FS I 88 - 2
Labour Market and Labour Market Policy
Trends in Selected Industrialized Countries 1980 to 1985 - An Overview
Peter Auer
March 1988
ISSN Nr. 1011-9523
Forschungsschwerpunkt
Arbeitsaarkt und
Beschaftigung (IIMV)
Research Unit Labour Market and
Eiaploynent (IIM)
Forschungsschwerpunkt
Arbeitsmarkt und Beschaftigung (IIMV)
Research Unit
Labour Market and Employment (IIM) Reichpietsch-Ufer 50
1000 Berlin 30
LABOUR MARKET AND LABOUR MARKET POLICY TRENDS IN SELECTED INDUSTRIALIZED COUNTRIES 1980 TO 1985 - AN OVERVIEW
Although employment has risen in most of the industrialized countries after the recession from 1980 to 1982, unemployment has fallen only slowly or was still increasing during the period considered. Youth unemployment in particular has risen dramatically in many European countries, and the ranks of the long-term unemployed have swelled record levels. It is noticeable that, while active labour market policies have concentrated on youth unemployment, there have been very few initiatives for the unemployed in other age groups. As the
"baby-boom generation" is moving into the prime age group, labour market policies have to be targetted on this group in the near future. The present paper summarizes the development of employment and unemployment in seven OECD countries (Canada, France, Germany, Italy, Sweden, United Kingdom, USA), and deals with certain trends in active labour market policy, concentrating on developments in the five European countries of this overview. Finally, two subjects which have recently come to the fore in the debate on combatting unemploy ment are discussed shortly: The reduction of working hours and measu res to increase the flexibility of the labour market.
Zusanmenfassung
ARBEITSMARKT UNO ARBEITSMARKTPOLITIK 1980-1985: EINE UBERSICHT UBER TRENDS IN AUSGEWAHLTEN INDUSTRIALISIERTEN LANDERN
Obwohl die Beschaftigung in den meisten industrialisierten Landern nach der Rezession von 1980/1982 wieder anstieg, fiel die Arbeits- losigkeit nur leicht oder nahm sogar weiter zu. In vielen europdi- schen Landern ist in der Peri ode 1980-85 vor all em die Jugendarbeits- losigkeit gestiegen, und auch die Langzeitarbeitslosigkeit hat Re- kordhShen erreicht. Wahrend die aktive Arbeitsmarktpolitik in mehre- ren Landern stark auf Jugendliche ausgerichtet war, gab es weniger Initiativen fUr andere Altersgruppen unter den Arbeitslosen. Da die
"baby boom"-Generation aber nun in das Haupterwerbsalter kommt und sich auch die Struktur der Arbeitslosigkeit entsprechend verandern durfte, muB die aktive Arbeitsmarktpolitik auf diese Zielgruppe aus
gerichtet werden. Das vorliegende Papier gibt einen kurzen Uberblick
Uber die Entwicklung des Arbeitsmarktes in sieben industrialisierten Landern (Kanada, Frankreich, Bundesrepublik Deutschland, Schweden, GroBbritannien und Vereinigte Staaten von Amerika) und die Entwick- lungen der Arbeitsmarktpolitik in den fiinf europaischen Landern die
ses Uberblicks.
CONTENTS
page
1 INTRODUCTION 1
2 EMPLOYMENT 1
2.1 Overall Trends 1
2.2 Shifts In the Structure of Employnient 5 2.2.1 Service sector and female employment increases 5
2.2.2 New forms of employment 6
2.2.3 Self employment 8
3 UNEMPLOYMENT 9
3.1 Overall Trends 9
3.2 Shifts in the Structure of Unemployment 9
3.2.1 Male/female employment 9
3.2.2 Youth unemployment and longterm unemployment 10
4 ACTIVE UBOUR MARKET POLICY 11
4.1 Overall Trends 11
4.2 Shifts in the Structure of Active Labour Market Policy 12
4.2.1 Main target: youth 12
4.2.2 Few measures for prime age adults 14
4.2.3 Policies for the older: withdrawal from the labour market 15
4.3 Labour Market Effects 16
5 OTHER MEASURES TO COMBAT UNEMPLOYMENT 18
5.1 Worktirae Reduction 18
5.2 Increasing the Flexibility of the Labour Market 19
6 OUTLOOK 21
Although employment has risen in most of the industrialized countries after the recession from 1980 to 1982, unemployment has fallen only slowly or was still increasing during the period considered. Youth unemployment in particular has risen dramatically in many European countries, and the ranks of the long-term unemployed have swelled record levels. It is noticeable that, while active labour market poli cies have concentrated on youth unemployment, there have been very few initiatives for the unemployed in other age groups. As the "baby-boom generation" is moving into the prime age group, labour market policies have, to be targetted on this group in the near future.
The present paper summarizes the development of employment and unem ployment in seven OECD countries (Canada, France, Germany, Italy, Sweden, United Kingdom, USA), and deals with certain trends in active labour market policy, concentrating on developments in the five Euro pean countries of this overview. Finally, two subjects which have recently come to the fore in the debate on combatting unemployment are discussed shortly: The reduction of working hours and measures to in crease the flexibility of the labour market.
2 EMPLOYMENT
2.1 Overall Trends
Whereas the beginning of the period under consideration was marked by a recession, most industrialized countries experienced an upturn in their economies after 1982. The USA (especially in 1984), Canada, West Germany, Great Britain and Italy all managed to achieve high growth rates of GDP (cf. table 1). However, growth was somewhat lower than during previous cyclical upturns, and unemployment remained at a much higher level. On the other hand, inflation came down in most countries
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to much lower values than would be expected during recovery, a fact attributable partly to the falling price of oil and other raw mater
ials.
In many countries the positive economic trend has led to an increase in the level of employment. This trend was particularly strong in the United States and Canada, but was much less pronounced in Europe - while Great Britain, Italy and, after 1984, West Germany achieved growth in employment, France suffered a fall, despite the economic upturn. Of the smaller OECD countries, employment grew particularly strongly in Scandinavia.
However, it must be remembered that even by 1985 many countries could not make good the loss of employment suffered during the years of recession in the beginning of the 80s. Examining employment from 1980 to 1985, it is evident that France, West Germany and especially Great Britain have all experienced a decrease in the numbers employed, whereas the USA, Canada, Sweden and Italy had more people in work in 1985 than before the onset of the recession (cf. table 2).
If one examines the level of employment in the countries under compar ison during the period 1980-85 (cf. table 2), one is again struck by the large increase in employment in North America compared with that in Europe. This difference conforms to the long-term trend: according to the OECD, during the period 1969-85 economic growth of 1 % led to an increase in employment of 0.8 % in the USA, but only 0.08 % in OECD
Europe.^
If one considers productivity growth rates, it appears that output growth in Europe during the period 1969-85 was mainly due to increase in productivity, whereas in the US output growth is largely attribut able to additional employment. Therefore, although growth rates were, from 1980 to 1985, much higher in the US and in Canada than in most other countries considered (cf. table 2) and have some importance in explaining the different development of the labor market in North
New Sources of Job Growth: a Macro/Micro Perspective OECD, Paris
1986.
America and Europe in the last years, they obviously cannot explain these differences in the long run: Between 1973 and 1983 GNP growth rates over the whole period were about 22 % in the US and 18 % in OECD-Europe, but the US economy created about 16 million net new jobs, whereas employment in Europe stagnated.
It is clear then, that slow productivity is behind much of the employ ment difference at least in statistical terms. Many arguments have
been advanced to explain the "great productivity mystery", as the slowdown of US productivity has been named, amongst them for example the large service sector, obsolete capital equipment and changing employment structure, lower relative wage costs (and therefore no need for labor-capital substitution) and others.2 This slow growth in pro
ductivity (a fact judged negatively by American labor market experts
which envy Japan or Germany for their productivity increases), is a
fact which is very often omitted when the American labor market is presented as a "model" which should be imitated by Europe.A particularly prominent argument for explaining the differences be tween the US and European employment creation performance has been lately the flexibility argument: It states in short that high wages and ample labor legislation such as for example dismissal procedures bargained by strong trade unions have hindered adjustment to market needs in Europe and are therefore responsible for low employment growth. In the wake of such arguments policies of flexibilisation have become prominent amongst the (mostly conservative) governments in Europe and have already lead to changes in labor legislation in certain countries. Although there might be benefits of flexibility for individual enterprises no empirical study has yet shown convincingly the advantages of lower wages or free hire and fire policies for a nation's entire economy. To the contrary, some studies have come to the conclusion that an introduction of flexibility for example in dis missal prodedures would result - at least in the medium term - in
1 see: Das Produktionsproblem in den USA, Wirtschafts- und Arbeits- marktentwicklung in den USA und der Bundesrepublik Deutschland, Informationspaket lAB Projekt 6-319, Bundesanstalt fiir Arbeit, NUrnberg, 1984.
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additional unemployment, as surplus labour would be shed.3 This seems
to be confirmed by French experiences: The change In dismissal proce dures during 1986 has lead - exactly as the critics of the flexibility argument predicted - to an Increase In dismissals and consequently to Increased unemployment. In other European countries, where flexibility arrangements were Introduced (e.g. deregulations In the area of fixed term contracts and temporary work) these policies seem to affect less the core workers which have already an employment, but seem to operate more on the marge of the employment system and therefore reinforcing labor segmentation. That Is, a growing number of new entrants Into the labor market only holds "precarious" jobs which will only eventually be transformed Into regular employment.
There seems to be growing awareness that different labor market cultu res In Europe and In the US which have much to do with different societal organization (e.g. strength of trade unions. Involvement of
central state etc.), different housing policies, which affect mobili
ty, different welfare policies etc. forbid for Europe a simple Imi tation of US model flexibility arrangements without causing a lot of disturbances which make them counterproductive as Instruments to 1n-4
crease employment.
A series of other factors also need to be taken Into account. If one
looks for an explanation of different employment growth rates between the US and Europe or between European countries. Examples of these are different demographic developments and changes In the participation rates, differences In the use of active labor market policy (which
explain a part of the Swedish performances) or work time reductions(which show Its effects at the end of the period under consideration
for example In Germany).
1 ^ 7"
Pulg, J.P./J. Maurlce/M.T. Join Lambert, Perspectives d'emplol a
moyen terme et les polltlques d'emplol en France. Paper presented at the conference "Medium term economic assessment", Stockholm 1984.4
see for example: Sengenberger, Vi., Das amerlkanlsche Beschaftlgungs-
system - dem deutschen uberlegen? In Wirtschaftsdienst 1984/VII.In the latest Issue of Its employment outlook, the OECO states that
"... it is cross country disparities in service sector job growth that
5
largely account for differences in overall employment performance" . That is, especially the different relative sizes, compositions and growth rates of the service sector could "explain" much of the differ ences in overall employment performances.
Of course, differences in economic policy may explain some of the
g
divergencies in employment growth. But - as the example of France shows, where employment was on the increase and unemployment almost stable during 1982/83 as a consequence of the demand oriented policy of the socialist government - expansionary policies of only one coun try may well come under pressure in an open world economy. That is, in fact, what happened to France, where a large part of additional demand went into imports leading to a detoriation in the trade balance thus contributing to the setting up of a more restrictive economic policy.
2.2 Shifts In the Structure of Employment
2.2.1 Service sector and female employment increases
In all the countries examined the increase in employment can be traced back to expansion in the tertiary sector. At the same time there was a fall in employment in the agricultural and industrial sector. But even this development was subject to country-specific variation. A decrease in agricultural employment was registered in every country, but the trend was most pronounced in France and Italy. This is partly due to the relatively high proportion of agricultural employment in these countries, which leaves more scope for structural adjustment.
In the United States only a relatively small decrease in industrial employment was recorded, while in Canada and the industrialized coun tries of Europe the fall was much greater. Particularly hard hit by falling industrial employment were Great Britain (1980-85 -26.0 %),
^ Employment Outlook, OECD, Paris 1987, P. 40.
g
For more details on possible strategies see: Scharpf, F.W., Sozial- demokratische Krisenpolitik in Europa, Frankfurt/New York, 1987.
France (-15.0 %), followed by West Germany (-13.9 %) and Italy (approx. -12 %). The increase in employment in the tertiary sector was
particularly strong in Italy (1980-85 +18 56), in the United States (approx. +14 56) and Canada (+12 56). Sweden and France with 7-8 % re
corded lower rates, while Britain and West Germany with 4 % and 3 %respectively over the same period lagged far behind (cf. table 2).
A reduction of employment in the agricultural and industrial sectors affects in the main male workers, while an increase in employment in the service sector tends to favour women. Consequently the sectoral shift in employment is reflected in different rates of growth of male and female employment (cf. table 2), although here too there are country-specific variations; in North America there has been an in crease in both male and female employment, while in the other coun tries only female employment has risen (exceptions to this are Great Britain and West Germany where both male and female employment de creased from 1980 to 1985). The fall in male employment is most pro nounced in those countries where large numbers of jobs were lost in the industrial sector: in Great Britain male employment fell by some 10 56 and in France and West Germany by more than 6 %. The fact that male employment only decreased slightly in Italy despite job losses in the agricultural and industrial sectors can be partly explained by institutional factors: for example, many industrial workers who have in fact been made redundant, receive financial support from the 'Cassa Integrazione' (a fund strictly speaking for those on short time work ing or who have been temporarily laid off) and are still counted as employed. (In 1984 on average around 470 000 people were in the •Cassa
Integrazione', that is some 2.2 56 of those in employment).^
2.2.2 New forms of employment
Partly in connection with the structural changes described above, there has been a recent trend towards new forms of employment such as part-time work, employment on fixed-term contracts and temporary agency work, although the unlimited full-time employment relationship remains the dominant form of employment in the industrialized
7 Economic Survey: Italy, OECD, Paris, 1986b.
Q
countries. This trend differs among countries: For example, in France part-time work was the only source of net employment creation
(+ 372.000 net part time jobs created against a net loss of 450.000
full time jobs) and in Britain more than 80 % of the 700 000 jobs created during this period were part-time. In the USA the figure was a mere 7 %, in Canada it was around one third. The only country whereQ
part-time working actually declined was Sweden. This seems to be due to an increased demand of women for full-time jobs in a labor market with a very high percentage of part-time jobs {24,5 % in 1985 as opposed to 10,8 in France, 21,2 in the UK and 16.3 in the US, 12,3
(1984) in the FRG and only 5,3 in Italy).
In France fixed term contracts and temporary work were heavily repre sented among new jobs, although at 4 % the proportion of these forms of employment in total employment remains small. Considering firms with more than 50 employees, in 1983 50 % and in 1984 some 60 % of all newly recruited employees were initially offered fixed-term con
tracts.^^ Helped by the passing of the Employment Promotion Act in
1984 which favoured this form of employment, fixed term contracts are becoming increasingly important in West Germany for recruiting new
workers.
Although fixed-term contracts are rare in the USA since employment relationships generally lack codification, there has been a noticeable increase in temporary work there in recent years. About 5 % of the growth in employment betv/een 1982 and 1985 can be attributable to
temporary work.^^
_
Buchtemann, Ch.F./Burian, K., Befristete Beschaftigungsverhaltnisse:
ein internationaler Vergleich, in: Internationale Chronik zur Ar- beitsmarktpolitik 24, Wissenschaftszentrum Berlin fUr Sozialfor- schung, Berlin, April 1986.
g Employment Outlook, OECD, Paris, 1986c.
Cornilleau, et al.. La suppression de 1'autorisation administrative de licenciement: des emplois ou des chomeurs?, in: Lettre de I'DFCE, No. 31, Paris, 1986.
OECD, 1986c.
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It is yet not clear how this trends towards an increase in temporary jobs has to be interpreted: for some the trend to more temporary em ployment is a sign of additional job creation and new labor market dynamics. The temporary jobs created will, so their argument, be transformed into additional regular full-time jobs once the recovery is more robust. Critics argue, that the easing of legislative barriers for temporary jobs has lead if not to a substitution of full-time jobs by temporary jobs at least to an ever increasing number of the work force experiencing only instable job tenure. Some empirical evidence supports such a critical view: There is an increasing number of unem ployed entering employment via temporary jobs while the ending of a temporary work assignment is becoming an increasingly important reason for unemployment registration. But too little is yet known on the longer term employment prospective of temporary workers as to empiri cally assess either of both views. However, the fact that the recovery has lost much of its strength since 1986 could also forbid a compre hensive transformation of temporary jobs into full-time jobs.
2.2.3 Self Employment
In some countries the proportion of self-employed in the non-agricul tural sectors has risen in recent years. The OECD average is around 10 %, but in Italy it is 21 %. The increase in the number of the self-employed was especially strong in Great Britain, Italy and Canada, thus contributing considerably to the overall employment in crease, less so in Germany, France and the USA. The figure for Sweden remained about constant at just 4.6 %.12
The increase in the number of self-employed can be at least partly accounted for by new forms of state aid to assist in the setting up of small businesses. Examples of this are the small business programmes available to the unemployed in Britain and France (see below).
OECD, 1986c.
3 UNEMPLOYMENT
3.1 Overall Trends
Although 1n some countries economic growth and increased employment have recently begun to have some effect on the unemployment statis tics, the reduction in the jobless totals is still moving at a snail's pace. Even those countries which have managed to bring unemployment down, like the USA, now have totals which are higher than in past recoveries (cf. table 3). In some of the large European countries - Britain, Italy, France and Germany - unemployment has continued to rise during the period under consideration and thereafter despite economic growth and in some cases even increased employment. In Italy, for example, the rate of unemployment increased to around 11 %, in Great Britain - where it is declining only recently - to about 12 % of the working population, whereas in Sweden the rate was held below 3 % - the figure sometimes used as a definition of 'full employment' - due, among other things, to the extended application of active labour
market measures (cf. table 3).
3.2 Shifts in the Structure of Unemployment
3.2.1 Male/female unemployment
The increase in female employment has done relatively little to ease unemployment among women, whereas the fall in male employment was not always fully reflected in an equal rise in unemployment, because men often held jobs in the better protected core sectors of industry, and the increase in unemployment has been lowered by using such measures as short-time working or early retirement schemes. Despite these fac tors, since 1979 the increase in unemployment amongst men was stronger than for women in nearly all industrialized countries. In Canada and the USA the upturn since 1983 has been a return to the historical trend of relatively higher unemployment among women, after the in crease in male unemployment during the recession. This could be partly
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due to the fact, that women tend to raise their participation rates during a recovery, but - in absence of a sufficient number of jobs - join the ranks of the unemployed rather than those of the employed.
3.2.2 Youth unemployment and long-term unemployment
With the exception of West Germany, all the countries studied recorded youth unemployment rates two to three times higher than those for older workers. However, the proportion of young people who have been out of work is now decreasing in most European countries (Italy being an exception), partly because of labour market policy measures (see below), partly because of demographic reasons. Youth unemployment is especially high in Britain, France and Italy (cf. table 3).
The same countries have also the highest percentages of long-term unemployed. In France and Italy almost half of all unemployed are without work for more than 12 months, in the United Kingdom more than 40 %. Long-term unemployment remains primarily a problem of adult workers: on average over 70 % of the long-term unemployed in the countries under comparison are over 25. The duration of unemployment still correlates positively with age, i.e. the older the unemployed person is, the greater is the likelihood that he or she will have to suffer long periods of unemployment. However, it was the age group 25 to 44 which became the largest group among the long-term unemployed.
This can largely be attributed to mass redundancies in industrial core sectors.13 In some countries (e.g. Great Britain and France) the in crease in total unemployment during the latter part of the period 1980-85 is not only caused by an increased inflow into unemployment, but rather by an increase in its duration, i.e. a reduction in the
outflow. In these countries there has also been a particularly sharp
increase in the proportion of the unemployed who have been out of work for more than two or three years.TTAuer, P., Reintegration of the long-term Unemployed: an Overview of Public Programmes in eight countries, IIM/LMP 84-20a, Wissen- schaftszentrum Berlin fUr Sozialforschung, 1984; and White, M., Long-term unemployment and labour markets, PSI no. 622, London,
1983.
4 ACTIVE LABOUR MARKET POLICY
4.1 Overall Trends
What follows is restricted to describing changing trends in labour market policies of selected European countries during the period 1980 to 1985. The emphasis is on developments in West Germany, Britain and France. Sweden and Italy are also considered.
Persistent mass unemployment and its concentration among young people and the long-term unemployed have forced the governments of all the industrialized nations to introduce, expand and adapt specific labour market policies. In addition to the traditional measures of active labour market policies such as job maintenance (e.g. short-time work
ing), job creation, wage subsidies and training, new programmes have
been introduced: examples include early retirement schemes with an obligation on the employer to refill vacancies thus created, or grants to unemployed to found small businesses. However, labour market and employment policies have also come to include measures aiming at more flexibility of the labour market.An active labour market policy was continued and expanded in all the countries during the upturn, although, of course, its anti-cyclical components became less important. In West Germany, where short-time work remains an important means of bridging short-term cyclical fluc tuations, the number of workers on reduced hours fell from its cycli cal high-point of 680 000 in 1983 to around 235 000 in 1985. A similar development has taken place in France and even in Italy where the number of 'short-time' workers - most of whom have, in fact, been made redundant - supported by the 'Cassa Integrazione' was starting to decline. In Great Britain, which in 1980/81 had around 1 million of its workers on short-time, the numbers also fell dramatically, but for political reasons rather than because of the economic upturn. In 1984 the government stopped using short-time working as a policy instrument because in their opinion it was preventing necessary structural ad
justments.
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Thus while the economic upturn reduced the importance of anti-cyclical measures, other elements of active labour market policies were streng thened, and total expenditure on active labour market policy was in- creased in most European countries.14
4.2 Shifts in the Structure of Active Labor Market Policy
4.2.1 Main target: youth
The most noticeable feature of all the measures taken is their strong orientation towards young people, which in Britain, France and Italy goes together with an increasing importance of training programs. This focus on youth and training is much less pronounced in Germany and holds also only partially true for Sweden.
In Britain, for example, all 260.000 (1984/85) participants on the
"Youth Training Scheme" (a training programme for 16 to 17 year old school leavers) and also over 60 % of the 140.000 in the "Community Progranmie" (a part-time job creation programme for long-term unemploy ed) are under 25. This age group is also the main target group in the
'Young Workers' Scheme' (since 1986 'New Workers' Scheme') a wage cost subsidy prograrane for employers who take on young people at low wages (about 60 000 placements in 1984/85). In all some 73 % of participants in Britain's active labour market policy programmes are under 25.
The situation is similar in France, where nearly all those participat ing in the various training schemes as well those in the 'Travaux d'Utilite Collective' - a scheme to create part-time temporary employ ment, introduced in 1984, with some 320 000 participants (1984/85) -
are young people. In Italy too, v/here labour market policy is still less developed than in other European countries, most of those on government programmes are under 25, e.g. the 100 000 young people who have been employed on work/training contracts in 1985.
For more details see: Schmid, G./Reissert, B./Bruche, G., Arbeits- losenversicherung und aktive Arbeitsmarktpolitik Finanzierungs- systeme der Arbeitsmarktpolitik im international en Vergleich, edi tion Sigma, Berlin 1987.
The particular focus on the employment problems of young people is explained by the mere extent of youth unemployment in these countries which made political action necessary (cf. table 3). The stress on training is due - besides a general trend of active labour market policy towards policies which act on the supply side of the labour market in all countries - to special deficiences in the vocational system in the three countries.15
A common feature of training programmes in all these countries is that they combine theoretical training with practical work experience, with the aim of getting round the 'Catch 22' situation of 'no job without experience, no experience without a job', which, in contrast to West Germany's 'dual' system of apprentice training, is inherent in the education system of these countries, because it is either mainly based on special vocational schoools which do not offer practical exper ience or merely on "learning-on-the-job" without much theoretical schooling.
Also in Sweden, where the youth unemployment rate amounts to more than twice the total unemployment rate, the proportion of young, people amongst the participants in the various measures of active labor market policy reaches about 60 %. But contrary to Britain, France and Italy the main focus is not on training but on temporary job creation.
In Sweden all young unemployed in the age of IB to 28 have the right to work in a part-time job creation scheme ("ungdomslag"). However, also in Sweden there are special "work-experience jobs" for the 16 to 17 years old school leavers, which should provide them with "work experience" necessary to enter the labor market.
In Germany, v/here the youth unemployment rate is generally not signi ficantly higher than the general unemployment rate (1985: total unem
ployment rate: 8,3 %; youth unemployment rate: 9,5; 1986: 8 %:8,4 %)
the age distribution in the measures of active labor market policy isT§ Auer, P./Maier, F./Mosley, H., Programme zum Abbau der Jugend- arbeitslosigkeit, in: Internationale Chronik zur Arbeitsmarkt- politik 25, Wissenschaftszentrum Berlin fiir Sozialforschung, Berlin, Juli 1986.
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clearly different from the other countries: in 1985 only about 30 % of those participating in training schemes and 35 % in job creation measures were young people under 25.
4.2.2 Few measures for prime age adults
In Sweden and West Germany both young and adult unemployed have been increasingly taken into account in the provision of policy measures to combat unemployment - in Sweden the long-term unemployed have the right to a job in one of the job creation schemes - but this is not always the case in the other countries in this study. This develop ment, however justified it might be, given the high levels of youth unemployment and the large proportion of young people who have been out of work for long periods, is all the more questionable when it is recalled that long-term unemployment remains largely a problem for the over 25's. In this respect both core groups (25 to 45 year olds) and older workers are equally badly affected. In France around 50 % of all prime age unemployed and 70 % of all older unemployed (over 49) are out of work for more than a year. For Great Britain the figure is 45 % and 56 %, for West Germany 30 % and 50 %.
But in the countries, where labour market policy focusses heavily on measures for the young (i.e. especially Britain, France and Italy) there was up to now a severe lack of active measures designed to help the unemployed in the prime age groups.
The prime age groups in those countries are usually only 'over-repre sented' in the special placement efforts for the long-term unemployed, the support schemes for starting up small businesses, and measures for vocational training for adults, but the importance of the latter has decreased in recent years, again partly as a result of the emphasis put on combatting youth unemployment.
Recently there has been recognition that there are not many measures for the prime age long term unemployed and both Britain and France have recently introduced or plan to introduce changes in their active labor market policies. In France, the whole range of measures for
youths (training programmes, job creation and wage subsidies in the form of a reduction of employers' contribution to social security) has been copied in order to set up almost identical measures for the long term unemployed. In Britain it is mainly the job creation programme (community programme) which will now be transformed from a youth pro gramme into a programme for adult long term unemployed.
4.2.3 Policies for the older: withdrawal from the labour market
In all countries there are few active labor market policy measures for the older long term unemployed. But most countries give them longer benefit periods in the unemployment systems, often associated with their exemption from the obligation to seek work. As they are then no longer registered as unemployed, the unemployment statistics in some countries have shown a considerable decline. From August 1983 British unemployment statistics no longer take account of about 160 ODD unem ployed men over 60. Similarly in West Germany, the exclusion of such people has made a contribution of about 40.000 to the 1986 fall in the unemployment figures.
In addition to this particular form of "quasi early retirement", which leads to the withdrawal of older workers from the labour market, all European countries tried alleviate the labour market by using more or less extensively early retirement schemes. This policy was associated sometimes by an effort to redistribute work in favour of the younger unemployed. As older workers are often the prime target of dismissals during mass redundancies, the introduction of such schemes, while not altering the structural change from the old to the young, indeed often accelerating it, does prevent a rise in registered unemployment of older age groups. Early retirement policies have been particularly popular in France, where between 1982 and 1983 some 210 000 people (or ca. 24 % of all private sector employees between 55 and 59) left em ployment under an early retirement scheme (known as 'contrats de soli- darite'), whereby 95 % of these jobs were then taken up by younger v/orkers. Subsequently the early retirement schemes were restricted - the 'contrats de solidarite' expired at the end of 1983 - because they had led to large deficits in the unemployment insurance funds. Fur-
16 -
thermore, in April 1983 the retirement age was reduced from 65 to 60 years, leading to a generalized reduction in the early retirement schemes for the over 60's. Nevertheless, during 1985 a further 70 000 workers left employment as a result of early retirement schemes still in operation (the so-called 'Fonds National de I'Emploi' schemes).
Between 1980 and 1985 approximately 800 000 employees left employment at 55 or 60 under various schemes, although not all of these jobs were subsequently filled by younger workers.
In Britain the so-called 'Job Release Scheme' was introduced, offering early retirement to men and women when they reached 64 and 59 respec tively, with an obligation on the employer to take on replacement workers. The scheme was less successful than its French equivalent, with 94 000 having retired early by March 1984, and 70 000 retiring in 1985. In 1984 Germany introduced an early retirement scheme for workers of 58 and over, where the unemployment insurance meets some of the costs of retirement if re-employment takes place. The take-up was not as important as the governement has sought because the scheme involved quite heavy cost for the employers. By the end of 1985 some 45 000 workers had used the scheme, with about -66 % of jobs thus freed being filled by younger workers and trainees.16
As a result of such schemes aimed at encouraging older workers to withdraw from the labour market, which have been introduced already earlier, the decrease in the participation rate of the over 55's in all the countries studied, with the most dramatic fall registered in
France (cf. table 4) has continued.
4.3 Labour Market Effects
It is clear that the gross overall employment effects of current active labour market programmes are positive and unemployment would have been much higher without them. This is, of course, particularly true for Sweden, where some 218 000 persons (average 1984) took ad-
See also Casey, B., Early retirement schemes with a replacement condition: programmes and experiences in Belgium, France, Great Britain and the Federal Republic of Germany, IIM-LMP 85-6a, Wissen- schaftszentrum Berlin fiir Sozialforschung, Berlin, 1985.
vantage of labour market policy measures (about 5 % of the total labour force). This has to be compared with the 136 000 officially declared unemployed. In the same year in Germany, the participants numbered 583.000 (about 2 % of the labour force, 65 % of them were short-time workers). Without such measures one would have had to add 300 000 people to registered unemployment and the German unemployment rate, for example, would have been 9.6 % instead of 8.4 %. In Great Britain the 570 000 participants (in April 1985, 2 % of the labour
force) in labour market policy measures alleviated registered unem
ployment by about 450 000 persons, and in France the unemployment rate would have been more than 1 percentage point higher than without these measures (here mostly early retirement with replacement).These gross employment effects do not take into account indirect effects such as substitution or displacement of other workers by the measures which could diminish the results. Neither do they consider factors which could add positively to the employment effect such as additional revenue and thus additional demand created by labour market policy programmes.
There has been much discussion about the status of people in labor market policy measures. Some critics have argued that the participants in the measures have to be consideres as "hidden unemployed" and in cluded in the official unemployment statistics. In France, conserva tive critics have brought that question into political debate, asking the then socialist government to include people on various schemes to the unemployed figures. The socialist government turned this demand down and was helped in doing so by the ILO which defines the unem ployed as those being out of work and immediately available on the labor market, which is not the case for most participants in labour market policy measures. There is of course not much talking about that in conservative led France anymore, where currently the so-called
"social treatment of unemployment" (traitement social du chomage) which was criticized during the period of conservative opposition, is now heavily extended.
- 18 -
5 OTHER MEASURES TO COMBAT UNEMPLOYMENT
5.1 Worktime Reduction
In addition to an active labour market policy, which is today a rather
important instrument of social and economic policy in all European
countries, in some countries work time reductions were used to raise the level of employment. Lacking sufficient information to make an overall evaluation, I will merely mention some individual policy initiatives. The 39-hour-week was incorporated into French law asearly as 1982, and the government originally wanted to make the
35-hour-week the norm by 1985. Despite studies showing that the 39-hour-week had had positive effects on employment at least in the short-term, the government plan for a legislative reduction in working hours was abandoned partly because of resistance by the employers.The opportunity of negotiating further, voluntary reductions in weekly hours on branch and firm level aided by state grants, also introduced in 1982 was, after initial success, only infrequently taken up. Never theless, in 1982/83 there was a substantial reduction in working hours for some 220 000 employees, with the subsequent creation of approxi mately 17 000 new jobs. In 1985 only a further 15 000 employees en
joyed reduced working hours with the creation of about another 1 000 new jobs.
In West Germany the trade unions succeeded in 1985 after strikes to arrange for a l l / 2 hour/reduction per week in working hours in several important industrial sectors in exchange for greater flexi bility in working time. The result in Germany was also positive in terms of increased employment.18 The exact number of jobs created by
T7
18
Colin, J.F./Elbaum, M./Fonteneau, A., Chomage et politique de I'emploi 1981-1983, in: Observations et diagnostics economiques.
No. 7, Paris, April 1984.
One of the big economic research institutes estimates, that about 50.000 jobs were created in the metal manufactoring industry in the first year after the reduction. See: Beschaftigungsauswirkungen der ArbeitszeitverkUrzung in der Metallindustrie, DIW Wochenbericht 20/87, 14.5.87.
the reduction in hours remains a subject for controversy; Without denying that the work time reductions had positive employment effects, the employers claim that the extra jobs created were mainly attribut able to fuller order-books and the improved opportunities for a more flexible use of working time, which permitted for example to separate machining time from individual working time. The unions, on the other hand, maintain that the extra jobs created are mostly due to the re- duction in working time.19 The German unions have gone ahead in that direction and have negotiated further reductions which will bring weekly statutory working time in the metal branches down to 37 hours
in 1989.
5.2 Increasing the Flexibility of the Labour Market
As has already been said, in the wake of the shift away from the Keynesian-oriented economic policies of the 70's towards a more neo classical interpretation of the economy, nearly all European countries, albeit to a different extent, developed policies aimed at increasing the 'flexibility of the labour market'.
According to the supporters of such theories the 'downward inflexibi
lity' of wages together with high indirect wage costs (e.g. employers'
social security contributions) prevent the clearing of the market via the price mechanism and have therefore to be held responsible for at least part of the current unemployment. Similarly, legislation giving protection from dismissal and rigid controls on working hours are considered to hinder the rapid adjustment of the labour force or of working hours to cyclical fluctuations in demand.In the course of the eighties such theories have led to considerable changes in collective and legislative regulation and have had some influence on the conception of labour market policy. In Britain, for example, the setting of a minimum wage for young workers by the 'Wage Councils' was abolished. In some countries (e.g. Britain and France)
T9 IGMetall: Ergebnisse der Umfrage "Bilanz Arbeitsplatze und Mehr- arbeit in der Metallindustrie fUr das Bundesgebiet", Materialien zur Arbeitszeitdiskussion 1/85; Gesamtmetall: Informationen fiir Presse, Funk und Fernsehen, Nr. 28/1986.
- 20 -
there was a weakening in the legislation giving protection from dis missal. A worker in Britain now has to have worked for two years in a
company to enjoy the protection of dismissal legislation, whereas
before the qualification period was only six months. As already stated above, the French Government makes it no longer necessary to seek official authorisation of mass redundancies, which previously had de-layed (and in a few cases prevented) large-scale lay-offs.
20The French as well as the German government have also promoted the spread of fixed term contracts by changing regulations. An agreement on more flexible working hours - as trade off for reduction in work hours - was reached in some important branches in West Germany, and the last law of the socialist government in France passed in 1986 linked flexibility provision with further work time reduction. This law was never applied and instead the conservative French government's new law on flexibility does not provide for a necessary link between flexibility and work time reduction anymore.
In addition to the measures described above labour market policies were revised to take account of the new objective of flexibility. For example, young people on various government schemes usually receive less than the going wage rate and do not enjoy much dismissal pro tection. In the case of Britain the special wage-cost subsidy is only paid when young people are employed at low wage levels. For the U.K.
it seems not exaggerated to conclude, that labour market policy is also one element of the low wage policy of the Thatcher government. In Italy, where the regulations on fixed term contracts are very strict, employers can, with the help of the newly created so-called work/
training contracts, take on young people for fixed periods, if they provide them with some on-the-job training. As the training content is not clearly regulated, these "contratti formazione-lavoro" are often used as a substitute for fixed-term contracts.21 Some observers see in
that general development a strategy of the governments to introduce
Auer, P., Flexibilisierung des Arbeitsmarktes in Frankreich, in:
Blichtemann, Ch., Mehr Arbeit durch weniger Recht, forthcoming.
21 La formazione inesistente, in: Nuova Rassegna sindacale Nr. 46, Rome, december 14, 1987.
flexibility in the labor market via labor market policies.
6 OUTLOOK
The overview of labor market trends between 1980 and 1985 has shown
that unemployment remained a most serious problem in all countries.
Whereas in the US and Canada a further slight fall is predicted, total unemployment in Europe will, after a period of stabilisation between 1985 and 1986, increase again at the end of 1987. For all European OECD-countries an unemployment rate of almost 12 % which will affect almost 20 million people is forecasted for 1988.22 Although the indi
vidual countries are differently affected, virtually all European countries - except Great Britain - will face increasing unemployment.
Of the countries considered in our sample only Sweden will have rates below 3 % (other good European performers being Switzerland with pre dicted 1 %, Norway with predicted 3 %). The others will have rates going from over 8 (Germany) to 12 % (France).
Besides Sweden then, none of the other European countries in our sample has obviously found an answer to the problem of unemployment.
Our overview of the measures of an active labor market policy has shown, that in many countries youths have become the main target group of the different progranmes and that it was tried to introduce differ ent elements of "flexibility" into the measures to ease the integra tion of youth into a .labour market which offers less stable employment opportunities than in the past.
With the emergence and persistence of mass unemployment, the functions of active labour market policies seem to have changed: from an instru ment to accompany structural adjustment in the 60s (this holds true mainly for Sweden, as in other countries labour market policies were introduced later) it changed into an instrumnent targetted more on the hard to place in the 70s. During the first part of the 80s, active
JK
Employment Outlook 1987, OECD, Paris 1987.
- 22 -
labour market policy seems to have developed into an instrument to
"manage" the oversupply of young entrants into the labour market and to organize the retreat of older workers from the labour market. Con sequently the integration into the labor market of many young is not straight forward any more but happens via the transit through several buffer zones between the educational system and the labour market - like training or job creation programmes - which are institutionalized in some countries as almost permanent bridging systems. The moving of
the "baby boom generation" into the prime age groups will make it
necessary to change the target again. A change in target may also meandifferent instruments: while occupational and geographical mobility
could decline as a consequence of the growing age of the work force, future policies should not strive at providing only temporary employment possibilities (which might be acceptable for youth) but have to
include instruments which favor stable employment. More adult training
and permanent job creation might be consequences of these changes.
1982 1983 1984 1985 1986
CANADA
GDP - 3,2 3,2 6,3 4,3 3,3
employment - 3,3 0,8 2,5 2,8 2,9
FRANCE
GDP 2,5 0,7 1,4 1,7 2,0
employment 0,1 - 0,4 - 1,0 - 0,2 - 0,1
GERMANY
6NP - 1,0 1,9 3,3 2,0 2,5
employment - 1,7 - 1,5 0,1 0,7 1,0
ITALY
GDP 0,2 0,5 3,5 2,7 2,7
employment 0,6 0,5 0,8 1,4 0,8
SWEDEN
GDP 0,8 2,4 4,0 2,2 1,3
emploement - 0,5 - 0,4 1,1 0,5 0,6
UNITED KINGDOM
GDP 1,5 3,3 2,7 3,6 3,3
employment - 1»9 - 0,6 1,8 1,4 0,5
UNITED STATES
GNP - 2,5 3,6 6,8 3,0 2,9
employment - 0,9 1,3 4,1 2,0 2,3
1) Aggregates computed on the basis of 1982 exchange rates
Sources: OECD, economic outlook. No. 40, december 1987.
Table 2: Enploynent, total labour force, participation and uneoployment rates, GOP.
(percentage change over whole period 1980-1985) Contrles with enployment losses
u
total male female 2)
Agri culture
2) Industry
2) Services
3) Total labour force
4)
Participation rates total male female
5) Unemploy
ment rates
6) GDP
France -2.4 -6.6 +4.0 t16.9 -15.0 7.2 2.8 (7.2) A) 68.5 82.8 54.1
B) 65.7 76.3 55.0
3.8 6.6
Germany -4.3 -6.1 -1.1 -4.9 -13.1 3.2 2.9 (6.1) A) 66.8 84.5 49.6
8) 65.1 79.8 50.4
5.6 9.8
United Kingdom
-6.2 -10.5 -1.2 -4.9 -26.0 4.0 1.7 (3.8) A) 74.2 90.5 57.9
8) 73.8 87.7 59.8
6.6 5.3
Countries with employment gains
Canada 5.2 -0.8 14.0 -0.9 -9.5 12.0 10.4 (7.8) A) 70.8 86.2 55.5
B) 73,6 84.8 62.4
3.0 13.4
Italy 1.1 -0.5 4.8 -29.2 -11.9 18.0 5.3 (6.7) A) 60.2 82.6 38.7
B) 60.0 79.2 41.3
3.0 8.5
Sweden 1.5 -3.5 7.4 -13.0 -10.0 7.8 3.1 (1.8) A) 80.5 87,9 72.8
8) 81.9 85.7 78.0
0.8 10.3
USA 7.7 4,0 13.1 -4,8 -4.2 13,9 9,2 (6.1) A) 72.1 85.7 58.9
B) 74.3 84.9 64.0
0.1 12.3
1) total employment 2) civilian employment
3) In brackets: growth rates of population of working age (15-64)
4) A) = 1979; 8) = 1985, total labour force divided by population of working age
5) percentage points (OECO standardized rates: differ slightly from figures used in table 3
6) standardized OECD rates Source: OECD; own calculations
Unemployment ' Uneoployoent
1982 1983 1984 1985 1986 1980 1985 1986 1979 1985 1986
male female total male female total male female total male female total total
Canada 11,0 II.0 10.9 12.0 11.6 11.9 11.1 11.4 11.3 10,2 10.7 10.5 9.5 13.2 16.5 14.7 3.5 10.3 10.9
France 6.0 11,2 8.7 6.3 11.1 8.4 7.7 12.6 9.9 8.2 12.9 10.2 10^,4 15.0 25,6 23.4 30.3 46.8 47.8
Germany 6.0 7.7 6,9 7.5 9.3 8.2 7.5 9.3 8,2 7.6 9.4 8.3 8.0 3.9 9.5 8,4 19.9 31,0 32,0
Italy 6.0 14.7 9.1 6.2 15,3 9.3 6.5 16.3 9.9 6.7 16.6 10,1 10.9 25.2 34.8 39,3
35,8 56.4^^ -
Sweden 2.9 3.4 3.2 3.4 3.5 3.3 3.0 3.3 3.0 2.8 2.7 2.8 2.7 5.1 5.8 5.6 6.8 11.4 8.0
United Kingdom
12.6 7.0 10.6 13.3 8.0 11,2 13.0 8.4 11.2 13.4 8.8 11.5 11,6 14.1 21.7 20.8 24.8 41,0 41.1
USA 9.6 9.4 9.7 9.6 9.2 9.4 7.2 7.6 7.4 6.8 7.4 7.1 6.9 13,3 13,0 12.7 4.2 9.5 8,7
1) Youth c age groups 15-24, except Italy = 14-24 and USA 16-24
2) defined as those continuously unemployed for a year or more in percentages of total unemployment 3) average of quarterly Figures (ISTAT)
Source: OECD, employment outlook 1986/1987
Table 4: Participation Rates of "Older Workers"
55 - 64 64 and o v e r
male female male female
CANADA 1970 1980 1986
84,2 76,2 68,5
29,8 33,7 33,3
22.6 14.7 11.8
5,0 4,3 3,6 FRANCE
1970 1980 1986
75.4 68.5 49,5
40,0 39,7 30,9
19,5 7,5 5,0
8,6 3,3 2,0 GERMANY
1970 1980 1986
80,1 65,5 55,7
28,5 27,2 22,1
17,2 7,0 5,0
6,1 3,1 2,1 SWEDEN
1970 1980 1986
85.4 78,7 75.5
44,5 55.3 61.4
28,9 14,2 11,0
8,7 4,0 3,2 UNITED KINGDOM
1970"
1980 1986
88,1 81,6 67,0
39,9 39,1 35,0
19,3 - 10,3 7,4
6,3 3.6 2.7 UNITED STATES
1970 1980 1986
80,7 71.2 66,7
42,2 41,0 42,0
25,7 18,3.,
15,2^V
9,0
7,62)
1) 1971 2) 1985
Source: Labour Force Statistics 1965 - 1985, OECD, 1987
Peter Auer:
Labour Market and Labour Market Policy
Trends in Selected Industrialized Countries 1980 to 1985 - An Overview Discussion Paper FS I 88 - 2
Wissenschaftszentrum Berlin fUr
Sozialforschung 1988.
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