The interaction of labor market regulation and labor market policies in welfare state reform

Abstract

"In order to explain differences in labor market performance, factors determining the capacity of economic actors to adapt to structural shifts or business cycle variations have to be taken into account. In this context, employment protection legislation, unemployment benefits, and active labor market policy are Janus-faced institutions. On the one hand they partly determine the overall adaptability of labor markets in that they influence actors' behavior. On the other hand, they also constitute welfare state provisions of insurance against labor market risk. They not only determine the level of income and employment security but also the chances of individual reemployment after unemployment. Since there are complementarities between these institutions, reforms to increase the dynamics of European labor markets have to address more than one area. This paper will first describe recent reform sequences affecting employment protection, unemployment benefits, and active labor market policies in a number of European countries that belong to different regimes of welfare states: Denmark, Sweden, the United Kingdom, Switzerland, the Netherlands, Spain, and Germany. The paper shows whether and to what extent national policy patterns actually converge in the direction of a higher level of adaptability with employment protection being eased and labor market policies being activated through a combination of 'carrots and sticks.' Second, regarding the politics of reforms, the paper tries to answer the question whether consistent reforms of the three insurance devices are more likely in political systems characterized by strong government and/or social partnership since such institutional prerequisites may favor reform packages." (Author's abstract, IAB-Doku) ((en))

Cite article

Eichhorst, W. & Konle-Seidl, R. (2006): The interaction of labor market regulation and labor market policies in welfare state reform. In: Comparative labor law & policy journal, Vol. 28, No. 1, p. 1-42.