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

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1 Institutional moral hazard in the multi-tiered regulation of unemployment Switzerland – 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 Swiss insurance regulated federal government thereof implemented cantonal offices Minimum requirements monitoring system were introduced ensure these focused caseloads Furthermore attempted harmonise social assistance top-down efforts dropped favour non-binding inter-cantonal guidelines In short reforms borne out concerns often rejected or altered cantons defended their autonomy Keywords: hazard; states; relations; insurance; assistance; Active Labour Market Policies; activation; policy; 2 Switzerland1 thank Guiliano Bonoli Cyrielle Champion very useful exchanges extensive comments our drafts List Abbreviations AC Fonds de compensation l’assurance-chômage (unemployment fund) ALMP Policy AVIG/LACI Arbeitsversicherungsgesetz/Loi sur l’assurance Chomage (Federal Act Obligatory Insurance Insolvency Compensation) MAMAC Medizinisch‐Arbeitsmarktliche Assesments mit Case Management (inter-agency collaboration pilot project) PES Public Employment Services RAV/ORP Regionalen Arbeitsvermittlungszentren/offices régionaux placement (Regional employment offices) SA SI Supplément d’intégration (integration supplement SA) SODK/CDAS Konferenz der kantonalen Sozialdirektorinnen und Sozialdirektoren/ Conférence des directrices et directeurs cantonaux affaires sociales (inter-cantonal association ministries) SKOS/CSIAS Schweizerische für Sozialhilfe/Conférence suisse institutions d’action sociale (Swiss Conference Assistance) SMI minimal UA UI Introduction interesting subject at hand due combination factors First all characterised significant political decentralisation involves three levels government: level municipalities Secondly are amongst highest OECD terms net replacement rates other words if combined with long duration high accessibility probable labour market governance will confronted substantial measure both individual institutional issues Finally somewhat resembles German opted sustain face same dilemmas Germany opt more control protection governed unique (Bertozzi Ross 2008 p 122) its brand federalism encompasses major executive role 26 regions ‘cantons’ relatively generous also heavily private (for-profit non-profit) agencies Some argue two features inhibits formulation coherent strategy “some categories non-working individuals […] catered regimes obeying different masters” Thirdly akin Anglo-Saxon archetype than continental characterises most neighbouring countries The type shares characteristics US counterparts (Obinger Armingeon Bertozzi 2005 263) interplay between state Obinger al note forces have decisive shaping policy: 1) unifying centralizing which formed challenges 19th 20th century; 2) cooperation 3 municipal administrations context weak central state; 3) force diversity decentralization “stemming from competencies resources polities politics policies” These influential It could said four key principle sanctioned legislate policy area no explicit constitutional competence Every takeover new requires direct democratic parliamentary approval Second differentiates substantially region tax public services contrary Austrian Third prerogative levy taxes periodic parliament voters always granted temporary basis creates bias towards ‘lean’ reflecting what called ‘the federalism’ reliant administration systems implementing programmes pp 266-267) Not included list probably distinguishing influence institutionalization democracy through referenda Direct essentially functions “strengthen power veto available constituent units” 270) preserves promotes regional combines some benefit schemes strong an (both for-profit regulates old-age pensions sickness invalidity insurances maternity leave child completely organised insurers play large federally especially when comes (Duell Tergeist Bazant Cimper 2010 81) “However although main legislative regulatory authority over finances respective make considerable they given set up varying implementation mechanisms Thus there nationally-unified since free choice means reach goals national level” 38) design financing left So fragmented actors responsibilities multiple Then unlike Dismissal limited exposing business cycle Immigrant workers time functioned reserve perceived success WWII until 1990s crisis broke point led many (attempted) revisions rising resulted renewed focus changed nature various security tried prevent dumping According areas relied contributed fragmentation (i e 4 started promote multi-level coordination early 2000s (Champion Pisoni 2014 15) reduce practice initiatives experimentation several types 5 experienced genesis scheme everything do special administrated financed 38 funds (Caisses chômage) obligatory 1982 Each canton own fund 12 privately partners overseen Ministry economy organisation can vary slightly “the rather precise rules granting fixed law corresponding ordinance” 53) constellation reflection historical developments first had already created century (tripartite result legislation (private) local action therefore dispersed heterogeneous delayed current factors: initial absence jurisdiction feedback arrangements lack will” 276) Only after WWI general strike did pressure intervention increase By then beginning along lines Ghent anchored provide subsidies standards 1924 seen gradual step direction involvement less homogenous today would prove inadequate Great Depression sparked round debate See Articles 77-78 AVIG Article 114 Constitution 1947 decades intense confederation adopted amendment empowered enact Federal followed 1951 institutionalised existing obligated them adhere However voluntary never gained great importance 283) oil shocks 1970s kick-started wave (provisional) yet create Compensation (AVIG/LACI) name suggests “enacted statute procedural substantive law” 135) additional regulations dominant Since undergone economic recession notably 1995 2003 2011 characterise inherent status quo They blocked development shielded austerity And so retrenchment during either watered down coupled 288-289) reform possible compromise; generosity toned little return 6 measures (ALMPs) extension maximum impact federalist structure Popular protest opposition against slashing hold latter incentive agree spill 291) Further 3rd 4th revision discussed detail later below All employees nowadays covered designed Despite existence Denmark we classify federalised administratively decentralised devolved primarily contributions fiscal burden equally divided employers amount 90% total while rest 52-53) (see Table revenues collected (Fonds AC) ALMPs job centres) managed ministry fully under 1a risks 2-5 22 7 27 Duell 88 200 daily allowances reflect regime people who exempt receive 90 Financial (AC) Source http://www espace-emploi ch/ueberuns/arbeitslosenversicherung/ 2013 Millions CHF % Contributions insured 6633 91 6% 6457 5% participation Confederation 454 3% 449 4% 151 1% 149 five six