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What is ‘New’ in the New Governance of Activation?
A Comparison between Italian and Finnish Labour
Market Policy Reforms
Simone Scarpa
Post-Doc Researcher
Department of Sociology and Social Research
University of Milan-Bicocca
Research questions
• Does the introduction of similarly-functioning ‘new modes of
governance’ and ‘instruments of activation’ indicate a convergence
of labour market policies in Europe?
• Can the institutional differences between activation approaches be
instead explained against the background of country-specific shifts
towards a ‘postindustrial’ service economy?
• Following Richard B. Saltman’s distinction between
‘technical/mechanical’, ‘political’ and ‘social’ types of convergence,
Finland and Italy are selected as cases for comparison:
Did Italy become ‘more’ universalistic and, conversely, Finland ‘less’
universalistic after the introduction of recent ‘activation’ reforms?
Technical, political, socio-structural convergence
‘Type’ of convergence
The focus is placed on:
Limit(s) of each approach:
Technical/mechanical
convergence
‘How things are done’, how
policies are implemented
(i.e. ‘activation instruments’,
new modes of governance).
Changes in the policy
‘instrumentation’ may also
not be related to changes in
the policy paradigm(s).
Political convergence
Spreading of certain norms
and values of solidarity,
‘typologies’ of activation
approaches.
Absence of a shared set of
indicators. Comparative
analyses tend to be based on
personal views on the effects
of welfare reforms.
Socio-structural
convergence
Changing labour market
conditions and subsequent
adaptation of social security
systems.
There are different (welfare
regime-specific) pathways
towards the service
economy.
The economic crises of the early 1990s as the ‘triggers’
of welfare state reforms in Finland and Italy
In Finland:
In Italy:
• 1980s: Liberalization of financial
and credit markets, debt-financed
economic boom, rising inflation,
overvaluation of national
currency
• Early 1990s: Delayed devaluation,
worst economic crisis of the
century, fall in the GDP, growth in
the unemployment rate
• During the 1990s: structural
adjustment of the economic
structure and welfare reforms
• 1980s: Rising public debt and
dramatic worsening of current
account deficit, rising inflation,
overvaluation of national
currency
• Early 1990s: Delayed devaluation,
exit from the EMS, fall in the GDP,
growth in the unemployment rate
• During the 1990s: labour market
deregulation and minor welfare
reforms
The effects of the crises on economic growth
and labour market dynamics
• Peak in the years 1991-1993:
In Italy: lower fall in GDP, lower
increase in the employment rate
In Finland: deeper fall in GDP,
greater increase in the
unemployment rate
• After the peak (mid-1990s):
In Italy: stronger employment
growth, weaker GDP growth,
first-time-ever positive current
account
In Finland: slower employment
growth, stronger GDP growth,
positive current account (but
smaller than Italy until 1999)
A closer look at labour market dynamics:
productivity growth vs. job creation
Jobless growth in Finland:
Labour productivity growth has
always been positive but the
original level of employment (= n.
of employees in the year 1990)
could not be restored until 2007.
‘Growth-less’ job-creation in Italy:
Employment growth also in the
absence of labour productivity
growth (i.e. when the latter has
been negative).
The transformation of the composition of the
employed and unemployed populations
Italy: shorter average spells
of unemployment ,
decrease in youth
employment share as % of
total unemployment.
Finland: decrease in the
share of youth
unemployment, increase in
the share of long-term
unemployment, fall (in the
1990s) in the employment
rate of older individuals.
Different ‘post-industrial’ trajectories of
structural adjustment
In Finland:
In Italy:
• Failed attempt to deregulate the
labour market:
fixed-term contracts from 18.3%
to 16% between 1997-2007
• Technological upgrading of the
economic structure:
R&D expenditure from 2.3% to
3.5% of GDP between 1995-2005
• Higher structural unemployment,
barriers to employment for
individuals with low or obsolete
skills
• “Selective and shielded
deregulation”:
fixed-term contracts from 8.2%
to 13.5% between 1997-2007
• Preservation of the economic
structure:
R&D expenditure from 1% to
1.1% of GDP between 1995-2005
• Lower unemployment level but
higher level of labour market
segmentation (than before, than
Finland)
Adaptation of welfare states to
changing labour market conditions?
In Finland:
In Italy:
• The extension of contribution and
membership conditions for
unemployment benefits caused
an increase in social assistance
receipt
• Introduction of a new scheme
(labour market subsidy) targeted
at individuals who cannot gain
access to the insurance-based
component of the unemployment
security system
• Reduction of differences
between provisions for
collectively dismissed workers
and those for individually
dismissed workers
• Existing measures are still
solely targeted at a minority of
the labour force (the majority
of the workers on nonstandard contracts are still
excluded)
The operation of social assistance systems
in the two countries
In Finland:
In Italy:
• Combination of centrally-defined
rules (since 1993) and municipal
case management (‘basic’ +
‘supplementary’ component of
the benefit)
• Statutory right to receive social
assistance benefits when needs
cannot be satisfied in any other
way. The benefit can be also
provided as a compensation (e.g.
for labour market support)
• Absence of a nationally-regulated
social assistance scheme,
discretionary measures
administered at the local level
(‘vital minimum’)
• Unemployment is not a sufficient
condition to be entitled to the
‘vital minimum’: more serious
social deprivations are ‘required’
• Provision is subject to meanstesting on household income
A common path towards social service integration?
(cross-departmental initiatives within public sector)
In Finland:
In Italy:
• Need to target the growing
number of long-term
unemployed
• Act of Rehabilitative Work
Experience (2001): ‘last-resort
labour policy measure’ for
individuals in receipt of lastresort benefits
• Creation of Labour Force Service
Centres (LAFOs), jointlyadministered by the state and the
municipalities
• Social service integration as a
strategy of ‘residualization’?
• Framework Law on the
Realization of an Integrated
System of Social Interventions and
Services (2000): narrow
identification of a target
population of clients with more
serious economic and social
disadvantages (‘selective
universalism’)
Public-private partnerships:
A common trend towards the ‘social economy’?
In Finland:
In Italy:
• Social enterprises: marketoriented firms whose 30% of
employees is represented by
long-term unemployed, ageing
jobseekers, or people with
impaired capacity to work
• Social enterprises can receive
state subsidies that can cover up
to 50% of total labour costs
• Social enterprises compete on
equal footing with other firms
(same wages)
• Social cooperatives: if they hire
long-term unemployed
jobseekers with disabilities and
other barriers to employment,
they bid on public tenders for
public services at more
favourable conditions than other
types of firms
• Social cooperatives participate at
decision making and at service
provision
• Large array of flexible contracts
Discussion and conclusions:
• The scope of technical/mechanical innovations needs to be seen
against the background of changing labour market contexts
• There is no evidence of any political convergence :
Finland: retreat from universalistic principles somehow
counterbalanced by an ‘encompassing’ approach to social security
Italy: enduring importance of the insiders/outsiders axis (but,
maybe, less ‘segmentation’ among the insiders)
• Central importance of socio-structural conditions:
Finland: knowledge-based development and creation of a surplus
population which relies on social benefits rather than on cheap jobs
Italy: the widespread availability of low-paid jobs created an
incentive for the resilience rather than for the adaptation of the
welfare state
• “The standard discussion rests on the tacit belief that all the
problems lie on the supply side of the labour market; kennel dogs
need merely act like bird dogs, and birds will come” [Solow, 1998:5]