Globalisation and flexicurity Torben M Andersen Department of Economics Aarhus University November 2016 Globalization • Is it Incompatible with – High employment – Decent wages (no working poor) – Low inequality – Extended welfare state Nordic experience • Routinely classified as ”small, open economies” = highly globalised • Welfare model developed in a globalised environment; – Common understanding – need to be ”competitive” • Not politics against markets • The model depends on maintaining a high employment level -Ambitious distributional goals Globalisation and competitiveness Globalisation Ease of doing Competitiveness KOF‐index business World Economic World Bank Forum Denmark 7 3 12 Finland 11 13 8 Norway13611 Sweden 8 9 9 # countries 204 189 140 Cross country performance Tax burden: 25% vs 50 % of GDP Trade share: 20% vs 50‐60% of GDP 45000 40000 $ [CELLRANGE] [CELLRANGE] US 35000 [CELLRANGE] [CELLRANGE][CELLRANGE][CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] 30000 [CELLRANGE][CELLRANGE] [CELLRANGE] PPP [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE][CELLRANGE] [CELLRANGE] 25000 [CELLRANGE] [CELLRANGE] [CELLRANGE] 20000 [CELLRANGE][CELLRANGE] income, [CELLRANGE] [CELLRANGE][CELLRANGE] 15000 [CELLRANGE] [CELLRANGE] capita 10000 [CELLRANGE] [CELLRANGE] Per 5000 0 0.6 0.62 0.64 0.66 0.68 0.7 0.72 0.74 0.76 0.78 0.8 Income equality: 1‐Gini Nordic Model: Employment dependent model • High tax burden + generous transfers • Budget very sensitive to the employment level • Financial viability presumes a high employment level • Also crucial for living standards, per capita income etc. Employment over the life cycle 100 Employment rate 90 80 70 60 50 40 30 20 10 0 15‐19 20‐24 25‐29 30‐34 35‐39 40‐44 45‐49 50‐54 55‐59 60‐64 65‐69 70‐74 Minimum Maximum Denmark Norway Finland Sweden Low inequality – labour market outcomes are crucial Inequality 30 above 25 average 20 15 10 average 5 from 0 ‐5 ‐10 deviation % ‐15 Inequality ‐20 below ‐25 average NOR DNK FIN SWE NLD GER FRA CAN ITA NZL AUS JPN UK ISR USA MarkedsindkomstMarket income OmfordelingRedistribution Total The Danish flexicurity model Lax hiring and Combining flexibility and firing rules (EPL) security Maintaining job search incentives Maintaining human Generous Active labour unemployment market policy capital insurance (UIB) (ALMP) Unemployment 12 10 8 % 6 4 Low youth unemployment 2 Low long‐term unemployment 0 2000 2003 2006 2009 2012 2015 Denmark OECD EU Main characteristics • High level of job- 35 turnover 30 • Many affected by 25 unemployment, but 20 most unemployment 15 employment spells are short of % 10 • Low long-term unemployment 5 0 1999 2003 2007 2011 2015 • Easy entry for young Inflows to jobs Outflows from jobs Labour market transitions– one 100 10 20 30 40 50 60 70 80 90 0 Denmark Unemployment Unemployment Switzerland Sweden Estonia Norway Austria ‐ ‐ employment Finland inactivity Portugal Latvia Hungary quarter France Czech Republic Netherlands Unemployment Cyprus Slovenia United Kingdom Lithuania Spain ‐ Romania unemployment Ireland Italy Poland Luxembourg Slovakia Bulgaria Greece Large adjustments across sectors Denmark during boom (2005.1-2008.3) and recession (2008.1-2009.3) 25 20 15 10 5 0 ‐5 ‐10 ‐15 ‐20 Increase Decrease Perceptions – jobs and globalisation Your personal job situation Globalisation 0.5 0.8 0.45 0.7 0.4 0.6 0.35 0.3 0.5 0.25 0.4 0.2 0.3 0.15 0.1 0.2 0.05 0.1 0 Very Rather Rather Very bad Don't 0 Globalisation Globalisation Don't know good good bad know represents a good represents a threat opportunity for to employment and DK EU (NATIONALITY) companies in (OUR companies thanks COUNTRY), to the opening‐up of markets, DK EU • Publiceducation education: Strong focus on • Labourmarket training • ressourceuse Flip-side: system (life-long learning) –1.8% ofGDP ALMP: –6.1% ofGDP Education: Education and qualifications 10 15 20 25 30 35 40 0 5 Denmark Switzerland Sweden Iceland Finland Indicator Norway Netherlands Luxembourg France United Kingdom Austria Slovenia life Estonia Spain ‐ Portugal long Germany Czech Republic Belgium Lithuania learning Hungary Italy Cyprus Malta Ireland Latvia Poland Slovakia Croatia Greece Bulgaria Romania Labour market and qualifications • Close link between 100 education and 90 – Employment rates 80 Globalisation – Wages 70 New technology …. 60 – Retirement % 50 – Health 40 Policy 30 response • Education and labour 20 market policies - crucial for 10 distributional objectives! 0 Low Medium High • Important to ensure a high BeskæftigelsesandelEmployment share qualification level for the Andel af arbejdsstyrken entire labour force Share of work force Conclusions • Globalization has not • Not a ”crisis”-free model implied a retrenchment of welfare arrangements • Need to continously adjust labour market policies • Flexicurity: – Employment remains high • Challenge: to reduce fraction of youth without – Few working-poor labour market relevant education – Copes with large adjustments in the labour market – ”Active” policy approach • Active labour market policies • Education/live-long learning.