The Icelandic Neo-corporative Model August 2012 The Icelandic Neo-corporative Model Post 2008 crisis development – a new life Cooperation between government and social partners Tripartate Agreements Social partners deeply involved in organisation and delivery of social services on a long term basis – Pension funds – Education – Rehabilitation – Unemployment Samtök atvinnulífsins • • • • www.sa.is 2 Reaction to 2008 Crisis 3 www.sa.is Collapse of the financial institutions Social upheaval Uncertainty SA and unions worked closely together Elements of stability, cooperation, solidarity, vision and hope • Jobs important anchors - save as many as possible Samtök atvinnulífsins • • • • • Tradition for Tripartate Agreements Samtök atvinnulífsins • Unsuccessful attempts to subdue inflation in the 1980‘s • „National Pact“ 1990 www.sa.is – Wide ranging tripartate agreement calling for wage moderation, fixed exchange rate and strategy to break up inflationary expectations • Tripartate Agreements in early 1990‘s • Became less important • Delivery of unemployment services transfered from unions to the state 1997 4 Pension Funds Samtök atvinnulífsins • Landmark tripartate agreement in 1969 • Pension Funds established to provide universal coverage for the labour market • Funded system – Defined contributions • Jointly operated by SA and unions. • 1997 legislation is now the legal basis • SA/ASI funds have approx. 50% market share. • Pension funds assets are 137% of GPD www.sa.is 5 Education www.sa.is 6 Samtök atvinnulífsins • Employers contribute to funds for supporting continuing education that are jointly managed with the unions. • SA and the unions along with the public sector labour market partners operate a state funded institution for continuing education. The aim is ambitious. Raise the completion rate of secondary level education to 90%. Targeted on unskilled labour. • The unions operate an educational institute for unskilled labour and are involved with many others. • SA is involved with Reykjavik University and Bifröst University • Other business organisations operate two secondary level schools • Education is almost always on the agenda in rounds of negotiations. Rehabilitation Samtök atvinnulífsins • New joint labour market institution „VIRK“ set up by the February 2008 collective agreement between SA/ASÍ. • Funded in the beginning by a contribution 0,13% of wages • The public sector labour market partners joined in 2009. • The objective is to fight higher disability incidence by proactive means as early as possible in the developent process from illness/accident towards total disability • Strong and efficient central office with professional control and initiative • Advisors based with the unions • Services oursourced to health experts and institutions • New legislation passed that obliges universal participation • Pension funds and the state will also contribute 0,13% each www.sa.is 7 Services to unemployed Lack of contact with the unemployed Ineffective services to the unemployed Bureaucratic atmosphere Inferior services to employers with vacancies Ineffective employment mediation Insufficient surveillance of cheating Services not adquately prioritised www.sa.is – – – – – – – Samtök atvinnulífsins • SA/ASÍ criticised delivery of services to unemployed • Cost of unemployment paid for by contribution from employers (wage tax) • Pilot project started 1 August 2012. SA/ASÍ deliver services • Jointly managed central office. Advisors at unions 8 New Tripartate Agreements Samtök atvinnulífsins • The Stability Pact: June 2009 – Motivation: Avoid opening private market collective agreements in a difficult situation and close public market agreements. – Wide scope (examples) Taxes 45% of measures to bring down budget deficit Facilitate investments Bank restructuring Corporate social responsibility Lifting of capital controls Address different pension fund schemes Reduction of interest rates www.sa.is • • • • • • • 9 New Tripartate Agreements – 14 page document – product of 6 months of negotiations 10 www.sa.is • State finances, economic planning, monetary policy, lifting of capital controls • Social benefits, personal income tax • Unemployment contributions, wage tax, delivery of services to unemployed • Company tax legislation, shadow economy, procurement issues • Investment objectives, public and private investments, innovation • Education, project for unemployed youth • Pension schemes issues, rehabilitation, housing issues • Fisheries legislation Samtök atvinnulífsins • Declaration of the government attached to collective agreements 5 May 2011 Assessment www.sa.is – – – – Samtök atvinnulífsins • Neo-corporatism gains ground in crisis times. Tripartate agreements have their role. • Necessary to break up the model as the crisis situation eases. • Not hinder changes and progress with too much power of social partners • Strong labour market organisations are important. They are elements of stability but also facilitate mobilisation of society • Delivery of social services by social partners is much more successful Pension funds Education Rehabilitation Services to unemployed 11 Main characteristics of the labour market in Iceland – women, older workers, students – Improvements have been realised - mainly increased services to potential new entrants – but a lot remains to be done to slow and reverse the process – especially changes in laws and regulations regarding eligibility to the entitlements – there are strong financial incitaments, especially for single mothers 12 www.sa.is • Late exit from the labour market • Annual working hours not particularly high, despite many overtime hours, due to long vacation and many special holidays • Days absent from work relatively few (difficulties in comparison) • A large increase in number of people receiving disablement benefits in the past decade Samtök atvinnulífsins • High participation in the labour force • High employment rate Total labour force as % population, 2010 70 Males 56.4 Samtök atvinnulífsins 60 Females 59.5 54.3 50 50.1 40 30 www.sa.is 20 10 0 Source: OECD.stat 13 Employment rate, Aged 15-64. 2011. 90 80 80 77 77 73 Males Females 73 60 57 70 Samtök atvinnulífsins 70 59 50 40 30 www.sa.is 20 10 0 Source: OECD Stat 14 Employment rate, Aged 15-74. 2011. 80 77 72 70 Males 71 Females 67 Samtök atvinnulífsins 63 60 52 50 40 30 www.sa.is 20 10 0 Source: OECD.stat 15 Average year of age at labour force exit, 2010 75 Men 69.7 65.4 65 Samtök atvinnulífsins 70 Women 64.7 64.5 63.9 62.4 60 www.sa.is 55 50 Source: OECD - Pensions at a Glance 16 Average annual hours actually worked per worker, 2011 2,500 Samtök atvinnulífsins 2,000 1,776 1,500 1,732 1,426 1,000 www.sa.is 500 0 Source: OECD.stat 17 Hours worked per week of full-time employment, 2008 60 Samtök atvinnulífsins 50 46.1 41.8 39.2 40 30 www.sa.is 20 10 0 Source: Eurostat 18 Key figures on the labour market in 2nd quarter 2012 Unemployment rate Male Female All persons 17 19 18 5 5 5 5 4 4 7 7 7 www.sa.is Full time Part time All persons Working hours Male Female All persons 47 41 44 26 24 24 44 35 40 Samtök atvinnulífsins 16-24 25-54 55-74 All persons Employment rate Male Female All persons 85 85 85 92 89 91 69 60 64 85 81 83 19 Compensated absence from work due to illness Number of days lost per person per year 20 16 14 17 Samtök atvinnulífsins 18 19 16 14 12 12 10 8 11 11 11 10 10 3,5% of working days 9 8 8 8 8 7 6 4 3 2 0 Source: OECD.stat 20 www.sa.is 7 Total number of disabled people in Iceland 16,000 15,197 14,000 13,230 14,507 2009 2010 Samtök atvinnulífsins 14,103 14,714 13,616 12,755 12,011 12,000 11,199 10,443 9,780 10,000 9,329 8,673 8,000 7,776 7,980 1996 1997 1998 www.sa.is 7,577 6,000 4,000 2,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2011 Source: Social Insurance Administration 21 New entrants into the ranks of the disabled 1,600 1.474 1.343 1.291 1.301 1.176 1,200 Samtök atvinnulífsins 1,400 1.182 1.165 1.105 803 1,000 760 737 767 695 800 663 652 611 www.sa.is 600 400 583 671 524 481 513 2005 2006 2007 200 564 519 494 2010 2011 0 2004 Men 2008 Women 2009 Source: Social Insurance Administration 22