Transcript ACTIVE LABOUR MARKET POLICY IN REDUCTION OF …

Equity and efficiency trade-off in
social and employment policy and
education, case of South East
Europe
Countries cases and experiences
Regional seminar – Zagreb, April 2011
Editors:
Predrag Bejaković - Institute of Public
Finance, Zagreb, &
Marc Meinardus - Friedrich Ebert Stiftung,
Sofia, Bulgaria
Content of presentation
Introduction
The aim of the publication
Country cases: Albania, Bulgaria,
Croatia, Kosovo, Macedonia,
Moldova, Montenegro, Romania
and Serbia
Conclusion and recommendation
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Introduction (I)
Although we are preoccupied – or more
accurately obsessed – with our past, we
lack a clear idea of who we have been.
What is more serious, we have no
desire to know. We live between myth
and negations; we enshrine certain
periods, we forget others. These
exclusions are significant…
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Introduction (II)
South –East Europe?
No, New Spain and Mexico in
Octavio Paz For Juana
(Harvard University Press, 1988)
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Introduction (III)
While it is straightforwardly apparent
what equity and what efficiency is, the
relation between those two phenomena is
not so obvious.
The efficiency and equity trade-off is that
adequate equity enhances the poverty
reduction agenda and thus, socioeconomic efficiency.
The poor have less influence, less
income, and less access to services than
other better-off social groups.
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The aim of the publication
To analyse and propose measures for
alleviating the widespread existing
conflict between equity and efficiency
in social policy in the broader sense:
including social welfare, education and
employment.
Education, social welfare and the
labour market are closely intertwined
and mutually reinforcing.
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Country case: Albania
Even from its first days of independence
in 1912, the country was plagued by a
host of ills, among others, overwhelming
illiteracy and epidemics of disease.
Albania was kept Europe's most isolated
and deprived country overwhelmed by
instability and poverty.
It entered a turbulent period of political
and economic change.
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Erisa Çela about Albania (I)
Although in the last decade Albania has
made progress in its social, economic
and political development, it still faces a
number of challenges, like:
 widespread informal economy,
 various distortions of the labour
market,
 inefficient educational system
 huge regional disparities
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Erisa Çela about Albania (II)
Measures for improvement include:
 increase employment – particularly
women participation in the labour
market
 a growth of the employment capability
of the economy, harmonized with a
skilled and educated human capital
 improve education efficiency and output
– especially secondary education
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Country case: Bosnia and Herzegovina
15 years after the war, the country is still
not prosperous and united, but it is poor
and divided into two entities.
Welfare system is highly fragmented and
comprises various almost independent
subsystems, with a low level of
coordination and cooperation between
them.
Furthermore, functions are overlapped
and division of responsibilities is unclear.
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Cenić on Bosnia and Herzegovina (I)
 Analyses relationship between poverty and
development and underlines
poverty applies to individuals and
households, whereas
development refers to large-scale
processes of change at societal level.
Absence of a legal framework at various
levels results in the exclusion of certain
vulnerable categories of the population.
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Cenić on Bosnia and Herzegovina (II)
Improvement could be obtained through:
 need that country should finds itself at
decisive stage in transformation of its
socio-political and economic structure
 development of more effective system
that would reduce poverty, inequality
and social exclusion
 better coverage of social security and
welfare particularly among workers
employed in the informal economy
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Country case: Bulgaria
Supported by more than a decade of
consistent macroeconomic policies and
deep structural reforms, joined the EU
However, country still has to overcome
many obstacles, including harsh social
situation, low technological level of
economy, significant productivity gap and
low labour remuneration in comparison with
the rest of the EU and deeply rooted
unofficial economy
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Petkov and Vladikov on Bulgaria (I)
The two central problems:
 the demographic crisis (which is accelerated
by low-cost labour migration and the brain
drain) and
 economic and social transformation coupled
with the issue of increasing the standard of
living and incomes to some acceptable level
 the social security sector is administratively
regulated top-down and the principles of
command-administrative decision-making
imposition are still preserved.
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Petkov and Vladikov on Bulgaria (II)
Amelioration could be achieved through:
 wider introduction and application of
modern technology in the national
economy
 improvements in social effectiveness and
social equality
 fiscal consolidation and restructure public
finances, strengthen financial stability, and
mitigate the social impact of the crisis in
the short-run.
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Country case: Croatia
 Although the multidimensional approach
and the governance of policies and
practices have not fully become a reality,
the assessment can be made that a
significant progress in cooperation and
coordination of various bodies and activity
areas has been achieved in this area.
No doubt this is a consequence of
economic crisis and increased number of
unemployed and welfare beneficiaries.
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Bejaković on Croatia (I)
 Absolute poverty is low, but this diagnosis
is only deceptively consolatory
 Poverty is characterized by stagnancy those who become poor take a great deal of
time to escape from penury
There is currently a concern that social care
services are not necessarily targeted to
those most in need - despite the high
percentage of social transfers in GDP
Croatia has achieved little redistribution.
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Bejaković on Croatia (II)
Improvement can be achieved through
 better targeting of social assistance
programmes to most vulnerable
 more attention should be dedicated to
deinstitutionalisation and half-day or daycare centres and provision of services in the
user’s home.
a need to increase the scope and improve
the efficiency of currently insufficient labour
market programmes.
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Country case: Kosovo
 It is the smallest state in terms of
territory and the newest state in the SEE,
but with very old, deep and serious
economic and social problems.
 During the 1990s, its economy had
already suffered from poor economic
policies, lack of domestic institutions,
broken external trade and financial links,
international sanctions, underinvestment
and ethnic conflict.
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Jeton Mehmet on Kosovo (I)
 Insufficient long-term economic growth, low
incomes and limited financial possibility are
factors that cause a large percentage of
poverty.
 However, economic growth in the past decade
has been solid but social assistance
programmes are inadequate.
 Remittances have helped individual families,
but they are not a source for financing public
investments in infrastructure and social
services.
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Jeton Mehmet on Kosovo (II)
 Poverty reduction could be achieved
through strategies that lead to high
employment-generating and long term
sustainable growth.
One of the main pillars for growth is export.
Creating jobs is a major challenge that
needs immediate solution. It should be the
government’s responsibility to improve the
country’s image and attract foreign
investors.
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Country case: Macedonia
 Apart from the typical transition troubles
there were also other long-term problems
which have been prevailing before: low
level of the country’s economic
development, higher unemployment level
and low investment level.
Furthermore, economic emigration and
low education attainment have aggravated
the transition process.
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Milevska Kostova & Kotevska on Macedonia (I)
Main characteristic of social policy:
 low or limited financial resources and
insufficient administrative capacity at the
disposal to the institutions in charge
 consequently, slow or weak
implementation of law and reforms
 hardly sustainable and equitable social
protection system
 effectiveness and equity are questionable
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Milevska Kostova & Kotevska on Macedonia (II)
Conclusion and proposals for improvement:
 The interconnectedness between the three
areas is more than evident - measures
undertaken in each of them reflect upon the
others.
 Enhancing the capacity of the administration
and of the personnel working in the institutions
for social welfare and unemployment.
 Employment policy still lacks sufficient active
labour measures.
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Country case: Moldova
Characteristics:
 a complex socio-economic situation, primarily
linked with increase of poverty after the
proclamation of the independence
 transition process had devastatingly impacted
the country's social situation
 heavy external debt burden and high
dependency on migrant remittances
 unfavourable economic situation has been
further worsened by political instability
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Cornel Ciurea on Moldova (I)
 Poverty reached its peak after the economic
crisis in Russia in 1998, when over 53% of
the population were living on an income of
less than 2.15 USD per day.
 A slowed rate of economic growth,
accompanied by significant disparity
between development in rural and urban
areas and constant growth of inequalities.
 A significant segment of persons engaged in
the informal economy.
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Cornel Ciurea on Moldova (II)
Proposals for improvements
 an attempt should be made to find the optimum
ratio between the desired labour market
flexibility and the required social protection
 primary health care level should be empowered
to deal with majority of the health care needs
 attention should be given to long-term efficiency
in education, social and health policy
The adoption of measures depends on the ability
of state agencies to undertake ambitious efforts.
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Country case: Montenegro
Achieved independence in 2006, applied
for EU membership in 2008 and received
candidate status in 2010.
Montenegro has recorded remarkable
economic growth in recent years, which
has created opportunities and enabled
progress in social situation and equity.
There are significant differences in the
extent of the poverty between the regions.
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Jadranka Kaludjerovic on Montenegro (I)
Main problems
 amounts of social benefits are not sufficient and
only reduce the vulnerability of families
 the timing of social assistance benefits is poor
and all social assistance benefits are paid to
beneficiaries with significant delays
 the educational system is still inefficient, as the
learning outcomes are very low and labour
market needs are not fulfilled
 financing of education is still fully centralized
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Jadranka Kaludjerovic on Montenegro (II)
Main proposals for improvement:
 significant efforts have been made to increase
access to education
 actions have to be focused on further enrolment
of children in pre-primary education institutions
and an increase of enrolment, attendance rates
and quality of education
 there is a need to implement planned
decentralization, in the first line to make
transfer of the financing on local government
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Country case: Romania
 The prospect of becoming an EU member
constituted, for more than a decade, a solid
external incentive for the transformation of the
country.
 Experiences show unrealistic expectation of
many transitional countries that all social
problems would be solved with EU accession.
 Romania is in spite of the accession to EU
faced with serious and overwhelming economic
crisis and the many difficulties of the integration,
primarily with many “working poor” people.
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Gabriela Cretu on Romania (I)
Despite many difficulties, there was huge
support for the accession to the EU.
For Romanians joining the EU was the
equivalent to a better quality of life, more
and better jobs, freedom of movement, their
expectations were high.
Labour migrations in the short-term palliate
poverty and remittance improve
unfavourable social picture, but in the longrun can endanger family links.
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Gabriela Cretu on Romania (II)
Main proposals for improvement:
 investing more in cohesion policies could be a
balanced solution for achieving higher efficiency
and a more equitable society
 a generous level of social protection and lower
inequality do not necessarily lead to lower
economic results
 broadening social security programmes may
enhance firms’ flexibility, facilitating labour
mobility and social services could become a
significant source of new jobs
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Country case: Serbia
In Serbia, war, sanctions and economic crisis produced
the unprecedented GDP drop, huge inflation, salaries’
reduction, unemployment rise, poverty and economic
collapse.
The new democratic Government (2000) prepared a
package of reform proposals whose goal was to create
a real market economy as well as a strong social policy.
The period after the democratic changes has been
characterized by the reforms directed toward the
creation of macro-economic preconditions for a
sustainable and stable economic development.
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Pavlović and Arandarenko on Serbia (I)
 By 2008, dynamic economic growth, stability of
prices and exchange rate were achieved along
with the constant growth of foreign reserves.
 Mandated the sell-off of the old, loss-making
and inefficient socially-owned enterprises
enabled the redistribution of resources, and the
asset’s redeployment in trade and services.
 The creation of a large service sector after 2000
came at a price: it was paid by the gradual
devastation of manufacturing, and agriculture.
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Pavlović and Arandarenko on Serbia (II)
Main proposals for improvement:
 Increase the relative share of wage tax revenues and
decrease the relative share of revenues from social
insurance contributions in the overall labour tax
revenue
 Reduce the tax burden on labour of low-wage
workers
 Ensure labour tax progressivity by introducing three
progressive non-zero tax rates on labour income
 Cut the overall combined social insurance
contributions rate.
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Differences are bigger than similarities
Due to various socio-economic
situations in the observed countries
and different contributions of authors
to the book, it is almost impossible to
perform inter-countries comparisons
regarding situations, problems and
solutions for efficiency and equity
trade-off, but….
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…for all observed countries it is important to
 eliminate (or at least reduce) corruption, improve
labour regulation and its implementation and
enhance the business start up regulations
 insure equitable access to quality public services
 perform institutional reforms regarding
transparency, accountability and good
governance
 significantly improve weak public administration,
ineffective oversight of regulatory authorities and
inefficient judiciary that hinder economic and
social development.
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Conclusion for all observed countries
 There is no universal model for all countries, but there
are some indications that SEE countries could benefit
from establishing a closer relationship between
employment policy and social policy.
 In countries with high (particularly long-term)
unemployment exposed to poverty and social
exclusion, the interaction between benefit systems
and employment policy is significant.
 As countries move to placing an emphasis on active
jobseekers, the link between policy and the delivery of
educational, social and employment services becomes
more important. In SEE this link seems to be missing.
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Final message
Liberalisation of economy and related
social policy is both an opportunity and a
treat.
It is an opportunity because it set society
free and breaks with overregulation in
economic and social life.
It is a treat because many social groups
are vulnerable but wit adequate policies
and measures they can be helped.
We are the masters of our destiny.
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THANK YOU FOR
YOUR
ATTENTION
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