Institutional moral hazard in the multi-tiered regulation of unemployment in Austria

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o 1 Institutional moral hazard in the multi-tiered regulation of unemployment Austria – Background paper Chris Luigjes & Frank Vandenbroucke December 2015 This document reflects views only authors and European Commission cannot be held responsible for any use that may made information contained therein Please refer to this as follows: C F (2015) support ‘Institutional Moral Hazard Multi-tiered Regulation Unemployment Social Assistance Benefits Activation – A summary eight country case studies’ Abstract has been written preparation a research project funded by (on Feasibility Added Value Benefit Scheme contract VC/2015/0006) adds detailed analysis following deliverable project: studies; but it was not We concept ‘institutional hazard’ analyse intergovernmental relations within welfare states specifically domain unemployment-related benefits related activation policies (the ‘regulation unemployment’) is one separate studies focuses on The Austrian involves federal government regional governments (Länder) Public Employment Services (PES) dominant policy concerns were threefold: divergence between practices social assistance insurance caseloads increasing heterogeneity schemes principal-agent issues concerning PES harmonized different making all Furthermore negotiated nation-wide agreement with Länder Finally governance reformed more monitoring minimum requirements introduced Keywords: hazard; states; relations; insurance; assistance; Active Labour Market Policies; activation; policy; 2 Austria1 thank Helmut Mahringer very useful exchanges system List Abbreviations AMS Arbeitsmarktservice Österreich (federal PES) AIVG Arbeitslosenversicherungsgesetz (Unemployment Insurance Act) AMFG Arbeitsmarktförderungsgesetz (Labour Promotion AMSG Arbeitsmarktservicegesetz Service ASVG Allgemeines Sozialversicherungsgesetz (General BMASK Bundesministerium für Arbeit Soziales und Konsumentenschutz (Austrian Federal Ministry Affairs Consumer Protection) BMS Bedarfsorientierte Mindestsicherung (social assistance) SA UI Introduction relatively centralised As several other cases legislation financing (SA) responsibility lower tier Länder) Unlike most however completely central or AMS) including recipients For reason serves contrasting Another (related) interesting feature similarity German Swiss cases; experienced similar challenges those two countries (mainly stark dichotomy UI) opted response division labour stable important reforms are introduction semi-independent strong ties partners formulation an level With these moves shifted from political decentralisation towards delegation There parallels regard also case; takes up position Before we turn briefly identify certain characteristic state: equalisation payments In financial poverty under ‘statutory pension system’ “topped supplement reach threshold value (called ‘equalisation reference rate’ Ausgleichszulagenrichtsatz)” (BMASK 2014a p 78) rate tool determining amounts market-related will become clear (cf infra) wage used determine rates which topped supplements 3 history low replacement (Obinger Tálos 2010 110) Currently they stand at 55%2 resulting lowering generosity 2000 benefit can topped-up (predominantly form family allowance) increased maximum 80% aforementioned being ceiling top-ups interrelated: prevent beneficiaries falling below changes lowered families tightened sanctions limited accessibility 117) no limit (and UA) itself; instead top wage) (Steiner Wakolbinger 4; pp 14-15) duration fairly short: ranges 20 52 weeks depending contribution period extended 78 after completion vocational rehabilitation measures 4 However when comparing (certainly terms duration) note scheme people who exhaust their potentially indefinite See paragraph 21 (3) (4-5) 18 (1-2) does have strict eligibility criteria (see Figure 1) its job-search somewhat stricter than (Figure 2) It probable strictness UA prolonged indefinitely if comply (among factors) same infra discussion) coupled fact functions last resort large group long-term unemployed might explain relaxed Australian supra) Overall Source: Langenbucher 27 Strictness legislated Act (Arbeitslosenversicherungsgesetz AIVG) 1977 5 sensu stricto regulated financed revenues predominantly provided Other acts include Policy Financing (Arbeitsmarktpolitik-Finanzierungsgesetz AMPFG) (Arbeitsmarktförderungsgesetz AMFG) 0 Average 8 cases5 through employer employee contributions possibly supplemented some funds 6 These pay complete regime costs 7 much executive body disburses (1) AMPFG (2) paragraphs 41-52 33 9 10 section administrative board directors 58-59 responsibilities Until 1994 fully integrated into (currently Protection BMASK) (Arbeitsmarktservicegesetz AMSG) arm’s length along “the entire structure changed deep ‘culture partnership’ established” (Weishaupt 2011b 3) legally supervised three-tier structure: headquarters nine offices 99 local Its ‘executive body’ consists two-member while (Verwaltungsrat) ‘legislative’ latter includes members: three ministries (two Finance) each employers unions Hence outnumber governmental representatives actor: plays major part translation ambitions operational targets approves dismisses distributes budget 4) means itself features counteract associated agencies; dominate heavily influence policymaking goal setting interests employees words presence dominance function checks balances semi-autonomous When look there structural differences Four them had average over years others poorer performances time Although represent likely structurally heterogeneous least translated entails redistribution since finances Regional national 1990-2013 Wirtschaftskammern Österreichs 2014: 34 12 1990 1995 2005 2013 Burgenland Carinthia Lower Upper Salzburg Styria Tyrol Vorarlberg Vienna Austria7 already mentioned second-tier scheme: (UA Notstandshilfe) Notstandshilfe easy classify either because shares similarities both (its income-dependent tested cf analytical grid column integral (AVIG) subject residual persons exhausted claim11 meant emergency experience hardship previous run out nature reflected means-tested applied five exhaustion varies 92% 95% basic amount (which 55% earned starting (in relation allowing income spouses child 2014b 79) codified therefore almost regular except sense resembles former contrast implemented cantons still small number cantons) prerogative 11 Or early exit called ‘transitional allowance’ (Übergangsgeld) 36a 13 35 37 see 15 14 2012 caseload 131 217 105 132 around 221 000 2014 96 99; 81) (2007 5) development 1987-2005 (before reform What so distinctive about 98) Notstandhilfe officially (52 weeks) long met Beneficiaries qualify continue entitlement pass test implications: reduce opportunities cost-shifting Long-term received far less end size vis-à-vis smaller examined study exception Belgium increases need effective UI/UA ineffective could result share dependent clients eligible third historically 101) Due potential relevant always included work requirement enforced caseworkers (Leibetseder rigidity Research shown provinces half stated requirements: “Either [were] exempted obligation caseworker [refrained] imposing such [left] [federal] jobcentres scheme” 6-7) generally favoured sanctioning rather provision intensive upskilling 2014a) historical autonomy led efforts (Mahringer 2007 3-4) Similar caused concern Germany Switzerland indicator disparities capacity subnational institutional probably mix challenged formulated ‘nationwide security’ stipulates common standard new type (Bedarfsorientierte BMS) essence reaction facing 2007) authorities: dichotomisation (of regimes) due levels practice entailed inclusion-oriented “The just like Hartz intended harmonise existing regulations order combat effectively roll-out work-focussed approach reintegration (long-term) primary market” 6) merged adopted apply variation implementation adheres standards laid down committed set general principles contrary exist example receive free design above Besides combatting ensured combination make agreements Article 15a Constitution shift renew comprises ensure people’s subsistence housing needs afford protection sickness pregnancy childbirth” flat-rate mandatory single parents medical asset conditional upon (with exceptions categories retirement age) unlimited baseline linked stipulate every beneficiary claim services obliges various institutions well obliging collect data standardised manner 16 entail even possibilities equal article 24 17 extra total capped €50 million annually €30 per individual region articles 20-21 here overview Under financier situation Most enforce municipal payment 50% fiscal current constellation Despite budgetary did increase broadens before factors better spread higher ways i e reduction non-take worsening economic circumstance contributed post-reform (L&R Sozialforschung 21-30) interacts parts security (Reform Monitor Bertelsmann Stiftung 2010) “Roughly claimants roughly quarters defined statutory persons” institution tasks set-up supra organisational structure) Because provide specific tasked responsibilities: efficient placement workers overcoming hurdles immediate counteracting complexity market matching supply demand maintaining many jobs possible ensuring training youth promoting re-employment physically disabled securing jobseekers 19 delivering disbursing 29 26-27 22 Kombilohn subsidised Kurzarbeit hire 34a 37a-38 26-35 Even though actually delivered ‘third parties’ provides majority counselling adult education mostly private created Economic Chamber (Wirtschaftskammer) Wirtschaftsförderungsinstitutionen workers’ chambers (Arbeiterkammer) Berufsförderinstitute open everyone 2011a 12-13) Additionally charities (licensed) for-profit agencies deliver providers tend operate temporary employment (or communal institutions) perform niche ‘difficult-to-place clients’ 13) four appropriate During initial intake classified types corresponding so-called ‘three-tier zone’ first ‘info mainly aimed self-help given access facilities registered vacancies Secondly ‘service offers job-brokering claims processing where start ‘counselling full range ALMPs zone specially trained staff difficult-to-place If get automatically months dependency 27) promote sustain leave part-time older prospective forms subsidies22 professional scholarships principle afforded treatment go option yet nor systematically currently lies dealt territorial pacts Today deemed ‘capable working’ sent classifying incentives municipalities direct able-bodied would positively affect financially liable rendered opposition resistance Optionskommunen 2011c 213) without connection (provided offices) remain focus loss control nationwide assures 23 To do involved required necessary job search report jobcentre modified themselves codify own remaining variations entities Leibetseder notes ten applications month verified 112-113) 49 Concern centralisation role analysed played dumping renewal addressed together treatments agency: eliminated agency Two hold caseload: Australia marginal privatised results larger reasons begin profits formal channels minister thus level) behaviour goals (such context) stronger way influencing 25 why extensive dense difficulties balancing flexibility multitude active influential Centrelink actors take Thirdly subcontractor enter contracts directly ministry differs reasons; firstly (ALGII) federalised especially comes regulatory bears impact feel pressure Consequently concerned ones downside move deal clash culture approaches lead (are seen to) overly shelter (especially often focussed work-first brings us difference Germany: remained outside scope natural experimentation (they Optionskommunen) seem tune actor closes off arise requalifying merge remains meaning Thus short- framework enforces performance measurement Goals ‘broad guidelines’ consultation then translates plan must approved board; actual 26 transpose add objectives district task implement achieve nationally- Länder-set 28 supported tripartite councils 5-9 40 15-16 parlance referred ‘regional’ Following determination approval sets annual ‘balanced scorecard’ clearly outcome-oriented overarching target incorporates inputs outputs outcomes quality Table Indicators Balanced Scorecard 2013: 30 quantitative personal fixed separately men women” (AMS Achievement Outcome Duration Intermediate outcome Outflow six Success Satisfaction Output (quality) Proportion expenditure women Input job-seeking Process service Utilisation e-service Penetration apprenticeship places enterprises Exact Job satisfaction internal advancement Development selected material Performance call centres ne