North-European system: Active Labour Market Policy

The North-European group was originally inspired to the lesson of Lord William Beveridge more than Bismarck. It includes the Scandinavian countries (Finland, Norway, Sweden and, according to some observers, also Denmark and the Netherlands). The flagship of Scandinavian Social Democracies, the welfare state, is characterized by its universal scope of coverage and citizenship, a non-contributory tax funding, envisaged flat rate, high levels of expenditure and supplied services, a substitutive rather than complementary role of the state (Leibfried and Mau, 2008).

In this regime, the state undertakes the aim of full employment and each citizen is guaranteed the “right to be employed”. The state is the employer of last resort. Employment is key to access citizenship and social rights. Accordingly, the welfare state is very well developed, while labour markets are far from flexible. Job search through public and private employment agencies is frequent.

The labour force has a high level of unionisation. The strength of the unions depends heavily on the so-called Ghent system, namely the role of unions in the management of income support schemes and active labour market policy, together with the public employment services (Skans, 2007).

The main feature of this system is perhaps the fact that it relies on a very well developed welfare state system. In fact, passive income support schemes are available for the unemployed. Recently unemployment benefits are given on a contractual basis and, namely, provided based on the obligation to attend training courses. Active labour market policy (ALMP) is implemented on a large scale. There is large evidence of a gross impact of ALMP on youth employment opportunities for those individuals who attended training programmes, though the net impact is a matter of discussion. By net impact of ALMP we mean the gross impact minus the number of those who would have obtained a job anyway, independent of attendance of training schemes (see, for an assessment, Sianesi, 2004).

The European Employment Strategy (EES) is already largely in place in as much as education, training or job opportunities are offered to each unemployed young people within 6 months of the unemployment spell. Overall, young people experience a high degree of employment protection, based on a long tradition of welfare state. The European Youth Guarantee a scheme that the EU has promoted in 2013 to fight youth unemployment in all member states is inspired to the Scandinavian model.

The disadvantages of this system include low social mobility and the high cost for the State budget of the overall transition. Especially the expenditure in ALMP is very high.

Different from Germany, the Swedish labour market - especially the youth labour market - has been experiencing severe hardship for over two decades. Until the 1980s, Sweden has been one of the countries with the lowest unemployment rate (1.5-2 per cent) and the highest employment rate (83 per cent) in the world. In the early nineties, the unemployment rate grew up to 8 per cent and employment was reduced down to 73%. The recovery of the mid-nineties was interrupted again in the 2000s, when both the youth unemployment rate and the ratio to the adult unemployment rate were high (Figures 9.1 and 9.2). By contrast, the long-term unemployment incidence is among the lowest (less than 10per cent) among oECD countries (Quintini, Martin and Martin, 2007, page 30).

This last figure, which would abstractly suggest that a high turnover rate exists, is apparently in contrast with the extremely low figure - among the lowest in the world - concerning the job destruction rate (Quintini, Martin and Martin, 2007, page 32). The most obvious explanation is to be searched for in the broad utilisation in Sweden of temporary work (concerning at present over 50 per cent of young unemployed; Quintini, Martin and Martin, 2007, page 38) as well as of vocational training schemes provided, together with unemployment insurance, to all persons out of a job after a certain length of time since unemployment occurred. This suggests that vocational training conceived in the framework of active employment policies produces effects of precarious work similar to those generated by temporary work.

By considering the similarities between the two welfare systems, the factor that, at first sight, could explain the difference between the performance of Sweden and Germany is the educational system. The German dual system is not only a youth social integration instrument, but also a wonderful tool to simplify school-to-work transitions. The education system is flexible and sequential.

A comparison of the effectiveness of employment services suggests the higher level of effectiveness of the Swedish system of employment services as compared to both the liberal and continental European ones. The proportion of workers who find a job through public employment agencies equalled 12.4% in 2007, a bit lower than Germany (13 per cent), but nearly double than in the United Kingdom (7.7%) and about four times bigger than in Italy (3.7 per cent) (Cicciomessere and Sorcioni, 2007, Table 9.3; Giubileo, 2011; Pastore, 2013).

Against this very high outcome, in terms of mediated work, PES expenditure in Sweden is much lower than in other countries. The share of GDP equals 0.8% and is, hence, closer to the United Kingdom (0.6%) rather than Germany (1.3%). Also the number of staff in employed in the PES (10,250) is much lower than in Germany (about 74 thousand) and Britain (about 67 thousand).

It is difficult to say what the secret of the Swedish system of PES is. Maybe, it is the continuous attention paid to the unemployed, also due to the small number of unemployed per employee of the PES, which equals nearly 28.9 units - one of the lowest - together with the United Kingdom and Denmark. This indicator depends on both the low density of population and the effectiveness of PES action. An important contribution is no doubt to be attributed to the attention towards businesses and their occupational needs, other than to the continuous monitoring and evaluation activities.