26-27.5.2008A.Tangian. On the European Readiness for Flexicurity. OECD Seminar on Innovative Approaches to Turning Statistics into Knowledge, Stockholm1

On the European Readiness for Flexicurity: Empirical Evidence with OECD/HBS Methodologies,

and Reform Proposals

Andranik Tangian Hans Böckler Foundation, D-40476 Düsseldorf

andranik-tangian@boeckler.de

26-27.5.2008A.Tangian. On the European Readiness for Flexicurity. OECD Seminar on Innovative Approaches to Turning Statistics into Knowledge, Stockholm2

Agenda

1 Flexicurity approach2 Operationalisation3 Findings4 Reform proposal 5 Conclusions

26-27.5.2008A.Tangian. On the European Readiness for Flexicurity. OECD Seminar on Innovative Approaches to Turning Statistics into Knowledge, Stockholm3

Towards Common Principles of flexicurity (Europ. Commission 07)

Claim: More and better jobs through flexibility and security

Flexicurity = Flexibility compensated by advantages in social security

Social security is understood as employment security

Employment security should be guaranteed by lifelong learning

External numerical flexibility, legal framework for ‘hiring and firing’ and use of atypical forms of employment

Internal numerical flexibility, legal and contractual framework to adjust working hours

Functional flexibility, scope to employ workers in different jobs

Wage flexibility, scope to adjust wages

Externalization flexibility, scope to use workers without employment contracts

Flexibility forms

26-27.5.2008A.Tangian. On the European Readiness for Flexicurity. OECD Seminar on Innovative Approaches to Turning Statistics into Knowledge, Stockholm5

Criteria of precariousness

Income: 2/3 of the median wage of the full-time employed

Employment stability, employment with a minimum of interruptions

Employability, capacity to be employed as a prerequisite for employment stability; among other things can be secured through lifelong learning

Data structure derived from EWCS (European Foundation 2007)

Internal numerical flexibilityNumber of working hours per week: as one will/not as one will

Overwork, more than 10 hours a day, number/month (q14e)

Number of working hours every day (q16aa): variable/constant

Number of working days every week (q16ab): variable/constant

Starting and finishing hours (q16ac): variable/constant

Working time arrangements (q17a): set by the company, choice from several option, reasonable adaptability to individual wishes, or full adaptability

Working time planning (q17b): on the same day, the day before, several days in advance, several weeks in advance, no changes of schedule

Two ways of scaling of variablesNormalization (HBS method): min, max → 0,100

Standardization (OECD method): μ, σ→ 0,100

min

max min

100x xy %x x

−= ⋅ .

−

100xy %μσ−

= ⋅

( )

23788

1

237882

1

1 (mean)23788

1 (standard deviation)23788 1

ii

ii

x

x

μ

σ μ

=

=

=

= −−

∑

∑

Factual indices (HBS method)

………………………………………………

Factual indices (OECD method)

……………………………………………..

26-27.5.2008A.Tangian. On the European Readiness for Flexicurity. OECD Seminar on Innovative Approaches to Turning Statistics into Knowledge, Stockholm11

Rank correlation for indices made with OECD/HBS methodologies

Aggregated flexibility 0.9182External numerical flexibility 0.9994Internal numerical flexibility 0.9774Functional flexibility 0.9902Wage flexibility 0.9237Aggregated precariousness 0.9335Precariousness of income 0.7161Precariousness of employment stability 0.9921Precariousness of employability 0.9365

Factual ≠ institutional flexibility

Strictness of employment protection legislation ~

external numerical flexibility (OECD 2004)

Work with no contract ~

outside legislation (EWCS 2005)

United KingdomSwitzerlandSwedenGermany…Turkey

0.41.11.61.8...4.9

130 of 875 = 15%26 of 847 = 3%1 of 968 =0.1%

32 of 911 = 4%…

302 of 454 = 67%

Flexibility–Precariousness dependence (HBS method)

No country in the South-East (flexicurity) corner

Flexibility-precariousness dependence is statistically certain: Regression on 23788 employees with P-value=0.0000

Conclusion:flexicurity is hardly attainable in practice

Flexicurity domain:

no country

Flexibility–Precariousness dependence (OECD method)

No country in the South-East (flexicurity) corner

Flexibility-precariousness dependence is statistically certain: Regression on 23788 employees with P-value=0.0000

Conclusion:flexicurity is hardly attainable in practice

Flexicurity domain:

no country

Flexibility is worst for employability

Operationalisation: Data for the composite indicator of decent work

Indicator of decent work (HBS)

…………………………………………………..

Observations:

Bad qualification possibilities

Poor career and modest income

Importance for job satisfaction

Most important:job stability

Disregarded:income

Negatively regarded:training, good management and creativity

……………………………………………

Indicator of decent work (HBS)by the type of contract

Atypical employees have poorer working conditions than the European average

Reform proposals

flexinsurance to steer flexicurity policy

basic income modelto resolve policy contradictions

workplace taxto equalize working conditions

analogy with regulation of immigrantsto regulate the outsiders from the mainstream

constraining financial markets to keep the labour market under control

Flexinsurance

Employer's contribution to social security is proportional to the flexibility of the contract

Compensation of unemployment risksMotivation to hire employees more favorably with no rigidly restricting labour market flexibility

Flexible instrument to regulate deregulation: adjustments need no new legislation

Moral aspect: social justice

Existing prototypes of “dismissal taxes” Progressive: American experience rating

Flat: Austrian Abfertigungsrecht

Basic income model

A flat income paid by the state to all citizens regardless of their earnings and property status

Additional budget from flexinsurance higher taxes of high-earners (to subtract the flat income) and funds released from an army of civil servants currently working in social security

Existing elements of the basic income model Kindergeld in Germany paid to all parentssome old-age provisions in Chili and Switzerlandthe idea of minimal wage

Workplace tax

The worse working conditions, the higher the tax payed by the employer

stimulation to improve working conditionscompensation of health and safty risks at workstimulates to equalize working conditions of flexibly employedfinance the bonus for employees with bad working conditions

Prototype: green tax which stimulates enterprises to consider the natural environmentindexing working conditions as an instrument (~‘measuring social pollution’)

Analogy with regulation of immigrants

Quotas for atypical contracts (~immigration quotas)

Justification of necessity of the atypical contract (~ obligation to explain why not own nationals)

Issuing a permanent contract after a number of successive temporary contracts (~ permanent residence after a few temporary residences)

These measures are aimed at reasonably constraining employment flexibility without excluding it in case of real necessity.

Constraining financial markets

Having liberalised financial markets, Europe loses control over labour markets:

Foreign investments actually mean export of jobsEmployers are given a legal instrument for exerting pressure on European governments: ‘If you do not relax employment protection according to our requirements, we shall move jobs abroad’

Since the way out is generally where the way in, financial markets must be constrained in order to restore the control

Conclusions

Methodology: OECD and HBS methods to construct composite indicators, new visual tools

Empirics Indices of flexible, precarious and decent work derived from 4th EWCS

Critics on the EC concept of flexicurityCommission’s flexicurity strategy cannot be consistently implemented

Consistent implementation of flexicurityFlexinsurance, workplace tax, constraining financial markets, basic income