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4Labor market policies:historical and comparative

perspectives

Philippe Askenazy (Paris School of Economics)

www.jourdan.ens.fr/~askenazy/laborpolicy.htm

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2000: Unemployment rate %. OECD

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Altered paradigms

European commission: the Lisbon agenda =Flexsecurity + knowledge economy

ILO: decent work

OECD job study revision: mix of low labor market rigidities and low product market rigidities (very fragile evidence)

US debate (still alive!) on the minimum wage: Reich versus Neumark

Nordic countries: high wages/low inequality… and low unemployment/ high participation rates

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Flexsecurity

FlexibilityExternal numerical flexibility: lay-offs, fixed term

contracts, temporary agency work.Internal flexibility: working time flexibility, overtime.Functional flexibility: flexibility within firm through multi-

tasking, job rotation. Wage flexibility, according to performance.

SecurityJob security: dismissal protection, etc.Employment security: employability (education, training). Income security: unemployment benefits, social security. Combination security: work-life balance.

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Flexsecurity

Consistent with high job/creation in the knowledge economy

High security feeling

But costly

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Job insecurity and spending on labor market policies. OECD countries, 2000

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Knowledge economy. R&D intensive countries in 1993

2

2,2

2,4

2,6

2,8

3

3,2

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Knowledge economy. R&D intensive countries in 2002

2

2,5

3

3,5

4

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Anglo-Saxon countries

An increase of inequality and a decline of the labor share…

Even dramatic

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Anglo-Saxon countries

UK: massive job creations in the public sector

5000

5200

5400

5600

5800

6000

6200

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Anglo-Saxon countries

The (re-)introduction of the minimum wage - 1999: UK- 2000: Ireland

Or significant increases at the end of the 1990’s: Australia New-Zealand

Evaluations for the UK (see Low-pay Commission): no significant impact on employment, lower profit margin in low-skilled intensive services (cleaning…)

While Uk or Irish minimum were immediately high

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Anglo-Saxon countries

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Anglo-Saxon countries

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A convergence of models or the application of the flexsecurity model? Ex: Germany

Hartz Reforms 2003 -2005: Getting the unemployed into jobs through

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.

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A convergence of models. Ex: Germany

More marginal, insecure and flexible employment. Low wage work rise (about 20% of the workforce up

from 12%)… especially for female Global decline of real wages Decline of the labor share

But high export competitivity

Very little evidence in favor of a positive impact on employment (See various IZA working papers)

Because of a deprived internal market?

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France 2002-2007: End of the reduction of working time process

Chirac: Raffarin (Fillon), de Villepin

Even reverse it? European Labour Force Survey:

-3,5

-3

-2,5

-2

-1,5

-1

-0,5

0

0,5

1

1,5

2

2,5

LV SK IE UK HU BE RO SI PT EE FI PL BG LT NL SE GR AT DK MT DE CZ EU25

ES CY LU IT FR

Change 1998-2002 Change 2002-2005

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France 2002-2007 Extension of the social contribution cuts

~ 8 billions euros no significant impact on employment! (unpublished papers L’Horty et al. (2010), Kramarz et al. (2009, unpublished)

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France 2002-2007

Again, “Enrich the labor content of growth” through niche job markets

“Chèque emploi service universel” (Borloo) Probably a positive impact but no detailed evaluation

Complete social and fiscal exonerations in 100 special zones (Zones Franches Urbaines) [2000 ; 10,000] job created. But unit cost in evaluated zones: about 70 Keuros!

CDD senior (short-term contracts for workers > 55) 0 impact

Villepin: “Contrat Nouvelle Embauche” Illegal! Thus removed in 2007…

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France 2007-2011

“Working more for earning more”

2007: Very positive expectations

Rapid decrease of unemployment Creation of “Pôle emploi” for improving the matching process and sanctions

The policy can favor overtime hours… Labor offer: Revenu de Solidarité Active And new entrepreneurs “Auto-entrepreneurs”

Inconsistent with the crises?

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Conclusion: the limits of modern labor policies

Theories born 25 years agoMain principles fixed 20 years ago…

Some (in)efficiency but unable to solve mass unemployment… or its return

However, significant impacts on working poor, inequality or job (in)security, public deficits

=> Variety of “models”: see 4 next courses

Since 2008, the specter of jobless growth

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Harmonized unemployment rate, Nov., 2010

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Harmonized youth unemployment rate, Nov., 2010