activation and smart safety nets in the western balkans boryana gotcheva & aylin isik-dikmelik...
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Activation and Smart Safety
Nets
in the Western Balkans
Boryana Gotcheva & Aylin Isik-Dikmelik
Vienna, March 4, 2014
Outline
Why activation? What is the challenge? What is activation? The Western Balkans Activation and Smart Safety
Nets Study: ContentOutputsAnalytical framework
Going forward
The Challenge
Employment and active inclusion are among the most critical challenges for countries across the Western Balkans
Daunting jobs challenge with low activity and employment rates …
Kazak
hsta
n
Azerb
aija
n*
Denm
ark
Germ
any
Czech
Rep
ublic
Georg
ia*
Portu
gal
Irelan
d
Slova
kia
Polan
d
Belar
us*
Belgi
um
Bulga
ria
Turke
y
Greec
e
Mon
tene
gro
Mol
dova
FYR Mac
ed...
Kosov
o0
10
20
30
40
50
60
70
80
Perc
enta
ge
Employment (age 15+), Q4, 2011
…and unemployment rates that are among the highest in Europe
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q20
5
10
15
20
25
CIS Western Balkans Non-ECA Europe Baltics ECA
Unem
plo
yment
rate
(la
test
ava
ilable
)
Unemployment rates, 2008-2012
What is activation?
Activation has a ‘history’ across the world Shift from “passive” to “active” social policies
Primary focus on employability and labor market re-attachment
The “European” model of activation policies generally place employment integration at the very heart of social policy This implies: Greater emphasis on work as a way to ensure that
individuals in their prime age are not excluded from mainstream society
Greater effort by the social and employment services in helping inactive, unemployed and benefit recipients overcome the obstacles to entering into paid work
Greater effort by the inactive, unemployed, and recipients to enter or re-enter the job market
Key building blocks of activation
1. The ‘mutual obligations’ principle
2. Frequent and personalized/tailored interventions of agencies during individual’s unemployment spell
3. Financial incentives to labor market re-integration
4. Stricter benefit eligibility criteria and benefit sanctions
5. Strong obligations to participate in labor market programs, community work or, to try self-employment
6. Changes in institutional arrangements and greater coordination across institutions
Promoting Employability and reducing reliance on social transfers
Integrated Service Models
Tailored to Clients
Employment & Social Service
Supports
Benefit Incentives
Activation “Package” of incentives & support services
Activation is for both the inactive and those who are active but without a job
Non-Poor
Poor
SSN-Beneficiaries
INACTIVEOut of the LF
WITHOUT A JOB
but active
Increase
Employability
Incre
ase
Pro
ductiv
ity
Activate into the LM
WITH A JOB
The Western Balkans Activation and Smart Safety Nets Study
Builds on previous research
Social Protection Systems in
Western Balkans
Country-specific case studies for all
Western Balkans
including entity-level cases in BH
Advice to the Governments
on policy changes that
promote activation
Assistance on how to
implement activation policies
Framework for the analysis
• Target Groups?• Inactive• Unemployed• SSN
Beneficiaries• Barriers to
Work?• Employability
barriers (skills, experience, etc.)
• Participation constraints
Activation for Who? PROFILING
• Benefit formula• Generosity/’packa
ge’• Mutual obligations• Duration/ phase
out• (Dis)incentives in
tax and benefit systems
• Earned income disregards
(Dis)Incentives in Benefit
Design
• Coordination between welfare and employment services
• Specific activation policies and ALMPs
• Implementation capacity (financing, staffing, etc.)
Institutional Readiness for
Activation Policies
Coverage of countries and activities
Country Profiling(Dis)incentives in the design
Institutional capacity
Phase 1-2 (2012-13)
FYR Macedonia
Kosovo
Montenegro
Serbia
Phase 3 (2013-14)
Albania
Bosnia and Herzegovina
Activation for Who? Profiling: SERBIA
• Target Groups?• Inactive• Unemployed• SSN
Beneficiaries• Barriers to
Work?• Employability
barriers (skills, experience, etc.)
• Participation constraints
Activation for Who? PROFILING
(Dis)Incentives in Benefit
Design
Institutional Readiness for
Activation Policies
Analytical framework to analyze constraints to employment of safety nets beneficiaries
Employability barriers
Participation constraints
Tax and Benefit
Disincentives
These barriers are interrelated
Objective of “Profiling” of Social Safety Net beneficiaries
Providing tailored activation strategies for a diverse vulnerable populationWho can be activated in the population?
Who are the “activable” among SSN beneficiaries?
Profile of the “activable”
What are the employability barriers?
Are there additional constraints to their participation ?
What are the main client segments for activation?
What graduation strategies suit each group?
Who can be “activated”?
Of working age (15-64)
Able bodied
Not in education or training
Activables:Individuals who can be presumed
to be able to work
• Who can be activated among the population? • Who can be activated among the SSN
beneficiaries?• Are these groups coinciding?
More than half of population in Serbia are “work-able” (potentially “activable”)
Source: Serbia HBS data 2010.Note: “Work-able” includes all individuals of working age (15–64) who are neither disabled nor in education or training.
Whole population
SSN all
FSA+CA beneficiaries
FSA beneficiary
0 10 20 30 40 50 60 70 80 90 100
12.6
27.1
11.3
26.4
22.1
9.6
32.1
11.0
8.0
8.6
6.1
4.7
56.8
52.9
50.0
54.8
Age Composition of SSN Beneficiaries Relative to General Population in Serbia, 2010
Child Old Working age (disabled)Working age (in education) Working age (work-able)
Percent
Employed
Unemployed
Outof labor force
0 10 20 30 40 50 60 70 80 90 100
79.0
83.3
72.8
13.0
8.5
13.5
6
6
9
1.9
5.
Safety Net Coverage of the Work-Able Population in Serbia, 2010
Nonbeneficiaries in Q2-Q5 Nonbeneficiaries in Q1
Beneficiaries of other SSN FSA beneficiaries
Percent
SSN beneficiaries represent only a small fraction of the work-able population
Source: Serbia HBS data 2010.Note: “Work-able” includes all individuals of working age (15–64) who are neither disabled nor in education or training.
Focusing only on SSN beneficiaries will have limited impact in the LM
Whole population
Non-beneficiaries, poor
SSN beneficiaries
FSA + CA beneficiaries
FSA beneficiaries
0 10 20 30 40 50 60 70 80 90 100
63.0
55.2
56.8
58.1
56.5
16.4
25.9
20.7
21.9
20.7
20.6
18.8
22.4
20.1
22.8
Employment and Unemployment rates among the work-able popu-
lation in Serbia, 2010
Employed Unemployed Out of labor forcePercent
SSN Beneficiaries more likely to be unemployed or inactive or have low-quality jobs
Whole population
Nonbeneficiaries, poor
SSN beneficiaries
FSA beneficiaries
0 10 20 30 40 50 60 70 80 90 100
34.4
17.2
13
28.6
27.8
30.3
11.2
14.7
12.7
25.7
40.3
44.1
56.1
Sector of Employment for work-able Population in Serbia, 2010
Public and professionsRetail, trade, craftsConstr., industry, transportAgriculture and manual jobsNot identified*
Percent
Source: Serbia HBS data 2010.Note: “Work-able” includes all individuals of working age (15–64) who are neither disabled nor in education or training* Because of the sample size, conclusions cannot be drawn about the sectors other than “Agriculture and manual jobs.” .
Activablepopulation
SSN beneficiaries
Nonbeneficiaries, poor
SA + CA beneficiaries
FSA beneficiaries
0 10 20 30 40 50 60 70 80 90 100
5.4
11.0
9.0
12.1
17.3
19.0
28.0
29.2
28.5
33.5
59.3
53.0
56.4
52.5
40.8
Education Distribution of SSN Beneficiaries in Serbia, 2010
Never attended No education completed Elementary school
Secondary/Vocational Higher education (college or higher)
Percent
Which could be largely explained by lower educational attainment
Source: Serbia HBS data 2010.Note: “Work-able” includes all individuals of working age (15–64) who are neither disabled nor in education or training.
Work-able SSN beneficiaries display greater caretaking needs than the work-ready population as a whole
General population
SSN all
FSA+CA beneficiaries
FSA beneficiaries
0 5 10 15 20 25 30 35
5.3
20.4
4.9
23.7
9.4
31.5
8.2
29.8
2.6
9.5
2.4
15.4
Share of work-able population living with at least one person in need of care in Serbia, 2010
% hh with disabled % hh with child ≤5 % hh with child ≤2
Percent
Source: Serbia HBS data 2010.Note: “Work-able” includes all individuals of working age (15–64) who are neither disabled nor in education or training.
Latent Class Analysis: SERBIA
Elder experienced unemployed; 35%
Inactive uneducated women; 21%
Elder experienced inactive; 16%
Inexperi-enced
unemployed women,;
12%
Chronic unemployed; 8%
Educated
unemployed youth; 8%
These groups display different employability & labor supply constraints…
23
Employability Obstacles
(Skills, Experience)
Other Barriers to Participation(Social, Circumstances, Other)
(high)
(high)
… Which call for different packages of services
0.5 1 1.5 2 2.5 3 3.50
0.5
1
1.5
2
2.5
3
3.5
Inactive uned-ucated women
Inexperienced unemployed
women
Experienced in-active elder
Chronic un-employed
Educated un-employed youth
Size= % of total work-able FSA benefi-ciaries
Other barriers to participation
Em
plo
yab
ilit
y ob
stacl
es
Market Ready (job info, matching, search assistance)
Intensified Activation(TVET, Skills)
Hard-to-serve (skills, special support)
Special Support(care for dependents,
transport, social, health)
(Dis)Incentives in Benefit Design
Activation for Who? PROFILING
• Benefit formula• Generosity/’packa
ge’• Mutual obligations• Duration/ phase
out• (Dis)incentives in
tax and benefit systems
• Earned income disregards
(Dis)Incentives in Benefit
Design
Institutional Readiness for
Activation Policies
FYR Macedonia Social Financial Assistance
Type of program
• Minimum income guarantee / last resort social assistance
• Granted to individuals (and their households) that are able to work but cannot provide for themselves materially
• Works as a substitute for the contributory unemployment benefit which is received by only 9 percent of the unemployed
Design, financing and implementation
• Centrally designed: by the Ministry of Labor and Social Policy
• Centrally financed• Implementation at local level: by inter-municipal Social Work Centers which are de-concentrated structures of MLSP
Basic administrative data
• Number of beneficiaries: 35,450 (2012) beneficiary families , encompassing 115,000 direct and indirect beneficiaries
• Spending: about 1.1 billion (about 23 million USD) (2012)
• Spending is around 0.3 percent of GDP (2011), which is at the regional average, but declining since 2007
SFA design implies both incentives and disincentives to work
Incentives Disincentives
Tax-benefit disincentives
Benefit generosity
Benefit formula
SFA benefit phase out schedule and time limits
Work requirements
Work incentives exist mainly as work requirements
Job search, participation in ALMPs and training, job interviews; job offers; municipal PWP and seasonal jobs
Monitoring of compliance is relatively strict
There are sanctions for non-compliance with work requirements, but the right to FSA can be transferred
Additional incentives exist
• SFA benefit declines with time to 50 percent of the initial amount after three consecutive years of receipt
Declining Schedule for Receipt of SFA
• SFA beneficiaries can be engaged in public works up to five days per month without losing the right of SFA
• PWP income not disregarded, but reentry to the SFA program easier
Legal Guarantee for SFA status while on PWP
Disincentives for work stem from the SFA benefit formula
The benefit is calculated as ‘difference’ between the SFA threshold applicable to a family of that size and its monthly income Each additional denar earned is taken away from the
benefit amount due -> 100 percent marginal effective tax rate
Generosity is less of an issue: core SFA benefit is not very generous Generosity is measured as percentage of the consumption
in the poorest quintile ‘covered/paid for’ with the benefit amount
…but there’s ‘packaging’ with other benefits such as electricity subsidy
Health insurance is “de-linked” from SFA status (no longer part of the package). Poor, including SFA beneficiaries, are eligible for free health care, but it is provided outside the social assistance system
No legal guarantees for ‘restoring’ SFA status after finishing participation in activation, exception are PWPs
Standard re-certification rules apply, no flexibility of ‘in and out’
Incomes from training, other ALMPs, and from public works are fully calculated in the family income
Will impact the outcomes from activation
Disincentives could emerge from the design of activation measures
Participation in activation could undermine eligibility for SFA
Some incomes from work could be disregarded
Income thresholds for program exit could be higher than the entry thresholds
Some benefits could phase out gradually / be carried over for some time after the beneficiary gets a job (in-work)
Would help avoid the disincentive effect of high taxation of low incomes from work
Overall, modern social assistance programs for work able poor have more incentives for activation
Guaranteed minimum income / last resort programs to be open for poor of working age and able to work
when they are short of income
Institutional Readiness for Activation Policies
Activation for Who? PROFILING
(Dis)Incentives in Benefit
Design
• Coordination between welfare and employment services
• Specific activation policies and ALMPs
• Implementation capacity (financing, staffing, etc.)
Institutional Readiness for
Activation Policies
Two main service delivery mechanisms in the region…
… which are not coordinated
Limited interaction between employment services and centers for social work
Cooperation varies across localities – better where local offices in the same or close
premises
Lack of formal referral procedure for social assistance beneficiaries to employment services
High and uneven caseloads in many centers for social work and employment offices - little room for casework
Labor market institutions in place, but capacity for activation on a large scale still insufficient
Limited capacity for individualized interventions Due to the high client to staff ratio
Financing constraints for active measures Low level of spending on active policies
ranging only 0.1-0.2% GDP – significantly lower than the EU-27 average
Lack of outsourcing of the job placement and/or counseling services to non-state providers The regulatory framework for outsourcing is
not fully developed
Going forward: activation agenda much broader than just focusing on addressing welfare dependency
Activation agenda goes beyond safety net beneficiaries: They are only a fraction of the inactive, and activation measures that only target them will not bring significant impact
Smarter design of last resort social assistance programs needed–Enable/promote access to working poor while building in incentives for work (e.g. introduction of gradual income disregard, in-work benefits etc.)
Next steps in the broader activation agenda
Substantial amount of diagnostic work in place to inform legislative changes for future reforms
Room for country-specific follow up work to address needs for additional knowledge, information and provide just-in-time technical assistance
Investments to reform and strengthen the institutional set up for the provision of differentiated and at the same time integrated services that would help reduce multiple barriers to work and activate broader groups of inactive
Next steps in the broader activation agenda
• Improving the capacity for planning and designing activation measures, and evaluation of their effectiveness
• Improving the capacity and effectiveness of the public employment services for implementing activation measures
• Strengthening inter-institutional cooperation – especially between the employment services and the centers for social work for a holistic approach to effective activation of vulnerable
• Improving the cost-effectiveness of the ALMPs and other interventions – e.g. increased competition, advanced (statistical) profiling, application of job matching software tools, etc.
Possible institutional reforms for promotion of activation
Latent Class Analysis: SERBIA Elder experienced
unemployedInactive uneducated women
Elder experienced inactive
Inexperienced unemployed women
Chronic unemployed
Educated unemployed youth
Class size 35% 21% 16% 12% 8% 8%
Indicators
Worked before 100% 19% 95% 24% 20% 21%
Willing to retrain 54% 23% 5% 45% 66% 73%
Inactive 22% 100% 100% 16% 0% 19%
Long-term unemployed 66% 0% 0% 63% 99% 6%
Short-term unemployed 12% 0% 0% 21% 0% 75%
Active covariates
Uneducated 6% 31% 21% 31% 20% 6%Elementary education 34% 54% 36% 38% 37% 21%
Secondary+ education 61% 16% 43% 31% 43% 73%
Young (15–29) 4% 41% 8% 26% 39% 92%
Adult (30–54) 54% 52% 45% 59% 61% 4%Prime age (55–64) 42% 7% 47% 15% 0% 4%Female 41% 82% 34% 92% 28% 26%
Caretaker 0% 33% 32% 0% 0% 0%
Statistics
Married 62% 65% 64% 48% 55% 9%Discouraged inactive (% of total)
20% 56% 78% 8% 0% 14%
Willing inactive (% of total)
2% 44% 22% 8% 0% 5%
Mean age 46 32 47 36 31 23