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227
FLEXICURITY ­ CHALLENGE TO IMPROVE
CZECH LABOUR MARKET1
Zuzana Potužáková
Introduction
In the recent two decades, the Czech labour market has been deeply reformed due to the
political and economic changes. In spite of these reform steps, there is a space for the
future improvement, especially in the time of the global economic slow-down. The
paper is divided into two parts. In the first one we explain the reasons why flexicurity
got so popular and what are the potential threats in implementing it into other
economies. The second part deals with those elements of the flexicurity model (the so
called golden triangle) which could be implemented into the Czech labour market and
improve its functioning. In this part, we will mention the flexicurity elements which are
already used as within the active labour market policy (ALMP).
1. Fexicurity and its elements
Flexicurity, composed from the words flexibility and security, reflects current basic
trend in guaranteeing high employment levels and sustainability of national fiscal
systems in the welfare states. The fundamental idea behind the concept of flexicurity is
that flexibility and security are not contradictory to one another, but in many situations
can be mutually supportive. As a concept, flexicurity was created in the Netherlands in
the mid-1990s, based on a number of specific conditions. The goal of the Dutch
flexicurity legislation was to correct an imbalance between an inflexible labour market
for core workers and an insecure labour market situation for the contingency workforce.
In Denmark this concept was used in the broader way in the 1990s and helped to reduce
the unemployment levels significantly. The basic idea of this model comes from the so
called Golden triangle and focuses on combination of adaptability to a changing
international environment and a solidaristic welfare system. It combines a liberal and
flexible labour market with low barriers to (re)enter/leave and generous welfare system.
The high degree of mobility from employer to employer is linked to the low level of
employment protection in the Danish labour market. Thanks to the generous
unemployment support, Danes are not afraid of changing jobs often. Based on this we
speak about high numerical flexibility ­ number of people changing the job is therefore
substantially higher than in the EU. Denmark has the highest figures in the percentage
of employed which are each year affected by unemployment and receive unemployment
benefits or social assistance (around 20 %) within the EU. But the majority of these
unemployed persons manages to find their own way back into a new job.
The third part consists of active labour markets policy (ALMP) which enables to prequalify
those who do not enter the labour market within a short period. There are two
important effects in this connection. On the one hand, as a result of the active measures,
1
The paper was prepared within the project of the Czech Science Foundation GAČR
402/07/0521, Internal Market and its Effects within Visedgrad 4.
NÁRODOHOSPODÁŘSKÝ OBZOR
228
the participants in various programmes (e.g. job training and education) are upgraded
and thus improve their chances of getting a job (qualification effect). On the other hand,
the measures can have a motivational effect in that unemployed persons, who are
approaching the time when they are due for activation, may intensify their search for
ordinary jobs, in case they consider activation a negative prospect.1
The golden triangle
of flexicurity is illustrated in the scheme No. 1.
Scheme No. 1 - Golden triangle of flexicurity
Source: Madsen (2006), p. 8
Danish employment system is defined as a `hybrid' one. It includes a very liberal
feature ­ non-restrictive employment protection legislation typical for Anglo-Saxon
labour markets and generous welfare regime of social security usual in Scandinavian
countries. The system is generally accepted in Denmark and is based on public
consensus. Flexicurity stresses the potential for win-win-outcomes in situations which
are traditionally conceived as characterised by conflicting interests.2
During the so
called Danish job miracle the unemployment rate was reduced by 50 % from 10 % in
1993 to 5 % in 2002.3
This is without any doubt a very good result and since the end of
the 1990s, the flexicurity model became one of the "export articles" from Denmark and
other EU states started to implement this model into their employment systems.
The EU implemented this concept into the Lisbon Strategy in 2006. Lisabon strategy,
started in 2000 on European council in Lisbon, 4
aimed on improving of the EU
competitiveness within the world economy. In 2004 the Strategy was primarily focused
on economic growth. Growth could be created only in case there are enough jobs with a
1
Madsen (2006), p.7.
2
Madsen (2006), p.3.
3
Madsen (2002), p. 2.
4
http://ec.europa.eu/growthandjobs/european-councils/index_en.htm [15.8.2009].
Ročník IX. číslo 4/2009
229
high productivity. Otherwise the EU states would not be able to guarantee current
welfare standards in the future. Based on these circumstances, the flexicurity concept
was strongly welcomed within the EU.
In 2006, the Spring European council1
stressed the need to develop more systematically
in the National Reform Programmes comprehensive policy strategies to improve the
adaptability of workers and enterprises. It noted that the Commission, together with
Member States and social partners, will explore the development of a set of common
principles on flexicurity.2
As the Commission further noted, "Common principles of
flexicurity will provide Member States and the European Union with a common
understanding of flexicurity and the challenges it aims to address. They will strongly
underline the involvement of the EU in securing Europe's social and economic future".3
Another paper concerning this topic was published in 2007 by the DG Employment.4
This paper already highlights some good example practices already applied in the
Member States.
The EU, which is nowadays facing many external and internal challenges (in EU
language this means threats), is doing its best to mobilize as much of human resources
as possible and adapt the labour market for the disadvantaged groups at the margins
(e.g. older workers, disabled, youth, etc.). All these steps try to aim on the high
employment. High employment rates have two different contributions. The first
contribution is the social one. In case of high employment rates, the "negative social
behaviour" is reduced. The other gain is economical; the more people are employed, the
more people contribute to the budget and less resources for unemployment/social
benefits are required. This helps to secure the welfare systems.
Flexicurity reflects also another feature of the today's society, that means to keep
economically active the people employed in the jobs with low requirements on labour
force. Due to changing employment structures the requirements on labour force are
rising. In the past, most of people worked in agriculture sector with plenty of jobs
demanding limited skills. Due to the industrialization and later the tertialisation process
more skills were needed to manage the jobs. The jobs with low requirements on labour
force are disappearing from Europe.
Today, most of the EU labour force is employed in service sector. In 2007, almost 70 %
jobs belonged into tertiary sector in EU-15 and about 60 % in EU-12.5
In general, we
can consider European labour markets for societies where the computer and language
skills are broadly expected. The so called "knowledge society" got leitmotif of many
Commission's papers of the recent period. Despite the rising requirements on human
resources, their abilities remain on the same level. From the social and even economical
point of view, for the state it is less expensive to pre-qualify workers, create jobs for
them and keep them economically active.
1
http://ec.europa.eu/growthandjobs/european-councils/index_en.htm [15.8.2009].
2
EC(2007a), p. 4.
3
Ibid.
4
EC (2007c) Towards Common Principles of Flexicurity: More and better Jobs through
Flexibility and Security.
5
http://www.czso.cz/csu/2008edicniplan.nsf/kapitola/1607-08-2008_(vybrane_udaje)-3
[18.8.2009].
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230
In 2006, the EU defined the so called pathways to improve the functioning of the labour
markets:1
* Pathway 1: Reduce asymmetries between non-standard and standard employment
by integrating non-standard contracts fully into labour law, collective agreements,
social security and life-long learning, and consider making employment in standard
contracts more attractive to firms,
* Pathway 2: Enhance companies' and workers' adaptability by developing and
strengthening transition security,
* Pathway 3: Address opportunity and skills gaps among the workforce by
broadening and deepening investments in skills,
* Pathway 4: Enhance employment opportunities for benefit recipients, prevent longterm
welfare dependence, regularise informal work and build up more institutional
capacity for change.
The EU pathways in general correspond with the elements of the Danish golden
triangle. First two pathways cope with the active labour market measures. The third and
forth one includes ALMP elements declaring the tendency to prefer active labour
market policy to the passive one. The first element, flexible labour market, is described
to the greatest detail; general welfare system is left completely unnoticed. That
signalizes where weaknesses of most European labour markets are.
All the measures of the model and the model as a whole make a very positive
impression. In Denmark, the unemployment rate was substantially reduced, as well as
the long-term unemployment. Subsequently, the employment rate grew to the one of the
highest employment rates in the EU,2
reaching almost 80 % in 2008. Anyway, there are
some aspects which enable this concept in Denmark to function and which are typical
for this economy. In case the flexicurity is implemented into any other economy, the
concept may not have the same positive effect.
Low employment protection strictness for various groups of employers (regular
workers, temporary workers) is one of the particularities of the Danish labour market.
This strictness measured by Employment Protection Legislation (EPL) index was
constructed by OECD. EPL indicates how easy or complicated hiring and firing the
workers in a particular economy is. The figure can oscillate from 0 (no protection) to 6
(maximum protection). That means the higher the figure is, the higher is the
employment protection. Table No. 1 records the EPL index for all the EU Member
States who are OECD members as well. As we can see, the Danish economy has lower
employment protection according to the European standards (overall strictness in
Denmark is 1.8). The barriers are low for all the employers groups with small
differences in employment protection regime. In the EU, the lower value of the EPL
was recorded only in the UK and Ireland. The highest protection of employers was in
the Southern Europe (Portugal, Spain, and Greece).
Should other Member States implement the flexicurity model into their economies, they
would have to reform their labour codes, reduce their employment protection and
1
EC(2007a), p. 5.
2
http://epp.eurostat.ec.europa.eu/portal/page/portal/structural_indicators/indicators/employment
[16.8.2009].
Ročník IX. číslo 4/2009
231
differences between various groups of workers on the labour market. This measure
includes also the Pathway 1. In this case the problem dwells rather in realization and
reform of national labour codes, although the Danish case shows that the lower
employment protection is not harmful for employees.
Despite a high fraction of workers being affected by unemployment each year (around
20 percent), majority of these unemployed persons manages to find their own way back
into a new job. As an indication, the long-term unemployment as a percentage of total
unemployment (6+ months, 12+ months) in 2004 was 45 % and 22.6 % in Denmark,
compared to 60.4 % and 42.4 % in EU-15.1
Those who become long-term unemployed
end up in the target group for the active labour market policy, which ­ ideally ­ helps
them find job again.2
Table No. 1. EPL in 2008
Type of contract Regular Temporary Overal EPL strictness
State/Year 2008 2008 1998 2008
Austria 2,4 1,5 2,4 2,2
Belgium 1,7 2,6 2,5 2,5
Czech Republic 3,0 0,9 1,9 2,0
Denmark 1,6 1,4 1,9 1,8
Finland 2,2 1,8 2,2 2,0
France 2,5 3,6 2,8 2,9
Germany 3,0 1,2 2,6 2,4
Greece 2,3 3,1 3,5 2,8
Hungary 1,9 1,4 1,5 1,7
Ireland 1,6 0,6 1,2 1,3
Italy 1,8 2,0 3,1 2,4
Netherlands 2,7 1,2 2,8 2,1
Poland 2,1 1,8 1,9 2,2
Portugal 4,2 2,1 3,5 2,9
Slovak Republic 2,5 0,4 2,2 1,8
Spain 2,5 3,5 3,0 3,9
Sweden 2,9 0,9 2,5 2,2
United Kingdom 1,1 0,4 1,0 1,1
OECD total 2,1 1,8 2,2 2,1
Source: OECD,
http://www.oecd.org/document/22/0,3343,en_2649_39023495_43221014_1_1_1_1,00.html#epl
1
The fact that Denmark has the highest expenditures on disability within the EU is the ,dark
side`of the low long-term unemployment rate. In 2006, 14.9 % of the total social benefits (or
4.2 % of the GDP) were aimed on disability, compared with 7.5 % in the EU-27 (1.9 % of the
GDP), according to the Eurostat. To sum up, instead of high unemployment benefits, there are
high disability costs in Denmark. Disabled people do not belong into the group of economically
active, which makes the long-term unemployment rates impressively low.
2
Madsen (2007), p. 15.
NÁRODOHOSPODÁŘSKÝ OBZOR
232
Another specific is the difference in distribution of responsibilities of the social
partners, namely the unions. In Denmark, the social insurance is based on the so called
Ghent system. In this system, the unions were historically responsible for payment of
unemployment benefits. That explains the huge fraction of trade union membership in
Denmark (about 80% of workers) and also in other Scandinavian countries (Finland,
Sweden) where this system more or less exists. Today in Denmark, there are 31 state
recognised unemployment insurance funds. Most of the unemployment insurance funds
are affiliated with one or more trade unions. Workers will conceive the membership of
the trade union and the affiliated unemployment insurance fund as a package.
1
The
members of the unemployment insurance funds will therefore only be obliged to pay
a fixed membership contribution, independent of the actual level of unemployment.
The state has been taking over the responsibility for financing the extra costs of
unemployment benefits that were caused by increases in unemployment (the principle
of public financing "at the margin") since 1969. The government's share consists of 50­
80 % of the total unemployment benefits costs, depending on number of the
unemployed. As we can see, the unions played quite an important role in distributing
unemployment benefits. They were paid from their own funds (today insurance funds).
This means that the general interest of the unions was to reduce the number of the
unemployed because the rising number of unemployed meant the rising costs for their
insurance funds. Within the Ghent system, the unions have a strong position in
barraging collective agreements but their responsibility was traditionally higher due to
the obligation of distribution of unemployment benefits.
Finally, Denmark invests considerable amounts of money into activation policies and
continuously adapts of the economy to keep the pace for the future competitiveness. In
2007, according to the OECD, Denmark invested about 1.3 % of GDP into active labour
market policy (ALPM) ­ the highest rate in the EU, and 1.5% GDP into passive
measures. The OECD average is 0.6 % GDP for the ALPM and 0.8 % for the passive
one.2
According to the same database, the Czech Republic and Slovakia invested only
0.2 % GDP into ALMP, which is the lowest fraction in OECD.
Furthermore, in 2006 Denmark launched the Globalisation Fund.3
Until 2012, almost 40
billion DKK (about 5.2 billion EUR) will be provided for education, research and
entrepreneurship. Such a project is rare within the EU and enables to Denmark to gain
educated and skilled labour force. In the scheme No. 2 we can see how the resources of
the fund should be distributed. All these measures correspond with general
recommendation of the Commission's papers concerning the competitiveness topic.4
1
Ibid, p. 11.
2
http://www.oecd.org/document/22/0,3343,en_2649_39023495_43221014_1_1_1_1,00.html#almp
[17.8.2009].
3
National Reform Programme 2007 Denmark, p. 19.
4
E.g. High Level Group report Facing the Challenge or Integrated Guidelines for Growth and
Jobs (2008-10) available on: http://ec.europa.eu/growthandjobs/pdf/european-dimension-200712annual-progress-report/200712-annual-report-integrated-guidelines_en.pdf
[17.8.2009].
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233
Scheme No. 2. ­ Resources distribution of the Globalization Fund
2007 2008 2009 2010 2011 2012
DKK millon 2007 (2007 prices) total 2000 4000 6000 8000 9000 10000
Research and development 1000 2000 3300 4600 4900 5200
Innovation and enterpreneurship 350 400 400 500 500 500
All young people to have a youth
education
308 781 1220 1702 2232 2620
Increased tertiary education 200 285 537 650 1147 1461
Strenghtened adult and continuing
education initiative
141 534 540 547 217 217
Source: NRP Denmark 2007, p. 20
Apart from that, Denmark also supports the demand side of the labour market. It is
therefore considered a state where it is easy to run a business. According to the World
Bank's Doing Business 2009, Denmark ranked 5th
worldwide and 1st
in Europe.1
It takes
only 5 days to start a business and the whole process is free of charge. Similarly to other
Scandinavian economies, the business environment is very liberal. According to the
Index of economic freedom,2
(which covers 10 specific freedoms such as trade freedom,
property freedom and investment freedom), in 2009, Denmark ranked 8th
worldwide and
2nd
in the EU (after Ireland).
In case we summarize the specifics of the Danish economy and labour market features,
we should highlight that flexicurity concept is very successful thanks to the particular
macroeconomic environment. It is based on special conditions within the Danish
economy and the full applicability in other economies is therefore limited.
Based on the public consensus there is a low protection of workers across all of the
employers groups which enables to the businesses to react flexibly on situation. Thanks
to the their position in the economy, unions bear responsibility for unemployment
benefits payments. Their interest is therefore to create such frame within the
employability of their members that would be as high as possible. High unemployment
means high costs for insurance funds traditionally run by the unions.
Danish policy supports supply and demand side of the labour market. There are highest
investments on active labour market policies measures in the EU, high investments into
research and development and huge financial resources available for education and
entrepreneurship within the Globalisation Fund. Denmark is attractive place to run
business. It takes only 5 days to start a business and it is without any charge. The
business environment is liberal and trade, investment and other freedoms are widely
guaranteed. Before implementing the flexicurity measures into the other economies, we
should realize that this concept itself does not have to help substantially without broader
reforms of economy being made.
Due to the reasons mentioned below, at the moment it would be quite hard to apply the
concept as a whole into the conditions of the Czech economy. Anyway, at the moment
the Czechs can choose some of the mechanisms and implement them into their labour
1
http://www.doingbusiness.org/EconomyRankings/ [17.8.2009].
2
http://www.heritage.org/Index/ [17.8.2009].
NÁRODOHOSPODÁŘSKÝ OBZOR
234
market environment. The topic of applicable elements is discussed to a greater detail in
the next part of the paper.
2. Czech labour market and flexicurity
2.1. General labour market background
In the past two decades, the Czech labour market ­ together with other Central
European economies ­ had to face deep political, social and economic changes in the
1990s and transform the labour markets as well. The labour force was almost overnight
confronted with many new requirements (e.g. language knowledge, IT skills, flexibility).
According to Nesporova, Cazes (2003) these changes had impact on:1
1. Decline in employment rates
2. Shrinking participation rates
3. Growth of unemployment rates (long-term unemployment, unemployment of
disadvanced groups, regional unemployment).
All these changes had an impact on labour market performance which weakened
significantly at the beginning of the 1990s. It was only after the first economical and
labour market reforms had been executed in the 1990s that the Czech economy started
to grow. From 2000 to 2008, the GDP grew strongly above the EU average, in 2005-
2008 the annual GDP growth was more than 6 %. This had a positive effect on labour
market performance. The employment rates were raising and unemployment rates
declining. In 2008 the unemployment rate according to the Czech Statistical Office
reached the long-term minimum of 4.2 %. Nevertheless, due to the impact of the
economic crisis the unemployment reached the opposite record (7.9 % in the 2nd
quarter
of 2009, according to the national methodology) within 7 months and is expected to
grow further. In the table Nr. 2, we can see the latest available data demonstrating recent
labour market situation in the Czech Republic and in Central Europe. The figures are
compared to the Danish labour market.
In case we focus on performaace of the Central European region, we can state that in
2008, the whole region had lower employment rates. The difference between the
employment rate in the Czech Republic and Denmark was 12 %, in other CE states the
difference was even greater.
Table No. 2 Labour market indicators in % ­ Central Europe vs. Denmark, 2008
Employment
rate
Unempl. rate
06/09
Long-term
unemploymen
t/ total unem.
Part-time
empl /total
employment
Social
expenditure
s/GDP (06)
GDP/ head
EU27=100
CR 66.6 6.3 50.2 3.5 18.7 80.4
Hungary 56.7 10.3 47.6 3.1 22.3 62.9
Poland 59.2 8.2 29.0 9.3 19.2 57.5
Slovakia 62.3 11.7 66.1 2.7 15.9 71.9
Denmark 78.4 6.2 16.1 18.0 29.1 118.3
Source: Eurostat database, OECD, Employment Outlook 2009 ­ forthcoming edition
1
Cazes, Nesporová (2003), p. 10-18.
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235
Furthermore, very essential difference could be found in the category of long-term
unemployment rate. These low figures result from the flexicurity model as mentioned
above. Denmark has the lowest long-term unemployment thanks to qualification and
motivational effects. In the Central European economies, every other person is
unemployed for a period longer than 12 months. One year is considered to be
a psychological barrier after which the return on labour market gets more complicated.
Another difference can be seen in part-time employment. This is one of the ways to
boost employment rates and a way that is favoured mainly by women as it allows them
to combine their professional and private lives. Nevertheless, in the Central Europe this
kind of employment is not often preferred. Due to the lower economic level tabulated in
the last column, the second full-income in the family is very often a necessity to
guarantee certain living standard.
The fact that the harmonized data for Danish and Czech unemployment are on the very
same level (6.2 % or 6.3 %, respectively) can be considered quite surprising. The
unemployment rate in other Central European countries the in 2nd
quarter of 2009 was
even higher.
Generally, the period of 2005 to 2008 is considered to be a very successful one and until
autumn 2008 the labour force demand was very high. First the impact of economic
crisis and the slow-down of the economy reflected the real labour market situation with
all its weaknesses. In the next part of the paper we will focus on the flexicurity elements
which already exist in the Czech Republic and aim on the measures which could further
improve the labour market situation.
2.2. Flexible labour market
The difference between employment protections among various groups of workers is
the essential problem in this point there. Despite the fact that the overall strictness in
2008 reached 2.1 (OECD average is 2.0), there is a significant difference between
protection of regular and temporary workers. As mentioned above in the table No. 1, the
EPL index for regular workers is 3.0 and for temporary only 0.9. Furthermore, about
only 9 % of regular workers has a contract for a fixed period of time.1
This means that
there are two groups of workers and two different labour markets on the Czech labour
market. The first group is generously protected by quite complicated rules for firing the
workers, in the other group the employment protection is very weak compared to the
international standards.
Such a high employment protection of most of the workers has a negative effect on
employment; the companies are afraid of hiring the workers on regular contracts and
prefer other forms of employment, e.g. temporary employment or short-term
agreements. It is mainly young workers, who entered the labour market recently and the
workers with low achieved education, who are contracted on the basis of these forms of
employment. These groups of workers are mainly threatened by unemployment.
According to the Czech Statistical Office the unemployment rate of the workers with
primary education in 2009 was about 19 %.2
In case the employment protection is too
1
Nekolová (2008), p. 27.
2
http://www.czso.cz/csu/csu.nsf/informace/czam080409.doc [18.8.2009].
NÁRODOHOSPODÁŘSKÝ OBZOR
236
high, the effect on this group is negative. Companies prefer not to hire these workers
and as a result, those workers often aim into the grey economy or work semi-legally.
Here we can see the link with construction of social benefit system.
Broader use of part-time jobs is another feature which could stimulate flexibility of
labour markets. As mentioned in the first part, historically, this kind of jobs is very
rarely offered in the Czech Republic, the general interest for this type of jobs is lower
than in the EU-15. It is due to lower income level that in many cases another full
income to the family is required. Concerning female employment, it is usual that
mothers with children have a full-time job. Yet in the EU-15 many women with
children work part-time. This difference reduces the figures for part-time jobs in the
Czech Republic. Despite a rather additional character of the part-time jobs, they can
further boost the employment of mothers on maternity leave, students or retired people
in case of incentives to the companies.
2.3. Generous welfare system
Before focusing on the topic of welfare system, we should mention the structure of the
unemployed according to the highest education achieved. In the 1st
quarter of 2009, the
unemployment rate of those with primary education was 19 %, in the groups of workers
with secondary education it was 4.4 % and for people with tertiary education only 1.6 %.
Among the long-term unemployed, people with primary education represent 41 %,
another 44 % are people with secondary education without graduation. The group of
those unemployed for a long time in this 1st
quarter of 2009 comprised of almost 105
thousand people, 30 thousand of them did not work for longer than 8 years.1
Because
the wages tend to rise with the achieved education, it is obvious that workers with
primary education, who have predominantly low-income, belong into the group most
threatened by long-term unemployment.
Another topic which still has not been sucessfully solved in the Czech Republic is the
rules for being provided the unemployment benefits. In Denmark, there are strict rules
for the unemployed which the unemployed have to fulfil in order to receive
unemployment benefits. The possibility to refuse a job during the unemployment period
is much more limited than in the Czech Republic, which forces the people to accept the
job offered by the labour offices. Furthermore, the legal frame and the existence grey
economy in the Czech Republic (creating cca 20 % of the GDP) enables the
unemployed to receive the additional financial means. In Denmark, this fact is strictly
controlled, which helps reduce this type of unemployment. Last but not least, due to the
active labour market measures and the requalification scheme, this group of
unemployed people spend much more time in the requalification courses so they do not
have spare time to work illegally. To sup up, the current construction of the system
enables the low-income and low-educated group of the unemployed to stay outside the
official labour market, which boosts the unemployment. Rather ironically, the
generosity lies in the lack of factors pushing the unemployed back to the labour market.
The positive fact is that in 2007, the Czech Republic reformed its social benefit system
in such a way to increase the motivation of inactive low-income groups to enter the
labour market. The new legal adjustment is giving financial advantage to those welfare
1
http://www.czso.cz/csu/2009edicniplan.nsf/p/3101-09 [18.8.2009].
Ročník IX. číslo 4/2009
237
recipients, who are actively dealing with their situation (e.g. by looking for a job). In
case a person asking for welfare benefit does not actively cooperate in looking for a job,
rejects a job or does not show own effort to raise his orher income, the amount of the
social allowance will be lowered, possibly down to a new category of survival minimum.
At the same time, the welfare system was simplified. A number of previous social
allowances were replaced by three new allowances: living allowance, exceptional
immediate allowance and supplementary allowance.1
As a result of this reform dropped
since 2006 to 2008 the long-term unemployment rate from 3.9 % to 2.2 %.2
Despite the reform, there is still a problem with low motivation of the long-term
unemployed to enter the labour market. Thanks to the construction of the social system
a family with 2 children, one adult who is unemployed on a long-term basis and another
economically inactive preson receives about 80 % of the average income of the lowincome
group.3
To summarize, the low-income and low-educated groups make the
biggest share of long-time unemployed due to the still relatively generous social system
and high employment protection.
2.4. Active LMP
Active labour market policy is a part of public employment policy. It is executed on the
central (Social Security Administration) and on local level (Labour Offices). Within
their financial budget, Labour Offices can decide what type of ALPM they will apply
according to the need of the local labour market . As mentioned above, this type of
labour market policy is relatively new and the amount of means is low ­ in spite of the
continuous growth. In the 1990s, this type of policy was used very rarely. The position
of this policy improved and the financial amounts grew since the EU accession.
Nevertheless, in 2007 only 0.2 % of GDP aim on ALMP, which means that it is still
undersized.
What is further absent is a general consensus about the role of the ALMP. Today, there
are two types of ALPM provided by Labour offices ­ financial incentives to the
companies and non-financial incentives, such as qualification courses for the
unemployed, consulting etc. The ALMP is financed from the state budget, European
Social Fund and Operation Programme (OP) Human Resources Development.
According to the Czech National Reform Programme in 2007-13 the OP Human
Resources Developement allocates 1.84 billion EUR.4
The aim of the ALPM in the Czech Republic is to bring the unemployed back on the
labour market ­ we speak about the so called enforced participation typical for AngloSaxon
states. According to Nekolová,5
the problem lies in the fact that the groups most
threatened by unemployment are not interested in the ALMP measures. According to
opinion of the workers of the Labour Offices, there is a pressure from the central level
to fulfil formally the Individual Action Plans with this type of unemployed. The
1
EC (2007b), p.22.
2
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode
=tsisc070.
3
Nekolová (2008), p. 51.
4
NRP CZ 2008-10, p. 81.
5
Nekolová (2008), p. 39.
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238
unemployed can receive further higher social benefits and the effect of the ALPM is
only negative and the people on who it is aimed remain unemployed.
Lack of the tradition of further education after completing the formal education is
another problem. The intensity of further education and qualification is recorded by the
Eurostat with the use of the Life-long learning index. The results of the Czech Republic
are not very impressive. In the Czech Republic in 2008, education or training in the four
weeks preceding the survey received about 8 % of the workforce compared with almost
30 % in Denmark or 32 % in Sweden.1
In the Czech Republic still prevails the feeling
that in case the person gets skills and knowledge during education period, he or she can
apply them during the whole professional career.
Reasons why further (pre)qualification after completing formal education is low are
interesting indeed. According to the questionnaire of the National Training Fund2
it is
obvious that in case a person is once formally educated, the businesses do not invest in
further education due to the high costs (25 %). About 9 % of businesses still think that
only the state is responsible for the education and about 14 % of the workers are not
interested.
As we can see, the position of the ALPM is still quite weak, which is caused by the low
amount of money invested into this policy and general attitude to the need of investing
into human resources. The group of the long-term unemployed, on which the ALMP
should be aimed predominantly, is not incorporated into the qualification.
Conclusion
Danish concept of flexicurity is in general considered for a very successfully thanks to
its balance between low employment protection and generous welfare system which
stimulates the workers mobility among the jobs. This system is especially beneficiary in
case of frictional unemployment when the people are actively seeking the same type of
job. The workers unemployed for a longer period are according to this the concept
prequalified to facilitate the return on the labour market.
Despite this very positive impression and low long-term unemployment in Denmark we
should realize that model functions also thanks to the general economic frame. There
are very small differences in protection or various employment groups preventing the
creation of dual labour market. Historically, there is a public consensus about low
employment protection. Trade unions were and until today still partly are responsible
for payment of the unemployment benefits from the insurance funds governed by them.
The union's interest was traditionally in creating such conditions on labour market that
would minimize the number of unemployed people requiring benefits from their funds.
Danish investments into education and research are strongly above the EU average; the
country is one of the most attractive places for running a business worldwide and has
a very liberal business environment. In case the flexicurity concept will be implemented
into the other economies, we should realize that the success of such an implementation
is conditioned by the aspects mentioned above.
1
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode
=tsiem080 [16.8.2009].
2
National Training Fund (2003), p. 92.
Ročník IX. číslo 4/2009
239
If we apply the golden triangle of flexicurity on the Czech labour markets, we can say
that there are a coule of important elements which would help. First of all, the
employment protection of the regular workers is (measured by employment protection
legislation index) too high, which causes rigidities on the labour market, there is also
substantial difference in protection of regular and temporary workers. That dissuades
the companies from hiring the workers for shorter period because they would stay in the
company also after the time they were needed.
The problem lies in the construction of the welfare system. According to researches, the
group most threaten by (long-term) unemployment consists of people with primary
education who also belong into the low-income group. In 2009, about 41 % long-term
unemployed were the people with primary education; another 44 % with secondary
education without graduation. This group suffers from high employment protection
because the companies are afraid to hire them as regular workers for shorter periods.
Furthermore, the gap between the low-income wages and social benefits is still too
small. Despite the reform, a person that is unemployed for a long time, has 2 children
and lives with another economically inactive family member receives about 85 % of the
average low-income wage. The same group is further not interested in prequalification
within the ALMP and the system does not really force them to join such prequalification.
Finally we can say that in case the people are not personally interested in getting or
receiving a job, the system has actually no financial or non-financial means how to
bring them back on labour market. The solution in this case could be to combine lower
employment protection with positive taxes to the low-income group to widen the gap
between income in employment and unemployment.
Furthermore, in the Czech Republic there is quite a short tradition of prequalification or
further education of human resources during their career, which reduces their
employability. This corresponds to the value of the Life-long learning index which is
below the EU average. Only 8 % of the workforce received education or training in the
four weeks preceding the survey in the Czech Republic, which is significantly below
Scandinavian countries (30 % in Denmark). To sum up, there is still some space in the
Czech Republic to improve dealing with human resources after their completion of
formal education to improve the employability of the workforce.
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Ročník IX. číslo 4/2009
241
FLEXICURITY ­ CHALLENGE TO IMPROVE CZECH LABOUR MARKET
Zuzana Potužáková
Metropolitan University Prague, Department of Economics, Dubečská 900/10, 100 31,
Prague (potuzakova@mup.cz)
Abstract: Flexicurity reflects the current basic trend of the EU in guaranteeing high
employment levels and attainability of national fiscal systems. It was introduced in
Denmark in the 1990s and significantly helped reduce unemployment levels. The Czech
labour market, despite the transformation process, has still space for further
improvement, especially in the time of economic slow-down. The best way is to try to
apply elements and components which have been already successfully implemented in
the other EU Member States. The aim of the paper is (based on the statistical indicators
and official documents concerning labour markets topic) to describe the basic function
of the model and find the components of the flexicurity model which could be used also
in the Czech Republic and change labour market operation.
Key words: flexicurity, EU, Czech Republic, labour market
JEL Classification: J01, J10, J24