oint initiative of Ludwig-Maximilians-Universität and the Ifo Institute for Economic Research CESifo DICE REPORT Journal for Institutional Comparisons VOLUME 6, NO .4 W INTER 2008 Forum Peter Auer and Bernard Gazier Lans Bovenberg, Ton Wilthagen and Sonja Bekker FLEXICURITY Torben M. Andersen and Michael Svarer Luca Nunziata Wolfgang Ochel, Oliver Röhn, Anja Rohwer and Thomas Stratmann Richard V. Burkhauser Research Report CONTROL MECHANISMS FOR Steffen Kern SOVEREIGN WEALTH FUNDS Reform Model TWO-TIER EMPLOYMENT PROTECTION Samuel Bentolila, Juan J. Dolado and REFORMS:THE SPANISH EXPERIENCE Juan F. Jimeno Database DEPOSIT INSURANCE EMISSIONS TRADING ENERGY MARKETS TEMPORARY LABOUR MIGRATION ANTI-DISCRIMINATION LAWS BISMARCK VERSUS BEVERIDGE News NEW AT DICE DATABASE, CONFERENCES,BOOKS The international platform of Ludwig-Maximilians University’s Center for Economic Studies and the Ifo Institute for Economic Research, Munich CESifo DICE Report ISSN 1612-0663 A quarterly journal for institutional comparisons Publisher and distributor: Ifo Institute for Economic Research e.V. Poschingerstr. 5, D-81679 Munich, Germany Telephone ++49 89 9224-0, Telefax ++49 89 9224-1462, e-mail [email protected] Annual subscription rate: n50.00 Editor: Christa Hainz ([email protected]), Wolfgang Ochel ([email protected]) Editor of this issue: Wolfgang Ochel Copy editing: Anne Heritage, Paul Kremmel Reproduction permitted only if source is stated and copy is sent to the Ifo Institute. DICE Database: www.cesifo.de/DICE DICE Report Volume 6, Number 4 Winter 2008 _____________________________________________________________________________________ Forum FLEXICURITY Flexicurity as a Policy Agenda Peter Auer and Bernard Gazier 3 Flexicurity: Lessons and Proposals from the Netherlands Lans Bovenberg, Ton Wilthagen and Sonja Bekker 9 Flexicurity in Denmark Torben M. Andersen and Michael Svarer 15 European Employment and the Flexicurity Option Luca Nunziata 21 Reduction of Employment Protection in OECD Countries: Its Driving Forces Wolfgang Ochel, Oliver Röhn, Anja Rohwer and Thomas Stratmann 29 Creating an EU Flexicurity System: An American Perspective Richard V. Burkhauser 36 Research Report Control Mechanisms for Sovereign Wealth Funds in Selected Countries Steffen Kern 41 Reform Model Two-tier Employment Protection Reforms: The Spanish Experience Samuel Bentolila, Juan J. Dolado and Juan F. Jimeno 49 Database Deposit Insurance 60 Emissions Trading in Europe 62 Regulation of European Energy Markets 66 Temporary Labour Migration Programmes 68 Public Awareness of Anti-discrimination Laws 69 Bismarck versus Beveridge: Social Insurance Systems in Europe 70 News New at DICE Database, Conferences, Books 72 Forum FLEXICURITY FLEXICURITY AS A POLICY Numerous attempts have been made at clarifying the various interpretations, meanings and uses of the AGENDA term (e.g., Jorgensen and Madsen 2007; Wilthagen et al. 2007; Schmid 2008). In this article flexicurity will be seen as one of several policy agendas currently PETER AUER* AND being discussed and its place amongst these investi- gated.This departure point has two main advantages. ERNARD AZIER B G ** First it directs the attention towards the very nature of the flexicurity approach, which is neither a fully A remarkable success, not without criticisms integrated theory nor a set of independent policy and scepticism prescriptions. Second, it reintegrates it into a wider policy debate, which has been dominated for a long The numerous declarations, communications and de- time by the demand for more flexibility and reac- cisions made by the EU Commission as well as the tions to that demand. many reports and articles written by Europeans on flexicurity bear witness to the success of this concept, at least on paper. Even in the US the Danish model has been enthusiastically discussed by prominent The nature and rise of policy agendas: commentators and economists, such as Robert the challenge of “soft co-ordination” Kuttner and Dani Rodrik. The concept is now well- known worldwide, and seminars on flexicurity have Regional groupings comprising countries that are taken place in such diverse countries as Argentina, jealous of their prerogatives and room for manoeu- China, India and Vietnam. More importantly, flexi- vring, as is the case in the EU, presently rely on the curity is now the overriding guideline for labour subsidiarity principle and on “soft” laws. This is not market reform in the EU. Research and policy action true for all areas,1 but in particular for social, employ- following the “common principles of flexicurity” that ment and labour market policies and reforms. In this were adopted by the Lisbon ministerial council in context “soft” steering devices like the “open method late 2007 have been increasingly funded by EU of co-ordination” and “bottom-up policy implemen- sources. tation” (with an active role played by national/local actors at every level of responsibility) are a political- Despite this increasing institutionalisation and sup- ly feasible approach that enables countries to devel- port from many quarters, there are also critical voices, op their own approaches.This also applies to interna- both from academia and from the unions. Recently tional organisations that often have virtually no hold the Swedish labour economist Lars Calmfors wrote a on their member countries other than peer pressure, critical review of the concept and found that impor- except in areas were binding minimum rules and fol- tant trade-offs are “swept under the carpet”, main- low-up are agreed upon. Policy agendas and strate- taining the illusion of a win-win situation. He under- gies are usually not binding, but it may be possible to lines the danger “that the practice of trying to sub- achieve some convergence in policies by setting tar- sume a number of different policy approaches under gets and by developing guidelines and recommenda- the common heading of ‘flexicurity’ leads to less clar- tions. While the European Employment Strategy is ity regarding the policy options” (Calmfors 2007). the most developed of these strategies, there are sim- ilar strategies at work in other international arenas, such as the OECD Jobs Strategy (1994, reassessed in * Chief, Employment Analysis and Research Unit of the Economic and Labour Market Analysis Department of the Employment Sec- tor, ILO, Geneva. 1 Especially the Stability and Growth Pact criteria are stricter, as is ** Professor of Economics, University Paris 1 and fellow of the In- European legislation in many areas, also in the social and labour stitut Universitaire de France, Paris. market field. 3 CESifo DICE Report 4/2008 Forum 2006) and the Decent Work Agenda of the ILO of ing strong doses of flexibility as a cure. Since the 1999, which also has an employment strategy arm, the 1980s, the claim has been that in a period where all Global Employment Agenda. other markets (goods, services and financial) are increasingly liberalised, the labour markets cannot These “strategies” and “agendas” go beyond a simple remain regulated, as changes in the other three will collection of proposed measures with a timetable (a spill over to them. According to this view, the mar- “plan”) and propose an organised set of reasons and kets (workers) have to adapt and the preferred measurements underlying several measures and adaptation channel, in the absence of total wage flex- “plans”.They are not directly deduced from one pre- ibility, is the (external numerical) mobility of work- cise and unique theoretical perspective, nor do they ers and smooth worker reallocation, preferably simply arise from practice and experience. Policy unhindered by government intervention. agendas may be considered an intermediate body of more or less strictly interrelated arguments that The US labour market still holds as a model for this point to one broad policy direction and classify pri- approach.The World Economic Outlook (IMF 2003) orities accordingly in a more or less strict hierarchi- predicted gains in growth and employment and cal order. A set of policy perspectives can become a decreases in unemployment if Europe chose to adopt policy agenda if three conditions are met: US type low labour market level regulations. A low level of regulation is also a condition for being well i. it develops ends, means, targets and indicators; ranked on the World Bank’s doing business indica- ii. it integrates those four elements into a auto- tors (World Bank, 2004–08). Of concern here in par- nomous strategic approach; ticular is the Employing Workers Indicator (EWI), a iii. it imposes, through these elements and their justi- set of regulations concerning flexibility/rigidity in fications, evidence in favour of one particular, but terms of working hours and hiring and firing. These broadly defined policy option. indicators (and the ranking) very strongly suggest that labour market regulations are a pure cost of Policy agendas may be seen as deliberate interven- doing business. As a result of the EWI ranking, the tions aimed at transforming existing systems of ref- old American flexibility/European sclerosis debate erences in a given field and pointing them in a new has resurfaced. For example Germany and France direction. They provide a form of cognitive evidence are ranked 137 and 144, while the US is number 1.3 using concepts, values and evaluations. They are developed by experts and policymakers and are re- The flexibility reform agenda treats the exchange of fined through debates; they appear in a pluralistic goods on the labour market just as any other good. context because they are diverse and perhaps com- As a result this agenda is not concerned with work- pete with each other. er’s employment security or (wage) distribution poli- cies as they would distort the market. The propo- nents of the flexibility agenda might not be particu- Four policy agendas larly anti-worker (but anti-union, certainly) because in their equations more flexibility equals increased In the field of labour market and social policies, flex- workers’ welfare: benefits will simply trickle down as icurity coexists with at least three other agendas: flex- a result of improved economic and labour market ibility, capabilities and transitional labour markets.