Active or Passive? Reforming Employment Benefits in the OECD

Abstract

The last three decades witnessed attempts to reduce employment benefits in many OECD countries. This study distinguishes between three types of benefits: employment protection legislation (EPL), active labour market policies (ALMPs), and unemployment compensation. Using structural equation modeling, the study systematically examines the determinants of these benefits in 23 countries (1985 to 2008). The analysis contributes to the welfare state literature in at least three ways. First, it goes beyond studies of individual programs or overall "welfare effort" by examining three programs simultaneously. Second, it uncovers both direct and indirect channels of support for these programs. Finally, the analysis reveals, contrary to previous findings, that strict employment protection is quite compatible with more spending on ALMPs and unemployment compensation in some countries.

Tying Up the Loose Ends: The Determinants of Active Labour Market Policy in the Western Countries 1985-2013

“…Following the example of Huo et al (2008) in the operationalisation of the power resource theory, the extreme left and right, as classified by the ParlGov material, were excluded from the analysis. Following the method of Alemán (2012), corporatism was measured by the centralisation of pay policy, assigning scores from 1 (extremely fragmented) and 5 (extremely centralised) according to the scale created by ITCTWSS (2016). Deindustrialisation is measured by the number of service sector employees relative to the total labour force, as shown by Iversen and Cusack (2001).…”