Sharing Risks of Labour Market Transitions: Towards a System of Employment Insurance
| DOI | http://doi.org/10.1111/bjir.12041 |
| Author | Günther Schmid |
| Published date | 01 March 2015 |
| Date | 01 March 2015 |
Sharing Risks of Labour Market
Transitions: Towards a System of
Employment Insurance
Günther Schmid
Abstract
The increasing polarization of the labour market is closely related to the spread
of non-standard employment relationships that largely results from poor risk
management of critical transitions over the life course. The question, therefore,
arises whether labour market regulation, in particular unemployment insurance,
is still properly designed for the new world of work. This article argues for an
extension of unemployment insurance towards a system of employment insur-
ance by summarizing the concept of transitional labour markets, indicating the
risks that challenge current and future labour markets, laying the theoretical
groundwork, and discussing the main features of an employment insurance
system.
1. Introduction
The ‘flexicurity’ consensus that the European Commission was conjuring up
in 2006 seems to have broken down (European Commission 2006: 111). Its
flagship, the European Employment Strategy, did not deliver enough ‘good
jobs’, so the report on Employment and Social Development 2011 had to
acknowledge an ‘intensified wage polarization’ as the key to understanding
rising income inequalities and the risk of poverty at work (European
Commission 2012a: 12). Furthermore, the blatant neglect of a proper macro-
economic framework, in particular monetary and fiscal policy, led in some
countries to a mass unemployment, which many thought was now safely a
relic of history. During 2012, youth unemployment in Spain and Greece,
for instance, climbed over 50 per cent, an unbearable catastrophe for any
social democracy. Finally, the sexy slogan propagated by pundits of Danish
Günther Schmid is at the Social Science Research Centre Berlin (WZB) and the Free University
of Berlin.
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British Journal of Industrial Relations doi: 10.1111/bjir.12041
53:1 March 2015 0007–1080 pp. 70–93
© John Wiley & Sons Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
‘flexicurity’ ‘Protect people, not jobs!’ turned out to be too simple a
dichotomy, tempting many people to neglect the difference between occa-
sional and systemic jobs. Indeed, there is no need to protect occasional jobs
because they contain no investment, but systemic jobs need the protection of
substantive mutual investments between employers and workers.
Rising inequality and risk of poverty in work are closely related to the
increase of non-standard jobs of low quality or high risks involved. Even
during the recession in 2008 and 2010, when full-time jobs for the whole
EU-27 decreased by 6.5 million, part-time jobs increased by another 1.3
million. Although temporary jobs declined, too, their share of job recovery in
the next upswing year 2011 exceeded 50 per cent. In the same year, 42.5 per
cent of young employees were working on temporary contracts, that is a rate
three times higher than the average of 14 per cent for working-age adults
(European Commission 2012a: 32). This externalization of risks mostly to
individuals with weak labour market power raises the question whether
labour market regulation, in particular unemployment insurance (UI), is still
well adapted to the new world of work.
In the following, I will argue that in many European member-states (MS),
especially in those with good employment performance despite the great
fiscal and economic crisis in 2008 and 2009 (e.g. Denmark, the Netherlands,
Austria and Germany), the UI and active labour market policy (ALMP)
already function, to some extent, as a kind of employment insurance, but
with a different emphasis in their approaches. These elements could be
enforced and enhanced to cope with the current and future challenges of
European labour markets. During recent years, however, in many European
MS, not least in Germany, flexibility and security were shown to be out of
balance for more and more workers. Many life course risks are not at all
or at least not fully covered by the current insurance systems. Yet a fully
developed system of employment insurance as the cornerstone of social
security has to mind all critical transitions over the life course. This argument
is developed in three steps: First, by briefly presenting the concept of transi-
tional labour markets (TLM); second, by throwing some light on the chang-
ing employment relationships and related (new) social risks; and third by
laying the theoretical groundwork for risk-sharing and discussing the main
features for a fully developed system of employment insurance.
2. The concept of TLM
The concept of TLM aims at a consistent framework to give the strategy of
balancing flexibility and security a clear normative and analytical direction.
The core idea is to empower individuals to take over more risk during the life
course: First, by not only making work pay but also by making transitions pay
by extending the social insurance principle beyond unemployment and
including volatile income risks connected with other critical events over the
life course; second, by making not only workers fit for the market but also by
Sharing Risks of Labour Market Transitions 71
© John Wiley & Sons Ltd/London School of Economics 2013.
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