Introduction

At first sight, active labour market policies (ALMPs) are an ideal instrument to promote an inclusive growth strategy. They promote labour market participation and, as a result, access to incomes for disadvantaged people. In this way they allow them to make the most of their potential, to participate to economic growth. ALMPs consist of a broad range of tools, including training, work experience programmes, wage subsidies, job search assistance, and so forth (European Commission, 2016). If used appropriately, and if of sufficient quality, they can help jobless individuals to re-enter the labour market. It is a typical example of a productive or investment oriented social policy, which entails helping disadvantaged people not by redistribution but by investing in their human capital and by facilitating their participation in productive processes.

ALMPs, however, do not exist in a vacuum. They operate within specific labour markets, and their overall impact on social stratification will depend on the characteristics of the labour market in which they operate. More precisely, if ALMPs operate in balanced labour markets, where structural unemployment is low, then it is likely that they will serve well the objectives of an inclusive growth strategy. The few excluded individuals can be effectively helped to get a place in productive processes and, as a result, improve their living conditions and contribute to wealth creation.

In contrast, if ALMPs operate in unbalanced labour markets, where labour supply vastly exceeds demand and where structural unemployment is high, then the outcome may be different. Unbalanced labour markets produce low quality employment, with wages that may be insufficient to afford above poverty living conditions to even small households. Even when successful in putting jobless people back into the labour market, ALMPs may well be powerless in helping them out of poverty. In addition, the low quality employment produced by unbalanced labour markets tends to be unstable, and many individual trajectories are characterised by frequent moves between social benefits and precarious employment. ALMPs, in such a context, can at best help manage labour market exclusion. Whether they contribute to an inclusive growth strategy, however, remains doubtful.

In this chapter I argue that the conditions described here prevail in the low skill segment of the labour market in a majority of OECD countries. Globalisation, technological progress and mass migration have concurred in creating this situation.

Introduction

Integration of social and employment policies has been a highly topical issue over past decades in Europe. Faced with the complex task of facilitating the return to employment of jobless people with multiple barriers to work, several countries have developed integrated structures for delivering labour market and social support. ‘One stop-shops’, ‘integrated jobcenters’ and ‘interagency collaboration’ are some of the tools that are being developed in this context (Askim et al, 2011). These initiatives have taken different shapes in different countries. In some countries, such as in the UK, ‘one-stop’ jobcentres integrate the tasks of benefit payment and employment services, while in others, like in Denmark, the focus has been limited to activation and job-related services.

In spite of these differences, there are striking similarities in the motivations put forward by governments for these reforms. In many European countries the search for integrated services has been part of a broader trend towards the coordination of the public sector. The integration of social and employment policies clearly shares many of the goals of public sector coordination. Among these can be cited the aims to make better use of money by pooling resources and competences, to create more efficient services and to simplify clients’ access to services (Pollitt, 2003).

In the field of the welfare state, coordination has also emerged in close relationship with the turn to activation and the new emphasis on labour market integration (van Berkel et al, 2011). In this context, the initial goal was generally to widen access to employment-related services to all categories of benefit claimants, including those on social assistance and incapacity-related benefits, and to offer support based on individuals’ needs rather than on benefit entitlement (Newman, 2007; van Berkel et al, 2011). Further, in countries where responsibilities for benefits and employment services were traditionally divided among a number of separate actors, a second frequent motivation was to limit a sort of ‘institutional egoism’ that led actors to prioritise their own interests over the overall goal of labour market integration.

Against this background, this article examines the capacity of reforms geared towards the integration of social and employment policies to effectively deliver their multiple objectives. Its focus is primarily on two goals that were central in most reforms: increasing responsiveness to individual needs and strengthening central control.

Introduction

Active labour market policies (ALMPs) seem an obvious component of any social investment project. Rather than simply paying a replacement income to jobless people, an active labour market policy aims to make sure that unemployment spells are as short as possible, by proactively helping jobless people re-enter the labour market. Reducing the duration and the incidence of unemployment, or, more generally, of worklessness, is an objective that is perfectly consistent with the social investment perspective as defined by Jenson (see Chapter Three). ALMPs provide help to disadvantaged people (the jobless) and take a long-term perspective by reducing the scarring effect of unemployment. They also provide returns for society as a whole by contributing to reduce outlays for cash benefits.

Upon closer scrutiny of the policies that usually go under the rubric of ALMP, the case for their inclusion within the social investment perspective is less obvious. In fact, ALMP is an umbrella term that refers to very different types of interventions. These include training, assistance in job search, subsidies paid to employers who accept to take on an unemployed person, work experience placement programmes or temporary job creation programmes in the public sector. Some consider sanctions and benefit conditionality also part of the ALMP toolbox (see, for example, Kluve, 2006) in so far as these are instruments that may provoke a change in the behaviour of the beneficiaries and speed up labour market re-entry. In short, given the broad variety of interventions that constitute ALMPs, it is simply impossible to make a general statement concerning their conformity to the social investment ideal.

The objective of this chapter is to focus on the different types of ALMPs that exist, or have existed, in OECD countries, and assess the role they play or have played from the point of view of the social investment perspective, as discussed by Jenson (Chapter Three). It begins by developing a two-dimensional classification of ALMPs. The first one focuses on the extent to which policies comprise an investment in beneficiaries’ human capital. The second dimension considers the degree to which beneficiaries are expected to re-enter the labour market.

Introduction

Swiss federalism shares attributes with both United States and German federalism. As in the United States, an essential goal of the federalist project is to allow for differences in living conditions among the constituent territorial units. When the Swiss cantons formed a federal state in 1848, they did so on the basis of a constitutional structure that was designed to allow for diversity of social, economic and political organization at the cantonal level. On the other hand, Swiss federalism is hardly competitive. As in Germany, cantons co-operate with each other, and above all the federal government co-operates with the cantons because it relies on their administration for the implementation of most policies. Finally, as in both the US and Germany, the emergence of national social security systems has shifted power and resources from the local and the state to the federal level.

Unsurprisingly, this peculiar institutional context has contributed to the shaping of social policy over the years. Overall, we can identify three different forces underlying the territorial dimension of the Swiss welfare state and working in different directions: first, a unifying and centralizing force related to the rise of the national welfare state in response to the imperatives of industrialization and societal modernization in the nineteenth and twentieth centuries; second, a unifying – but not centralizing – force arising from the co-operation of cantonal and local administrations with a fiscally and politically weak central government; and, third, a force of diversity and decentralization stemming from the combination of cantonal competencies with different resources, polities, politics and policies.

Introduction

During the post-war years, all western European countries have seen the construction and the consolidation of comprehensive pension systems. The pre-war rudimentary schemes that offered modest coverage to some sections of the population only were expanded, combined with minimum guarantees, and with supplementary pensions. The result was that by the late 1970s, virtually every country in western Europe could provide reasonably good pension coverage to the whole resident population.

These pension systems were clearly designed to serve the typical male career profile of that period. In other words, the sort of coverage they offer is optimal for someone who has worked without interruptions, full time and from an early age. Today's labour markets, however, contain a much wider variety of career profiles. To a large extent, this has been the result of the gradual but massive entry of women into labour markets since the 1960s. Very often, women's career profiles are characterised by relatively long interruptions and by part-time employment. In addition, the end of full employment means that today's workers are more exposed to the risk of both cyclical and long-term unemployment than was the case for previous generations. Finally, the knowledge-based economies that are emerging across OECD countries require constant skill updating from workers who do not want to be left behind: an activity that may result in career interruptions.

In most countries the career profiles induced by the events described above will generate pension entitlements below the optimum level. Over the last few years, however, pension systems have been adapting to these new patterns of labour market participation. Even though coverage for the so-called ‘atypical’ workers remains suboptimal, many countries have over the last few years, adopted improvements in the provision for non-standard workers.

In this chapter, we review the reforms adopted in eight western European countries in order to deal with this issue. Our argument is that the measures adopted depend on the institutional structure of the pension system that countries have inherited from the post-war years, and before. In particular, what seems to be crucial is the initial choice between a social insurance and a multi-pillar system.

The 1990s have been a decade of big changes for welfare states. The adaptation process which in the United States and in Britain started in the 1980s has become part of policy-making also in continental European countries. The main objective of reform is to restore the compatibility of social policies with the changing economic and demographic contexts. In most cases, this objective is pursued by retrenching existing social programmes. Welfare retrenchment, thus, is not any longer an Anglo-Saxon idiosyncrasy. Countries such as Sweden, France and Germany, in which social policies are widely praised and contribute to the structure of national identities, have all curtailed their welfare states in the last few years.

In both waves of retrenchment, pension schemes have been a privileged target of governments' attempts to reduce spending on welfare. Pensions generally constitute the largest single item of social expenditure, so that successful cost containment in this area of policy is particularly beneficial to governments' budgets. In addition, pensions are directly exposed to the twin pressures of economic and demographic change. Economic changes, like globalisation, are reducing governments' ability to generate revenues. On the other hand, population ageing is resulting in increased pension expenditure. This is a powerful incentive for governments to take action. It explains why pension reform has been high on the agenda in most advanced industrial countries over the last decade.

In general, however, continental European welfare states are proving to be less vulnerable to cuts than their Anglo-Saxon counterparts. One way to explain this is with reference to their higher degree of middle-class integration.

As far as theory is concerned, France is probably the most interesting case among those covered by this study. Policy-makers unintentionally created ideal conditions for testing hypotheses concerning the determinants of pension policy and the factors that favour or hamper success in pension reform. In the space of only two years, two very similar plans for pension reform were put forward. The first concerned only private sector employees and was successfully transformed into law in summer 1993. The second, in 1995, consisted of the extension of the same measures to public sector employees. It generated a massive wave of strikes, mainly among rail workers, which forced the government to withdraw its plans. This chapter covers both events, and tries to answer the question of why two very similar plans for the reform of pensions generated such different public reactions.

Institutions and patterns of policy-making

Political scientists have generally considered France as a country where policy-making is characterised by a substantial degree of centralisation. Typically, public policy is decided at the top with little or no negotiation with external interests. In his comprehensive study of interest-group politics in France, Wilson points out that, albeit with some exceptions, the relationship between the state and organised interests in France is characterised by ‘a power situation of a state capable of resisting interests and proceeding with its own ends regardless of group pressures’(Wilson 1987: 238). This view is reflected in the literature on corporatism, which typically views France as a counter-example. Lijphart and Crepaz, in their review of expert opinion on the degree of corporatism in various countries, found that France is most often considered as one of the least corporatist countries (1991: 240).

With regard to political institutions and to patterns of exclusion and inclusion in policy-making, Switzerland can be considered as the mirror image of the UK. Because they provide a series of veto points, Swiss institutions allow a significant degree of influence to external groups. Most notably, this is the case of the referendum system, whereby any act passed by parliament can be challenged at the polls if 50,000 signatures are collected supporting a referendum. In addition, well-established decision-making procedures tend to include a wide range of different and often conflicting interests, and to produce compromises that are more or less acceptable to as many actors as possible. This peculiar approach to policy-making constitutes an important limitation to the room for manoeuvre available to the government in virtually all areas of policy.Pension policy, of course, is no exception.

The 1995 Swiss pension reform was adopted after more than a decade of intense negotiations between political parties and the social partners. Despite a series of attempts at reaching a mutually acceptable compromise, a totally consensual solution was not found. Eventually, however, the reform included both expansion and retrenchment elements, a combination that proved instrumental in guaranteeing the final adoption of the pension bill. The retrenchment measures alone would have been at a much higher risk of defeat in a referendum. This strategy has been used in other welfare reforms in the early 1990s, and can be seen as a response to the institutional constraints that limit policy-making. The combination of improvements in provision, on which there was widespread agreement, with controversial retrenchment elements has contributed to the successful adoption of reform also in the areas of unemployment benefits and health insurance (Bonoli 1997b).