CCWS Working Paper No. 2014-83 Privatizing Unemployment Protection
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CCWS Working paper no. 2014-83 Privatizing unemployment protection ‐ The rise of private unemployment insurance in Denmark and Sweden Peter Rasmussen MSc with distinction in Comparative Public Policy, University of Edinburgh, and MSc Cum Laude in Comparative welfare studies and labour market relations, Aalborg Universi- ty. Updated version - September 2013 Centre for Comparative Welfare Studies (CCWS) Department of Political Science Aalborg University www.ccws.dk Centre for Comparative Welfare Studies Working Paper Editor: Per H. Jensen E-mail: [email protected] www.ccws.dk Working papers may be ordered from: Inge Merete Ejsing-Duun Fibigerstræde 1 9220 Aalborg Ø E-mail: [email protected] Tlf: (+45) 99 40 82 18 Fax: (+45) 98 15 53 46 Layout: Connie Krogager Aalborg 2014 ISBN: 978-87-92174-63-5 ISSN: 1398-3024-2014-83 Acknowledgements: I am grateful to Jørgen Goul Andersen for his support and encouragements during my time as a student at both Aalborg University and University of Edinburgh. A list of people deserves credit for their contributions. Professor Anders Kjellberg provid- ed me contact details on relevant persons in SACO, TCO and LO. Ken Bjerregaard (TCO), Anders Edward (SACO) and Magnus Furbring (LO) supplied me with membership data from their respective organisations and took time to clarify my many questions while I was trying to get my ahead around the Swedish case. Björn Frimodig (SACO Salusansvar), Mathilda Widell (Bliwa) Patrick Nygren (Unionen Inkomstförsäkring) and Håkan Svärd- man (Folksam) provided annual reports and data. Verner Sand Kirk and Michel Klos (AK- Samvirke), Caspar Holm Andersen (HK Kommunal) and former colleagues at the Danish Ministry of Employment supplied me with information and guided me to relevant sources on the Danish case. Abstract: Since the early 1990s a series of reforms have jeopardized the universal and inclusive character of the unemployment insurance in Denmark and Sweden yet disagreement per‐ sist on to what extent this development signal transformative change or continuity. An issue that have received scant attention in this regard is the development of privately or‐ ganised unemployment insurances in both countries during the 2000s. This thesis takes the first step in remedying this neglect by analysing the differential growth of private un‐ employment insurance in Denmark and Sweden. The thesis first discuss the problems associated with the private supply of unemployment insurances and then highlight the potential benefits of approaching the issue from a wel‐ fare mix perspective by specifying the conditions under which private provision can serve as a supplement to the public unemployment insurance. Drawing upon the concept of risk‐ privatization the thesis then introduces a framework for analysing changes in the man‐ agement of social risks in order to explicate the different dimensions of change relevant to the assessment of changes in the welfare mix. The analysis first document the gradual change towards a basic security model of unem- ployment protection in both Denmark and Sweden and then compare the diverging re‐ sponses to this development. Through the analysis of differences in the structure and cov- erage of private provision in the two countries it is argued the comprehensive and inclu- sive character of private provision established in the Swedish case have not only made private supplementary schemes more equitable, but also both possible and viable, which contradicts with the Danish case where private schemes remains highly actuarial, more fragmented and limited in scope. This ‘paradox of privatization’ both confirm the inherent problems of private provision based on actuarial principles as well as highlight how types of private schemes address some of the key obstacles to private provision. In line with recent contributions on the role of trade unions in mitigating retrenchment of public policies this conclusion highlight the central role of strong collective intermediaries in shaping both private provision and pro- cesses of risk-privatization. 4 Table of contents: Chapter 1: Introduction ............................................................................................................................ 7 1.0 Privatizing unemployment protection ..................................................................................................... 7 1.1 Research questions and structure of analysis .......................................................................................... 9 Chapter 2: The welfare mix and unemployment insurance ..................................................................... 11 2.0 Varieties of social policy ......................................................................................................................... 11 2.1 The welfare mix and unemployment protection: The mirage of private unemployment insurance revisited ....................................................................................................................................... 12 2.2 The mirage of private unemployment insurance ................................................................................... 15 2.3 Welfare mix: A complimentary role for private unemployment insurance? ......................................... 18 Chapter 3: Welfare state change and the welfare mix ............................................................................. 22 3.0 Changing the welfare mix ....................................................................................................................... 22 3.1 The privatization of social risks .............................................................................................................. 25 3.2 Risk privatization in the Scandinavian context ....................................................................................... 26 3.3 The process re‐drawing the public‐private boundaries ......................................................................... 28 Chapter 4: Research design ..................................................................................................................... 31 4.0 Most similar research design and case selection ................................................................................... 31 4.1 Data and sources .................................................................................................................................... 32 Chapter 5: Towards a system of basic security ........................................................................................ 35 5.0 Dismantling income replacement .......................................................................................................... 35 5.1 Sweden: From gradual to radical dismantlement .................................................................................. 35 5.2 Denmark: Consensual dismantlement ................................................................................................... 39 5.3 Partial privatization: From earnings‐related income protection to basic security ................................ 42 Chapter 6: Sweden ‐ The layering of union‐run group insurances ............................................................ 47 6.0 Private unemployment insurance in Denmark and Sweden .................................................................. 47 6.1 Sweden: what kind of benefits? ............................................................................................................. 48 6.1.1 Individual insurances ....................................................................................................................... 48 6.1.2 Group insurances ............................................................................................................................ 49 6.3 Sweden: Who is covered? ...................................................................................................................... 51 6.4 Sweden: Who pays? ............................................................................................................................... 56 6.5 Who governs? ........................................................................................................................................ 59 5 6.5 Sweden: Policy change without legislative change ................................................................................ 60 6.6 Sweden: Re‐installing earning‐relatedness through union‐run group insurance .................................. 63 Chapter 7: Denmark: Fragmented layering .............................................................................................. 66 7.0 Denmark: What kind of benefits? .......................................................................................................... 66 7.1 Denmark: Who is covered? .................................................................................................................... 69 7.2 Denmark: Who pays? ............................................................................................................................. 72 7.3 Denmark: Who governs? ........................................................................................................................ 73 7.4 Denmark: The politics of non‐layering ................................................................................................... 74 7.5 Denmark: A fragmented response ........................................................................................................