40% in salaries in the public sector

• Severe losses in the property sector

• often combined with high risk loans in CHF or EURO

• Focus on keeping the society free of corruption and “black”

economy

• Wrong to treat “Eastern Europe” as one region with the same cultural and economical situation

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Video links and reports

Video links:

http://www.youtube.com/watch?v=U6n7jBY7-NA

http://www.youtube.com/watch?v=-NBULE-agZ8&feature=related http://www.youtube.com/watch?v=z_EhS81E4kk&feature=related Readings:

The Danish Flexicurity model:

http://www.sociology.ku.dk/faos/flexicurityska05.pdf

http://www.progressive-economics.ca/2008/01/23/the-danish-flexicurity-model/

http://www.employmentweek.com/cms.php?page=106 http

://research.cbs.dk/da/publications/denmark(93ccbf24-09ed-4a45-b419-c53ce1c1d6da).h tml

http://www.djoef-forlag.dk/vare/8757417083 Master thesis from Aalborg University

http://projekter.aau.dk/projekter/da/studentthesis/how-can-active-labor-market-policy-contribute- to-development-of-flexicurity-in-central-eastern-european-countries(2ebfce7c-c4be-4391- 984e-4bbc51ac4f50).html

Flexicurity: a relevant approach in Eastern and Central Europe

http://www.ilo.org/global/publications/ilo-bookstore/order-online/books/WCMS_091425/lang-- en/index.htm

Security in labour markets : combining flexibility with security for decent work http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_elm/---

analysis/documents/publication/wcms_113923.pdf