Are unemployment insurance systems in Europe adapting to new risks arising from non-standard

employment?

Janine Leschke, ETUI-REHS (research unit)

QMSS conference 2007, Prague, 20-23 June 2007

Hypotheses

Persons with non-standard employment contracts face greater risks to make transitions to unemployment or inactivity than persons with regular contracts;

Unemployment insurance systems that strongly incorporate welfare principles instead of insurance principles grant better coverage of non-standard workers.

• Insurance principle: strong equivalence between contributions and benefits; aims: status maintenance, contributory justice

Germany and Spain

• Welfare principle: stronger degree of tax financing and thus weaker link between contributions and benefits (easier redistribution); aims: preventing and mitigating poverty

United Kingdom and Denmark

Part-time employment by gender, 2006

(% of total employment of a given sex 15-64)

4.37

11.89.2 8.6

23.4

32.4

35.5

41.8

45.4

0

5

10

15

20

25

30

35

40

45

50

ES EU 25 DK UK DE

Men Women

Source: Eurostat LFS data, 2nd quarter 2006.

Fixed-term employment by age group, 2006 (% total number employees in age group)

24.8

42

56.8

66.6

12

0

10

20

30

40

50

60

70

UK DK EU 25 DE ES

15-24 25-49 50-64

Source: Eurostat LFS data, 2nd quarter 2006.

The European Community Household Panel (ECHP)

EU-15 countries

8 waves (for most countries 1994-2001)

Sample of approximatelly 60 500 nationally representative households and about 130 000 individuals (1994)

Follow up data: EU-SILC (from 2004 onwards)

Advantages:

Country comparisons are possible (common questionnaires except for DE, UK, LUX, SE)

Panel data (dynamic analysis is possible)

Encompassing information on individuals (employed, unemployed, inactive) and households

Disadvantages:

Sample size restrictions

Some limitations in variables (f. ex. no distinction between unemployment insurance and unemployment assistance)

Short-term upward, downward, and sideward transitions from and to full-time and part-time employment for prime-age workers (25 to 55)

t t+1

age 25 to 55 full-time part-time education unempl. inactivity

full-time DK 94.05 1.91 0.66 2.53 0.85

DE 92.54 1.85 0.61 3.49 1.50

SP 90.52 2.16 0.15 4.99 2.18

UK 92.14 3.08 0.20 1.61 2.97

part-time DK 21.21 67.96 2.96 5.42 2.46

DE 18.18 67.57 1.83 2.39 9.85

SP 31.09 46.36 1.12 9.58 11.85

UK 17.42 67.73 0.37 2.28 12.19

Source: Own calculation based on European Community Household Panel (ECHP), waves1994-2001.

Longer-term upward, downward, and sideward transitions from and to full-time and part-time employment for prime-age workers (25 to 55)

tage: 25-55

t+4

full-time part-time education unempl. inactivity

full-time DK 90.75 3.23 1.22 2.89 1.91

DE 86.02 2.71 0.79 5.18 5.30

SP 87.87 2.19 0.05 4.67 5.22

UK 85.62 4.67 0.25 2.78 6.68

part-time DK 37.67 48.34 2.75 6.69 4.56

DE 29.48 51.04 0.92 4.83 13.73

SP 42.46 34.01 0.33 8.66 14.54

UK 28.35 49.76 0.49 3.91 17.58 Source: Own calculation based on European Community Household Panel (ECHP), waves 1994-2001.

Characteristics of unemployment insurance systems that potentially restrict coverage of non-standard workers

Part-time workers:

Hours or wage thresholds (access)

Qualifying period (access)

Means-testing (access and level)

Proportionality between benefits and former wages (level)

Fixed-term workers:

Qualifying period (access)

Benefit period depending on contribution time (duration)

Means-testing (access and level)

%

1-19 hours 20-29 hours 30+ hours

Denmark 32 76 78

Germany 20 48 78

Spain 73 84 91

United Kingdom 28 28 54

Source: Own calculation based on pooled and weighted ECHP data; Basis: all unemployed jobseekers.

Registration at employment office by former working hours

Advantage of survey data

Unemployment benefit receipt of former full-time and part-time workers: comparison of registered unemployed (fond) and all unemployed jobseekers (stripes)

98

91

72

6358

28

19

3233

24

47

34

78

1614

36

0

10

20

30

40

50

60

70

80

90

100

full-time part-time full-time part-time full-time part-time full-time part-time

Denmark Germany Spain United Kingdom

Un

emp

loym

ent

ben

efit

rec

eip

t as

sh

are

of

reg

iste

red

un

emp

loye

d /

all u

nem

plo

yed

jo

bse

eker

s

registered all unemployed jobseekers

Source: Own calculation based on pooled and weighted ECHP data.

Access of non-standard workers to unemployment benefits (random effects logit model )

Dep. variable: unemploymentbenefit receipt (no/yes)

Denmark Germany Spain UnitedKingdom

odds ratios

last job part-time 0.32** 0.47** 0.80 0.29**

REFERENCE: reason for stopping last job: obliged to stop

end of contract/temp. job 0.55 0.70 1.01 0.47

women 1.56 0.58* 0.43** 0.36**

observations 892 2266 4200 588

prob > chi2 0.0000 0.0000 0.0000 0.0000

rho .24 .48 .45 .38

prob >= chibar2 0.004 0.000 0.000 0.001

Further variables included in models but not shown here: age, household type, qualification, wage beforeunemployment, current household wage, occupation last job (except for Germany), length of unemployment,year dummies.

+ significant at 10%; * significant at 5%; ** significant at 1%

Source: Own calculation based on ECHP data. Basis: all unemployed jobseekers.

Individual predicted probabilities of unemployment benefit receipt for typical former part-time and full-time workers

ideal type* Denmark Germany Spain UnitedKingdom

predicted probability (95% confidence interval in brackets)

Former female part-time worker in couplewithout kids

0.62(0.40-0.84)

0.14(0.07-0.20)

0.23(0.15-0.30)

0.11(0.03-0.19)

Former female full-time worker in couplewithout kids

0.83(0.71-0.95)

0.24(0.16-0.32)

0.27(0.20-0.34)

0.18 (0.06-0.30)

*Age, former wage, current household income, length of unemployment and qualification level are set to their mean. Source: Own calculation based on ECHP data; basis: all unemployed jobseekers.

Average monthly unemployment benefit level by working time (in purchasing power parities)

679

520

408

291

431

226

344

573

0

100

200

300

400

500

600

700

800

Denmark Germany Spain United Kingdom

Ne

t m

on

thly

un

em

plo

ym

en

t b

en

efi

t re

ce

ipt

for

fo

rme

r fu

ll-ti

me

an

d p

art

-tim

e w

ork

ers

in e

uro

-pp

p

full-time part-time

Source: Own calculation based on pooled and weighted ECHP data. The figure refers to unemployment benefit recipients with between 3 and 12 months of unemployment.

Net replacement rates at unemployment for former part-time and full-time workers (approximation)

% part-time (>20 hours)

full-time

Denmark 85 55

Germany 88 47

Spain 58 34

United Kingdom 73 22

Source: ECHP data, own calculation. Average wage and unemployment benefit level for people who worked more than 20 hours.

Conclusions

Non-standard workers are in all countries more likely than standard workers to become unemployed or inactive

The expectation that unemployment insurance systems of the four countries strongly vary in their potential to cover non-standard workers did not prove true

Differences in coverage rates are driven by the overall coverage levels rather than by the predominance of welfare or insurance principles

There is evidence for redistribution concerning benefit levels

Conclusions

Unemployment insurance reforms did not directly tackle deficient coverage of non-standard workers, nevertheless, they had some (unindended?) influences on the insurance situation of non-standard workers

• Hours thresholds have been lowered or abolished and some countries introduced favourable benefit regulations for workers who change from full-time to part-time work

• On the other hand, some of the reform measures that aimed at making the systems financially more viable worsened the situation of non-standard workers:

• Abolishment of original unemployment assistance (Germany)

• Shortening of reference periods for contribution requirements (Germany and Spain)

• Extension of contribution requirements (Denmark)

• Cutting of the duration of non means-tested benefits (Germany and the UK)

Possible solutions for more inclusive benefit systems

Fighting against the gendered division of labour

• Supporting high hours part-time employment and upward mobility (I)

• Incentives for more equal distribution of household/care activities between men and women (IV)

Modifications in UI design (II)

• Basic or minimum insurance for all (but danger of further segmentation)

• Abolishing earnings- and hours thresholds

• Installing sufficiently long reference periods for contribution payments

• Individualisation of benefit receipt

• Modifications in financing mechanisms

• Encouraging labour mobility through “positive” activation

Fighting against the gendered division of labour

• Supporting high hours part-time employment and upward mobility (I)

• Incentives for more equal distribution of household/care activities between men and women (IV)

Modifications in UI design (II)

• Basic or minimum insurance for all (but danger of further segmentation)

• Abolishing earnings- and hours thresholds

• Installing sufficiently long reference periods for contribution payments

• Individualisation of benefit receipt

• Modifications in financing mechanisms

• Encouraging labour mobility through “positive” activation

Modifying the gendered division of labour

Supporting high hours part-time employment and upward mobility

Incentives for more equal distribution of household/care activities between men and women

Modifying the design and functioning of unemployment benefits

Basic or minimum insurance for all (but danger of further segmentation)

Abolishing earnings- and hours thresholds and installing sufficiently long reference periods for contribution payments

Individualisation of benefit receipt

Modifications of financing mechanisms

Encouraging mobility and employability through “positive” activation