Ministerie van Sociale Zakenen Werkgelegenheid

Department of Social Affairs and EmploymentDirectorate ASEA

Klaas Beniers

kbeniers@minszw.nl

Ministerie van Sociale Zakenen Werkgelegenheid

2 Question:

• The socio-economic position of citizens in society (measured by income, status) is to a large extent driven by luck and misfortune.

• Who agrees?

Ministerie van Sociale Zakenen Werkgelegenheid

3 Luck and misfortune determines position

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Den Ned Spa Ita Noor Bel Duits VK Zwe Ier Fra Fin Jap Aus Oos IJs Can VS

Source: World Values Survey

Ministerie van Sociale Zakenen Werkgelegenheid

4 Aim of the Department

• Increase employment rates and improve the functioning of the labour market.

• Take care of the social security system.

• Take care of a balanced distribution of income.

• Establish good relations between unions, employers, and other interest groups.

• Protect employees against risk at work.

Ministerie van Sociale Zakenen Werkgelegenheid

5 Aim and position of ASEA

• The aim of ASEA is to think about the future of the welfare state and the functioning of the economy.

• To analyse, criticize and provide an economic view on policy proposals.

• For this purpose, the directorate is deliberately put on a distance of actual legislative work.

• Small (25 people), all economists, some did a Ph.D.

Ministerie van Sociale Zakenen Werkgelegenheid

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Questions we answer are:

• Should the welfare state adjust as a reaction to recent trends? Do these adjustments match with the preferences of society?

• Are Pareto improvements possible within the current system?

• How do insights from the scientific literature translate into policy choices?

• How do different parts of the welfare state interact and relate?

Ministerie van Sociale Zakenen Werkgelegenheid

7 What we do

• Inform the minister and bureaucrats about desirable policy proposals, macro economic conditions, the consequences of proposals for the distribution of income

• Negotiate with other departments.

• Educate non-economist.

• Investigate unsolved problems, cooperate with research institutes.

Ministerie van Sociale Zakenen Werkgelegenheid

8 Trade offs in the welfare state

1) Equity versus efficiency

• Redistributive policies are an insurance against the risk of having a low ability.

• Should we care about the level of income or about the differences between income groups?

• Richard Layard: happiness depends on relative rather than absolute levels of income.

• Unemployment insurance schemes affects moral hazard problems

Ministerie van Sociale Zakenen Werkgelegenheid

9 Trade offs in the welfare state

2) Solidarity versus the freedom to choose

• Redistribution is one motive for collective arrangements.

• Besides that adverse selection and information problem are a rationale for government intervention.

• However, risks and risk attitudes differ between citizens and moral hazards problems are severe.

• Are citizens rational and forward looking?

Ministerie van Sociale Zakenen Werkgelegenheid

10 Trade offs in the welfare state

3) Discretion versus the equality of rights

• Central problem: Information asymmetry between the central government and local public officials.

• Discretion for public officials may create inequality between citizens.

• How to induce alignment of preferences between public officials and the central government?

Ministerie van Sociale Zakenen Werkgelegenheid

11 Preferences of society

•Stable support for redistribution and a large welfare state.

•However, majority supports the claim that the welfare state should adjust.

•Sanctions and monitoring for unemployed are accepted and crucial for support.

•The Netherlands are a high trust society.

Ministerie van Sociale Zakenen Werkgelegenheid

12 Most people can be trusted

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Den Zwe Noor Ned Fin Jap IJs Aus Spa Can VS Ier Duits Oos Ita VK Bel Fra

Source: World Values Survey

Ministerie van Sociale Zakenen Werkgelegenheid

13 Reasons to adjust?

Trends: Technological change

• Changing functioning of the economy has an impact on the flexibility of employers and employees (education system).

• Different role for employment protection? How to insure employees against the risk of unemployment.

• Polarization of the labour market (Autor, Manning). Consequences for labour market policies and for the distribution of income.

Ministerie van Sociale Zakenen Werkgelegenheid

14 Reasons to adjust?

Trends: Individualisation

• Less support for solidarity and collective arrangements?

• More private insurance schemes?

• Poverty is a bigger problem, many unemployed are single.

Ministerie van Sociale Zakenen Werkgelegenheid

15 Reasons to adjust?

Trends: Ageing

• Pressure for the government budget, health care expenditures increase rapidly.

• Scarcity on the labour market, need to work longer? Changing the pension entitlements?

• How can we ensure solidarity between and within generations.

Ministerie van Sociale Zakenen Werkgelegenheid

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Relation between number of employees and people receiving a pension.

Ministerie van Sociale Zakenen Werkgelegenheid

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Current project: Wage-productivity profiles for older workers

• High unemployment for older people.

• Possible reasons: relationship between wage and productivity, perception, financial benefits of retirement?

• Steep wage profiles may work as an incentive device (Lazear) but may create unemployment if jobs disappear.

• Are older workers really less productive in comparison with younger workers?

Ministerie van Sociale Zakenen Werkgelegenheid

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Current project: Saving accounts to enhance efficiency of redistribution

• A large part of redistribution is over the life cycle rather than between individuals

Example: financial aid to students.

• Saving accounts are more efficient since they do not distort the decision to work (Bovenberg, Sorensen, Hansen).

• Moreover, saving accounts can alleviate moral hazard problems.

• Question is what kind of arrangements are really redistributive.

Ministerie van Sociale Zakenen Werkgelegenheid

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Current project: More efficient active labour market policies.

• Examine effectiveness of different instruments. Some programmes may have a strong lock-in effect.

• Towards a more efficient organizational structure. In the current system different public agencies are involved. Moreover, public agencies may have low incentives to perform well.

• Clear distinction between public and private tasks, take use of incentives.

Ministerie van Sociale Zakenen Werkgelegenheid

20 Who can apply

Of course, everybody… but in particular PhD students who:

• Are interested in working on the edge between science and policy making.

• Like to translate scientific results in a new view on the welfare state, to convince and communicate this to other bureaucrats.

• Like to work on both short-term and long-term projects.

• Like to work in a political environment.

Ministerie van Sociale Zakenen Werkgelegenheid

21 What we offer

• Interesting political environment.

• The possibility to translate economic insights into actual policy proposals.

• Working on topics discussed in the public scene.

• Good working conditions.

• Lively and ambitious directorate.