Chapter 6. Try and try again on the labour market

References [ CPB | General | Scientific ]     Summary

Authors

Rob Euwals, Pierre Koning, Daniël van Vuuren & Dinand Webbink
Contact: Rob Euwals

In this chapter

Unemployment is increasing dramatically. Why is that, and which employees are at the greatest risk?

Can we create jobs for younger workers by sending their older counterparts home?

Are the so-called Melkert jobs for benefit claimants the answer to preventing long-term unemployment?

The part-time Unemployment Insurance Act (deeltijd WW): a sensible answer to keeping unemployment in check?

Why does our dismissal protection system lead to a slower recovery of employment?

Will education and training help get us back on our feet sooner?

References

CPB

Rob Euwals, Ruud de Mooij and Daniel van Vuuren, 2009, Rethinking Retirement, CPB Speciale Publicatie 80.

The CPB publication discusses the labour market for older employees, the economic effects of the early retirement schemes on participation and the effects of dismissal protection on mobility and wages.

Ruud de Mooij, 2006, Reinventing the welfare state, CPB Speciale Publicatie 60.

This study explores how reforms within the welfare state could contribute to objectives such as sustainable public finances, increased labour participation and investment in human capital. The study also developed three comprehensive scenarios for the Dutch welfare state and investigated the robustness of the alternatives in terms of the future international trends.

Anja Deelen, Egbert Jongen and Sabine Visser, 2006, Employment protection legislation; lessons from theoretical and empirical studies for the dutch case, CPB Document 135.

The CPB publication gives a summary of theoretical and empirical studies conducted on the effects of dismissal protection. The document confronts the findings of these studies with the Dutch setup and considers a number of reform options.

Marc van der Steeg and Dinand Webbink, 2006, Voortijdig schoolverlaten in Nederland: omvang, beleid en resultaten, CPB Document 107.

This study offers, on the basis of literary research, insight into the scope and nature of dropping out of school in the Netherlands, as well as the ensuing private and public costs. Dropping out of the school system not only means poorer job prospects for the young people involved, but could also result in higher costs for society, in terms of an increased crime rate, for example, and social benefits.

Centraal Planbureau, 2004, De macro-economische effecten van arbeidsduurverlenging, CPB Notitie, 8 April.

This memorandum explains how a longer working week does not lead to higher unemployment (and that a shorter working week does not to lower unemployment). This is also quantified in a macro-economic model.

General

Actieplan Jeugdwerkloosheid, 2009, Ministerie van Sociale Zaken en Werkgelegenheid.

In this publication, the government explains how it intends to prevent large groups of young people who do not attend school and who do not have a job from simply staying at home. It describes how young people can find a job, work placement or a traineeship despite the credit crisis. A second approach is to keep young people in school for longer, for further education or a different training programme.

Pierre Koning, 2008, Tweedekans re-integratie, Economisch Statistische Berichten, 93 (4533S), pp 24-28.

This article focuses on the efficacy of the Dutch reintegration policy. It devotes special attention to the question of for whom, when and how the reintegration should be implemented.

Arie Kapteyn, Adriaan Kalwij and Ashgar Zaidi, 2004, Korter werken, minder werk, Economisch Statistische Berichten, 83 (4149), pp 332.

Shorter working weeks do not lead to more jobs. The authors discuss international empirical studies that have been conducted on the issue.

Arie Kapteyn, Hugo Keuzenkamp and Rick van der Ploeg, 1989, De hardnekkige werkloosheid in Nederland, Economisch Statistische Berichten 74 (3720), pp 794-798.

The authors discuss why long-term unemployment in the Netherlands was so high in the 1980s. They also argue that it will always remain necessary to combat long-term unemployment.

Jules Theeuwes, 2003, Epur si muove (En toch beweegt het), Uitgeverij Lemma.

This booklet provides an insightful discussion on movements on the labour market. It shows that there are indications of great dynamism on the labour market and the meaning of this dynamic image with regard to policy.

Scientific

Romain Duval, Jorgen Elmeskov and Lukas Vogel, 2007, Structural policies and economic resilience to shocks, OECD Economcs Department Working Paper 567.

This study discusses the economic resilience of various OECD countries and how this is affected by structural policy. The structural policy concerns labour market policy, product market policy and financial policy. The study shows that a rigid policy does initially cushion an economic shock, but also results in this shock continuing for longer.

Anders Forslund , Lars Calmfors and Maria Hemström, 2001, Does active labour market policy work? Lessons from the Swedish experiences, Swedish Economic Policy Review 8(2), pp 61-124.

Provides more information on experiences with Sweden's subsidised labour and reintegration policy. The researchers outline the effectiveness of this policy in Sweden in the 1990s. Their conclusion is that this policy was implemented on too large a scale, and therefore proved inefficient.

Steven Davis and John Haltiwanger, 1992, Gross job creation, gross job destruction, and employment reallocation, Quarterly Journal of Economics, Vol. 107 (30), pp 819-863.

The first comprehensive analysis of the gross labour market movements on the basis of microdata. The movements proved to be greater than initially thought, and the job numbers transpired to be relatively unaffected by the economic climate.

Richard Layard, Stephen Nickell and Richard Jackman, 1991, Unemployment, Oxford University Press.

This textbook addresses the most important aspects of unemployment. It explains why unemployment exists and why it will always be there. The book contains both technical chapters for specialists and chapters that are simple enough for non-economists to understand.

Anthony Atkinson and John Micklewright, 1991,Unemployment compensation and labor market transitions: A critical review, Journal of Economic Literature, Vol. 29 (4), pp 1679-1727.

This review discusses the effect of unemployment benefits on the anticipated duration of unemployment.

Coen Teulings, 1990, Conjunctuur en kwalificatie, SEO.

This thesis addresses the displacement that took place on the labour market during the crisis of the 1980s. Rising unemployment has an above-average effect on less educated workers and migrants.

Olivier Blanchard and Lawrence Summers, 1986,Fiscal increasing returns, hysteresis, real wages and unemployment, European Economic Review, Vol. 31 (3), pp 543-560.

The study introduces the concept of hysteresis for the European labour market. Hysteresis means that unemployment levels remain high after an economic shock instead of returning to a stable level. The study outlines the possible causes.

Olivier Blanchard and Peter Diamond, 1984, Ranking, unemployment duration and wages, Review of Economic Studies, Vol. 61 (3), pp 417-434.

The study analyses the effects of long-term unemployment on the labour market's capacity to recover.

Gary Becker, 1964, Human Capital, The University of Chicago Press.

Pioneering study that regards knowledge and training as an economic investment.

Summary

As a consequence of the economic crisis many firms will have to cut down on staff or even close their doors. The unemployment rate will rise to a level which has not been seen since the 1980s. Some groups of workers will suffer more than others. Migrants and lower-educated men, in particular, are likely to be harder hit than women, as the latter are more often employed in the care sector and other public/semi-public sectors and are therefore at a lower risk of becoming unemployed. An important lesson from the 1980s is that the government should practise restraint when providing financial support to firms. In the end, such support will lead to weaker firms and hamper the process of 'creative destruction'. A crisis typically leads to opportunities for new firms which create new jobs. The support of existing firms hampers the rise of these innovative and typically more efficient firms. Work sharing financed through the Unemployment Insurance scheme ('Partial UI') is, in fact, an example of support to existing firms. It tries to preserve jobs at firms that may have less of a future. The chapter argues that it would be more fruitful to focus on proper education and schooling, and a quick reallocation of labour. It is inevitable that jobs will disappear and new jobs will be created. The best way to combat the rising unemployment rate is to focus on future jobs. Or, in the words of the Swedish prime minister, it is more important to save the sailors than to save the ship.

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