This paper makes two contributions to the literature. First, by employing a macro-level institutional dataset on benefit levels for social assistance (SA) and minimum income protection (MIP) in 22 European countries in the period 1990–2013, I show that the adequacy of income support for low-income inactive individuals in European welfare states has been steadily decreasing since 1994. Second, the paper revisits empirically the hypothesis of a trade-off between the adequacy of out-of-work benefits and the public expenditure on active labor market policies (ALMPs). The empirical results of the fixed effects model show that the trade-off does not appear to be significant in any of the tested specifications. The results are robust to the introduction of a set of conventional controls related to the labor market. JEL Classification: H53, H55, I38.
This paper assesses the relationship between public and private wages in the EU, as measured by general government and manufacturing compensations, respectively. We find that the long-run relation between the two is stronger when the government is a large employer. Manufacturing compensations are better aligned with productivity and unemployment when general government compensations, to which they generally respond, are set through bargaining. Finally, manufacturing compensations react in the same way whether those in the general government sector are increased or cut, a relation that seems to hold also under fiscal consolidation provided the government is a large employer.
There are considerable differences in gender unemployment gaps across the EU. We use labor force survey data on 21 countries to perform a series of data decompositions and show that the cross-country variation in gender unemployment gaps is primarily driven by the differences in female labor force participation behavior after childbirth, namely, the family leave duration and the subsequent attachment of women to the labor force. Further, in countries where a high share of women permanently withdraw from the labor force after childbirth, the size of gender differences in unemployment strongly correlates with the Eurobarometer measure of perceived overall gender discrimination. Our findings suggest that family leave policies and institutions that facilitate the leave to work transition and the work-family balance are crucial to tackle the gender differences in unemployment in countries where the female unemployment rate exceeds that of men.
This paper explores the pattern of job loss in the Great Recession with a particular focus on its incidence by wage level, using data for Ireland. Ireland experienced a particularly pronounced decline in employment with the onset of the recession by international and historical standards, which makes it a valuable case study. Using EU-SILC data, our analysis identifies which employees were most affected. The results show that the probability of staying in employment, from one year to the next, is positively related to monthly wages both during the boom and in the bust. The gradient with wages, however, is much more marked in the bust, and remains significantly so even after controlling for a range of individual characteristics including part-time status, demographics, education, labour market history, industries or occupations.
Given human longevity, fertility, health and social developments, workers become inactive relatively early throughout Europe. This partially stems from older workers being pushed out of the labour market and from personal motivation to prefer benefits to wages. We focus on this latter effect and analyse whether workers would have stayed active had they not been tempted by the availability of the old-age benefits. We focus on Poland, a country severely experiencing the problem of population ageing. In 2013 persons 50+ accounted for 37% of the total population. Although they enjoy a relatively low unemployment rate, their participation and employment rates are very low: 34% and 32%, respectively. We analyse whether this is due to the discouraged worker effect. We identify the cyclical properties of activity and discouraged worker rates, and estimate a set of logistic regressions to identify the determinants of the exits from the labour market. Cyclical analysis indicates that the added worker effect prevails over the discouraged worker effect. The discouraged worker effect appears with a delay of a few quarters. The process is asymmetric for females. Workers often permanently leave the market. The availability of old-age benefits increases the probability of outflow from unemployment to inactivity, as do unemployment rate changes. If old-age benefits become the main source of income for the worker within the 1 year interval, they are 8 to 20 times more likely to leave the workforce compared to those who receive either unemployment benefits or social welfare benefits.
The divergences developed within the euro area represent the main threat to the existence of the single currency and to the stability of the EU as a whole. Without proper automatic stabilisers, a monetary union can only deliver suboptimal results and may not even be sustainable. In the recent years, common unemployment insurance has been examined as one of the possible ways to improve the functioning of the Economic and Monetary Union (EMU) through automatic stabilisation. Among various options, a partial pooling of unemployment benefit schemes stands out as the model with continuous impact and direct connection with the citizens, while the political process may favour less permanent features and more conditionality. There is a strong case for connecting the EMU reform with the EU social agenda and appreciating risk-sharing in Europe from a political as well as economic point of view.Jel codes: E24, E63, F45, H12, H53, J65.
This paper investigates how much of the difference in wage distributions is related to differences in skill distributions and whether a compressed wage distribution is associated with high unemployment across core OECD countries. Some countries that have more compressed (dispersed) wage structures simultaneously have more compressed (dispersed) skill structures as well, and according to many economists, variations in skill inequality can explain variations in wage inequality across different countries. Firstly, this paper examines the relationship between skill compression and wage compression; secondly, wage compression is linked to labor market outcomes in terms of employment. Compressed wage structure (usually caused by labor market institutions) is often seen as a cause for high unemployment in the low-skill sector. Does the wage compression hypothesis hold? Based on the PIAAC survey of adult skills for seventeen OECD countries, this paper seeks to shed light on these two important topics.
Earnings are the product of wages and hours of work; hence, the dispersion of hours can magnify or dampen a given distribution of wages. This paper examines how earnings inequality is affected by the dispersion of working hours using data for the USA, the UK, Germany, and France over the period 1989–2012. We find that hours dispersion can account for over a third of earnings inequality in some countries and that its contribution has been growing over time. We interpret the expansion in hours inequality in European countries as being the result of weaker union power that led to less successful bargaining concerning working hours.
Scholarly literature is inconclusive on how economic crises impact on minimum income protection. Earlier studies found small increases in the generosity of safety nets at the onset of the crisis. Yet an increased focus on budget austerity substantially altered the social policy context. This paper assesses how minimum income floors weathered the austerity tide following the crisis using purpose-collected data for 23 EU countries. Generally, social assistance benefit trends did not deviate much from pre-crisis growth levels. Yet retrenchment did occur through more technical measures, the combined impact of which was quite significant in some countries.
The role of the 2000's German labour market reforms in boosting the German economy has been widely discussed. Considering that one of the main objectives of these reforms was to improve the matching process on the labour market, I use high-frequency administrative data to present new details regarding the development of job-matching performance from 2000 to 2011. Matching productivity increased during all reform stages. Increases in matching productivity have become smaller from 2009. The analysis shows also differences and commonalities in the matching productivity changes on occupational labour markets.
This policy paper summarizes four corridor studies on bilateral social security agreements (BSSAs) between four European Union (EU) member and two nonmember states, draws conclusions on their results, and offers recommendations. BSSAs between migrant-sending and migrant-receiving countries are seen as the most important instrument to establish portability of social security benefits for internationally mobile workers. Yet, only about 23 % of international migrants profit from BSSAs and their functioning has been little analyzed and even less assessed. The four corridors studied (Austria-Turkey, Germany-Turkey, Belgium-Morocco, and France-Morocco) were selected to allow for comparison of both similarities and differences in experiences. The evaluation of these corridors’ BSSAs was undertaken against a methodological framework and three selected criteria: fairness for individuals, fiscal fairness for countries, and bureaucratic effectiveness for countries and migrant workers. The results suggest that the investigated BSSAs work and overall deliver reasonably well on individual fairness. The results on fiscal fairness are clouded by conceptual and empirical gaps. Bureaucratic effectiveness would profit from information and communication technology-based exchanges on both corridors once available. JEL Classification: D69, H55, I19, J62
This paper analyses patterns of student employment in Slovakia where the numbers of university graduates have risen significantly. We use online job vacancy data and compare ‘student jobs’ and ‘flexible jobs’ to understand differences and similarities between the student and flexible labour markets that are often seen as identical. We find substantive differences in the required skill profiles between student-focused vacancies and those based on flexible forms of contract. In addition, student-targeted vacancies can be found across the occupational ladder, which refutes propositions that the student labour market is only precarious, temporary and part-time. From a policy perspective, our findings imply that any regulation of the flexible labour market will only partially address the student labour market.
For the last two decades, the increase of employment among individuals aged 50+ has been a policy objective on the European employment agenda. The present paper focuses on the case of Belgium, France, Germany, and The Netherlands over the period 1997–2011. First, we provide descriptive analysis of older workers’ employment using data from the European Union Labour Force Survey. Second, we use econometric techniques to explain the different employment and hours of work patterns for various sub-groups of older workers over time. We find evidence of catching up of older generation’s employment rates—with no rupture at the financial crisis in 2007. Third, we use micro-simulation techniques to decompose the effects of structural changes, as well as extensive and intensive labor supply changes. JEL Classification: J08, J21, J26
The Great Recession has revived aggregate demand management policies. In particular, automatic stabilizers are praised since they are rule based and thus operate swiftly and symmetrically across the cycle. However, automatic stabilizers are not a result of macro design but the structure of the social safety net and the taxation system. The participation tax is a key determinant of the strength of the automatic stabilizers. Paradoxically, the disincentive effects of high participation taxes are often discussed at the same time as automatic stabilizers are praised. The paper considers the sources of automatic stabilizers and whether they (un)intentionally have been weakened via structural reforms to strengthen work incentives. It is considered whether it is possible to maintain strong automatic stabilizers without jeopardizing incentives via the design of the social safety net (workfare) or business cycle-dependent unemployment insurance. The criticism that automatic stabilizers may prolong downturns is also considered. Finally, it is discussed to what extent aggregate demand management policy can stabilize labour markets and, in particular, whether it is well targeted towards marginalized groups. Also, the potential sources of marginalization in the labour market are discussed.
We study cross-sectional and long-term poverty in Sweden over a period spanning two recessions, and discuss changes in the policy context. We find large increases in absolute poverty and deprivation during the 1990's recession but much smaller increases in 2008-2010. While increases in non-employment contributed to increasing poverty in the 1990's, the temporary poverty increase 2008-2010 was entirely due to growing poverty among non-employed. Relative poverty has increased with little variation across business cycles. Outflow from poverty and long-term poverty respond quickly to macro-economic recovery, but around one percent of the working-aged are quite resistant to such improvements.JEL codes: I30, I32, E32.
This paper provides a microeconometric analysis of labour force participation elasticities in Slovakia where we study the elasticity with respect to a unique tax reform whereby the flat tax was backtracked and replaced by a progressive tax. By estimating a probability model for labour force participation, we show that the low-skilled and females are groups that are particularly responsive to changes in income taxes and transfers. We perform a microsimulation analysis of two scenarios of flat-tax regime abolishment. We find that the recent departure from the flat-tax system in Slovakia in 2013, which introduced two tax brackets in personal income taxation, only negligibly reduced the average probability of being economically active at the extensive margin. A more significant average effect has been found in a hypothetical scenario with a similar fiscal revenue impact, simulating a departure from the flat-tax system by reintroducing five tax brackets. We show the different impacts of the two distinct scenarios of abolishing the flat tax on selected subgroups of the population.
In this paper, we investigate the unemployment dynamics and the determinants of the Beveridge curve in Greece. The economic recession alongside labor market reforms raised the inflow rate to and decreased the outflow rate from unemployment in the early crisis years. The gradual normalization of economic conditions and the adoption of further structural reforms led to a decline in the inflow rate and an increase in the outflow rate. Our results are suggestive of the presence of an inverse relationship between unemployment and vacancies in Greece, which is driven by the post-crisis developments.
This paper analyzes the Austrian Beveridge curve as well as the Beveridge curves for different economic sectors in Austria over the period from 2008 onwards. We find significant outward shifts of the Beveridge curves in eight of the 21 sectors of the economy. We further analyze what factors have contributed to this change. Our results suggest that a significant part of the currently rising unemployment in Austria may be attributed to structural changes. Those structural changes mainly affect the four large sectors: construction, wholesale, transportation, and accommodation and food service activities.
The crisis has deepened pre-existing concerns regarding low wage and non-standard employment. Countries where unemployment increased most strongly during the crisis period also saw part-time employment increasing, particularly involuntary part-time work. With involuntary part-time workers, as a particular group of underemployed, facing especially high poverty rates, this was accompanied by an increase, on average, in the poverty risk associated with working part-time. However, this was not reflected in a marked increase in the overall in-work poverty rate because full-time work remains dominant and its poverty risk did not change markedly. The household context is of the essence when considering policy implications.
Both economic and epidemiological literature have shown that perceived high strain at work and lack of social infrastructures are good predictors of sick leave. The latter is particularly relevant in countries where facilities for children and care services are scarce and women are asked to fill the gap. The Italian 2011 pension reform significantly restricted age and seniority requirements for retirement, especially for women in private employment. We investigated whether older Italian employed women reacted to the postponement of retirement by increasing their sick leave. The empirical analysis offers unequivocal evidence that this has indeed been the case, in particular, for low-income grandmothers living in regions with a poor supply of childcare services. Radical reforms risk losing some of their effectiveness if they are not accompanied by parallel measures designed to introduce the welfare provisions previously indirectly and inadequately provided by the pension system, such as care facilities.
