2012年-CEPS欧洲政策研究中心_Welfare_and_the_Labour_Market_in_the_EU_22页_203kb

Summary of "Welfare and the Labour Market in the EU" by Marie-Laure Michaud

Core Content

This paper examines the relationship between welfare policies and the labour market in the European Union (EU), focusing on how these policies can both support and hinder employment. It highlights the EU's evolving strategy to reduce unemployment and improve job creation through reforms in benefit and tax systems, while also addressing the challenges posed by population ageing.

Main Views

1. Protecting Individuals Against Unemployment

• The EU encourages member states to develop welfare systems that balance the negative effects of market relationships with the need to enhance market efficiency.
• Unemployment Insurance (UI) Systems:
  • UI benefits and employment protection legislation (EPL) are two common methods of unemployment protection.
  • UI is more effective in promoting labour mobility, especially in the context of EMU and EU enlargement, which require greater workforce flexibility.
  • However, UI can have perverse effects by reducing the incentive for unemployed individuals to actively seek new jobs.
  • Research by Tatsiramos (2002) shows that unemployed individuals with benefits are more likely to move for a new job, especially in the early period of unemployment, compared to those without benefits.
  • The European Community Household Panel (ECHP) data supports the idea that UI benefits can increase the likelihood of exiting unemployment, but the overall impact on job search is mixed.

2. Making Work Pay

• The welfare state can create labour supply disincentives due to high marginal tax rates and generous unemployment benefits.
• Tax credit mechanisms, such as the Earned Income Tax Credit (EITC) in the US, are seen as a way to make work more attractive.
• In Europe, tax credit schemes have been introduced in some countries, such as France and Germany, to support low-skilled workers and reduce the "welfare trap."
• However, these schemes have had limited success in increasing employment rates. For instance, the Prime Pour l'Emploi in France showed only a weak impact on female labour supply.
• The family component of tax credits can have an ambiguous effect on the other spouse's employment, potentially reducing their willingness to take part-time jobs.
• The paper suggests that part-time work should be treated as a reduction in earning ability, not as a substitute for full-time employment, to better incentivize work.

3. Early Retirement Programmes

• Over the past 30 years, early retirement policies have been widely adopted in the EU, particularly in manufacturing and construction sectors.
• These policies have reduced the labour force participation of middle-aged and older workers, which has had negative financial consequences for pay-as-you-go (PAYG) social security systems.
• The main reasons for early retirement policies include:
  • A large shock to the labour market that created a surplus of older workers.
  • Intragenerational redistribution, where younger workers expect to benefit from early retirement provisions in the future.
• However, these policies have perverse effects:
  • They distort the labour market by creating an imbalance in the dependency ratio.
  • They may reduce overall employment opportunities for younger workers by encouraging older workers to exit the workforce early.
  • In the long term, they may undermine the sustainability of social security systems due to increased financial strain.

Key Information

• The EU has shifted its focus from passive welfare to active labour market policies to reduce unemployment and promote job creation.
• Unemployment insurance is seen as a welfare-improving policy in the context of labour mobility, but it may also discourage job search.
• Tax credit mechanisms aim to make work more attractive, but their effectiveness in Europe has been limited.
• Early retirement policies have been used to support older workers, but they have negative consequences on the labour force supply and social security systems.
• The demographic challenge of population ageing requires reforms in pension systems and improved employment opportunities for older workers.
• The paper concludes that governments have a key role in educating and coordinating efforts to support older workers and ensure the sustainability of welfare and pension systems.

Conclusion

The paper argues that while unemployment insurance and early retirement policies have been important tools in EU welfare strategy, they must be reformed to address the demographic and economic challenges of the 21st century. The EU recommends more employment-friendly policies, such as tax credits, to encourage job search and reduce the welfare and inactivity traps. However, the effectiveness of these policies varies, and there is a need for careful design to ensure they promote labour market flexibility and economic sustainability.