Una perspectiva de inversi
| Autor | Nicaise, Ides |
| Cargo | MONOGR |
Sumario. 1. Introduction. 2. The neoliberal view: making work pay. 3. The conservative view: workfare, rights and duties. 4. The social investment approach. 5. The Re-InVEST research: European labour market policies from a social investment perspective. 5.1. Measuring effectiveness: econometric analysis. 5.2. Labour market policies and human rights. 5.3. Investing in capabilities. 5.4. Choice and voice. 6. Conclusion. 7. References.
A social investment perspective on labour market policies for vulnerable groups
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Introduction
The idea of the 'active welfare state' dates back to the post-war period in the Nordic countries, but conquered the rest of Europe during the 1980s, as the traditional welfare state got off-track. Massive unemployment, concentrated among vulnerable groups, put a high burden on the social protection budgets and necessitated a shift from redistribution of income to work as the main leverage for social inclusion. In the next decades, the discourse on the active welfare state diversified under the influence of various ideologies. Whereas all Western governments agreed on the need for more active labour market policies, neoliberal governments put more emphasis on 'incentives'; conservatives on duties and individual responsibility; while social-democrats tend to use a rights discourse and justify their approach in terms of social investment. This paper aims to develop the concept of social investment in the context of labour market integration, building on a human rights and capabilities approach. It draws lessons with regard to quality criteria for labour market integration services.
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The neoliberal view: making work pay
The economics of social security (Atkinson & Micklewright 1991; Barr 2001) are closely connected with the neoclassical theory of labour supply, which considers individual labour supply decisions as the result of a trade-off between income and leisure. In this context, generous social benefits are seen as potentially harmful because such regulations may reduce the incentives to re-enter the labour market (moral hazard effect). Hence, the theory prescribes that a sufficient gap must be maintained between earnings from work and social benefits for non-working people in order to 'make work pay'. Note that this argument applies to any kind of replacement income (unemployment benefit, sickness benefit, minimum income, early retirement etc.).
An additional, typical problem of guaranteed minimum income (GMI) schemes highlighted in this approach is the poverty trap effect. Given that benefits are means-tested and just meant to top up primary income, up to a fixed income threshold, each euro earned below that threshold is deducted from the benefit. This means that beneficiaries do not gain (and indeed, actually lose leisure time) when they take up small jobs. In economic jargon, the 'effective marginal tax rate on earnings' below the GMI threshold equals 100%, which supposedly completely discourages work.
These assumptions concerning human behaviour have informed the 'making work pay' agenda, which made up the core of the OECD's Jobs Study (OECD, 1994). The message was copied by the European Commission as one of the four pillars of its agenda for the modernisation of social protection (EC, 1997). The EU Employment Guidelines, developed around the turn of the millennium, urged Member States to "review and, where appropriate, reform their benefit and tax systems to reduce inactivity traps, and provide incentives for unemployed or inactive people to seek and take up work".
Neoliberal 'making work pay' policies are largely based on the assumption that individual behaviour can be 'steered' by financial incentives. Examples of such incentives include: benefit cuts, in-work benefits, negative income tax schemes, limited duration of benefits etc. The most notorious examples of such reforms in the EU are the UK's Universal Credit and the French Revenu de Solidarité Active.
The effectiveness of 'making work pay' policies is a hot topic in the literature. From a social inclusion perspective, the notion of 'effectiveness' refers to two key criteria: the employment effect and the poverty reduction effect. To some extent both effects reinforce each other, but in many countries rising employment went along with rising poverty in the past decades. In its reassessment of the Jobs Strategy after a decade, the OECD openly admitted that cutbacks in social benefits may be held responsible for increased poverty in some countries: "Cutting benefit levels and their duration have succeeded in raising work incentives but, beyond certain thresholds, this may compromise social objectives"" (OECD 2006: 10). As a consequence, the revised OECD Jobs Strategy has shifted away its emphasis from restricting unemployment benefits to other activation measures.
Whereas by and large empirical research appears to confirm that there is some effect of benefit design on labour supply, the effect is often small to insignificant and indeed less positive on the macro level than on the individual level. (EC 2012: 91-95; EC 2013b: 161-167; Lehwess-Litzmann & Nicaise, 2020).
For example, at country level, a slight positive correlation was found between the coverage rate of job seekers by unemployment benefits and the rate of re-entry into work--even after controlling for other determinants. Likewise, a positive correlation was found between the replacement rate (in unemployment benefits) and the probability of re-entry into work. More importantly, generous benefits systems (with decent replacement rates and a longer duration of entitlements) appear to protect job seekers from poverty and/or to foster exits from poverty.
The Commission's Employment and Social Developments in Europe 2013 report also focussed on the 'poverty trap effect' in social assistance and found the opposite of what economic textbooks predict, namely, that more generous social assistance (GMI) systems act as springboards out of poverty: more generous GMI benefit systems tend to result in quicker exits from poverty, rather than more persistent dependency.
At least five explanations can be given for these--at first glance, paradoxical findings:
--Firstly, as pointed out by Immervoll et al. (2009), work incentives targeting exclusively the supply side of the labour market (job seekers) have little (if any) effect as long as demand constraints dominate. When jobs are not available, incentives for job seekers to step up search efforts may only lead to greater frustration rather than higher employment. Bargain et al. (2005) come to the same conclusion in their evaluation of the German Mini-job reform (Hartz IV).
--Secondly, the inverse correlations in figure 2 may be spurious, as unobserved third factors may affect both covariates in each of the graphs. For example, countries with more developed social protection and GMI schemes may also spend more on active labour market policies. After all, this is not really a spurious correlation, because more generous social protection generates a stronger sense of belonging and citizenship on the part of recipients as well as a stronger pressure on governments to avoid the cost of unemployment through active labour market policies. Hence, efforts on both sides are encouraged for re-integration into the labour market.
--Thirdly, a distinction must be made between incentive effects at micro-level and the macro-economic impact of social protection, and between short- and longer-term effects. In less developed social protection / assistance systems, the financial pressure from low benefits and short duration of entitlement on individual job seekers may indeed accelerate their exit from unemployment, but this may be offset by substitution and revolving door effects at macro-level. Substitution effects mean that the waiting queues for jobs are simply re-shuffled as desperate job seekers just 'jump over the heads of others', with no net job creation effect. Revolving door (or 'churning') effects mean that job seekers take up the first job within their reach but fall back into unemployment soon, as their skills and aspirations do not match with the job requirements and content.
--Fourthly, extreme competition for jobs between under-protected job seekers exerts a downward pressure on wages and working conditions at the 'bottom' of the labour market, resulting in a further erosion of jobs and increased (in-work) poverty risks.
--Finally, maybe some key assumptions of the 'making work pay' paradigm do not hold in reality. Maybe--for the majority of the job seekers, and the poor in particular--job search behaviour is driven more by other motives (the quest for autonomy, participation and social inclusion, the sense of citizenship) than by financial incentives. Moreover, although inactivity and poverty traps may be 'biting' for some categories (early retired, large families, single parents, marginal workers) they do not affect the vast majority of welfare recipients. And most importantly, the majority of all unemployed people in Europe simply do not draw any unemployment benefit. In Spain in 2016, for example, barely one-third of all job seekers were covered by unemployment (insurance or assistance) benefits (OECD, 2018: 194). Across the OECD as a whole, the picture is roughly the same, though with a lot of variation between countries.
Overall, we must conclude from the empirical literature that the role of financial incentives has been grossly over-estimated. The 'making work pay' paradigm appears to rest on over-simplified assumptions, while other important determinants of employment are being overlooked.
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The conservative view: workfare, rights and duties
The rights and duties approach is based on the perception that financial safety nets do not just discourage job search, but even contribute to a 'dependency culture', i.e. a value system that is supposedly inherited from generation to generation in poor families. The fact...
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