sou · GOB383 · 2001-01-01 00:00:00 — In both countries the 1990s saw substantial changes in this area, one of the most visible being an increase in the number of measures. At the beginning of the 1990s there were just three policy measures to cater for adult unemployed people in (vocational training, subsidised employment and employment support), whereas by 1998 a number of new measures had been implemented (2000). The development in this respect has been similar in . The fact that new measures have been created and that there are movements of people from one measure to another, creates some difficulties for a comparison. Here, to simplify matters, we divide the various policy measures into two categories: vocational training20 and subsidised employment.21 So in order to reach a meaningful comparison the number of participants in all the various almp measures during a year was compared to the number of people in the entire labour force. Comparing developments in and , it can be seen there are variations in both levels and trends of this ratio (Figure 24). The difference in 1990 in the level of almp is clearly visible, with having far more participants in almp measures; in in 1990, the ratio was 3.1 compared to 1.8 in Finland.22 At the end of the period the ratio was higher in both countries: 5.9 in and 4.5 in . While was still far ahead of in terms of the scope of almp measures, it is worth noting that the difference between the countries narrowed over the period. For trends, the similarity for the period 1990–94 is again visible. Both countries intensified almp 20Arbetsmarknadsutbildning´ in and työvoimakoulutus in . 21For this category includes beredskapsarbete, handikappåtgärder, rekryteringsstöd, ungdomsåtgärder, utbildningsvikariat, arbetslivsutveckling, datortek, arbetsplatsintroduktion, starta eget, kommunala program för ungdo- mar, offentligt tillfälligt arbete, individuellt anställningsstöd, resursarbete i offentlig verksamhet, projektarbete med a-kassa, IT-satsning. For this includes valtion työllistämät, kuntien työllistämät, työllistäminen yrityksiin, yrittäjäraha, osa-aikalisä, vuorottelupaikkaan työllistetyt, työmarkkinatuen työharjoittelu. 22As statistics on almp are based on the total number of participants in programmes during a year, the ratio used here should not be compared to e.g. unemployment rates, that give an average rate of unemployment during the year. 80 Adaptation in social policy measures as unemployment rose, although in the increase was much more pronounced. The development since 1994 is especially interesting because of the disparities in the unemployment and employment trends. By the ratio measure, the volume of almp in decreased each year after 1994, while in it continued to increase until 1997, despite the declining trend in unemployment from 1994. In other words, the differ- ence is that in a stabilising unemployment situation was met with less efforts in activation. In there was more emphasis on measures while unemployment was decreasing. Participation in measures in and –98, ratio of participants in almp measures per 100 in labour force (15–64 years) Sources: 1–2/1999, Oral information from in ; SCB, 2000: Table 5.1 for , own calculations. Figure 25 shows in a more detail the development of almp participation in for the years 1990–98. In addition to total participation, the individual trends for vocational training and subsidised employment are presented. The volume of subsidised employment increased each year until 1997. The ratio of participants in vocational training to the total labour force also increased until 1997, although at a slower pace. The figures for 1997 and 1998 show the first decrease in volume. The trend in vocational training is very different from : the ratio of participants more than doubled over the period in , while in the ratios in 1998 and 1990 were about the same. The trend in resulted from a clear policy choice: the government wanted to shift the emphasis to measures and shift Adaptation in social policy 81 the balance of almp towards vocational training (1999b:55).23 Comparing almp trends with unemployment trends, it can be seen that while unemployment has decreased since 1994, the volume of measures has continued to increase.24 According to recent Finnish policy goals, almp will from now on follow unemployment trends with some minor adjustments in scope depending on the structure of unemployment (1999b). The structural features of unemployment have been a key justification for continuing a high intensity of almp measures ( Oral information from 1999) Figure 25: Participation at almp in 1990–98, ratio of participants per 100 in the labour force (15–64 years) Source: 1–2/1999, Oral information from . A similar figure for Swedish development trends shows that measures in have been weighted towards subsidised employ- ment (Figure 26). As indicated above, total almp measures decreased during the period 1994–97, although the unemployment rate remained stable. Subsidised employment decreased most markedly in 1997–98, coinciding with the drop in unemployment. In turn, vocational training 23Since 1997 there are more people starting training than entering subsidised employment (1999). 24In the government programme for 1995 it was explicitly mentioned that almp are used to decrease unemployment and that the goal is to increase the share of almp participants to 5 percent of the labour force. 82 Adaptation in social policy increased a despite the drop in unemployment between 1997 and 1998. Participation at almp in –98, ratio of participants per 100 in labour force (15–64) years Ratio of participants per in the labour force Sources: SCB, 2000: Table 5.1. In conclusion, the figures presented seem to show that and grew more similar over the period in terms of the total scope of almp. Although during the crisis years invested much more in almp than , in the latter part of the period almp was emphasised relatively more in . However, this does not mean almp have been abandoned in ; on the contrary, compared to the situation in 1990 invested even more in activation in 1998. It is more that has been able to catch up with due to a relatively low starting level. One could say that when it comes to the scope of activation measures, became much more Nordic during the decade, while remained the standard to follow. Yet a de-composition of the overall development was able to show that the two types of almp measures developed in different directions, with accentuating vocational training. In this final section we examine changes in peoples welfare with a focus on three different dimensions: unemployment, income distribu- tion and social assistance. Disparities in how unemployment problems were distributed in the population according to age and gender can be seen as indicators of welfare outcomes. In turn, data on income distribution reveal how overall inequality in income distribution developed among the population during and after the economic crisis, while more detailed breakdowns show how the crisis period affected disposable incomes of different categories of people. Finally, infor- mation on social assistance exposes another aspect of economic welfare: the adequacy of incomes to cover necessary expenditures. After the overall picture, breakdowns according to age and household type are presented. 5.1The distribution of unemployment When assessing welfare state development during the 1990s, the sharp increase in unemployment to unprecedented levels is clearly the most striking factor. The persistent nature of the unemployment of the 1990s has had consequences for public budgets as well as for adaptation in social policy. Moreover, unemployment is not only problematic from a financing perspective, but also because it may have negative societal consequences for example related to social cohesion. Apart from these dimensions, unemployment itself may be used as an indicator of living conditions among the population. As a welfare indicator, not only the level, but also the distribution of unemployment across social catego- ries are important. Here, employment statistics are used to obtain a compa- rable picture, even if they give slightly different information about the level of unemployment than national sources, and despite the lag in data production. Trends should be reliable, however. Unemployment is clearly higher for both men and women in (Figure 27). As regards the development of unemployment rates for both sexes, a certain similarity between and can be detected. During the deepest economic crisis years unemployment affected men more than women in both countries. This is understandable given the description in section one of how unemployment hit industries in the private sector. With the recovery in the private sector in , mens unemployment rate started to drop, and judged by the time-series provided here womens unemployment worsened. In men still had a higher unemployment rate also in the latter part of the period. The bend in the curve for womens unemployment is also very similar in both countries: since 1993 some years of more or less stable development, followed by a decrease in unemployment in since 1996 and in since 1997 (data, not shown here). According to national data, the trend continued in 1998. Unemployment rates for men and women in and –97, percent Unemployment rate, % Source: Employment in Europe 1998, 1996. Note: figures for 1992 and 1993 taken from Employment in Europe 1996 publication, other figures from the 1998 publication. Figures vary somewhat in different yearly publications. Looking at the development in unemployment by age one sees it is clearly age-related in both countries (Figures 28 and 29); the younger the age group, the higher the unemployment rate (although here the Finns between 55–59 years are an exception). The situation of the two youngest age groups is much worse in than in . Another interesting difference between the countries is the trend of the age-group 55–59 years. Unlike any other group in , their unem- ployment continued to increase until 1996, which appears to contrast with the trend for the oldest age group (60–64 years) in . Unemployment rates by age in 1990–98, percent Source: 1–2/1999. Unemployment rates by age in –98, percent Source: 2000. In the late 1980s and had among the most even income distributions in the world (, Rainwater and Smeeding 1995). While income inequality started to worsen in most Western countries with slightly differing timing in the 1970s and 1980s (as in ), it did not do so in during the 1980s growth period (, Rainwater and Smeeding 1995; et al. Even during the recession years the distribution of equivalent disposable income continued to be stable in (Uusitalo 1997; et al. According to these sources the development trends during the 1980s and early 1990s were somewhat different for and . Yet the latest data from the years after the economic recession show that income differences have indeed started to grow in , too. So combining this information with the latest analyses from suggests the paths of and are not that different after all. In the following examination, data from Statistics analysed by Uusitalo (1997, 1999) and from Statistics compiled for the Balance Sheet commission (2000) are compared to study income distribution trends. The figures presented here are drawn from national data calculated using different equivalence scales.1 The first figures display the development with the help of national equivalence scales. The figures portraying development according to socio- economic groups, household types and age in the latter part of this section are drawn using a new equivalence scale as employed by (2000). The Finnish figures are calculated according to the socalled OECD-equivalence scale, where the first adult has a weighting of 1.0, other adults a weighting of 0.7, and children a weighting of 0.5. The scale used for the Swedish data is based on the social assistance norm of 1996, where the first adult has a weighting of 1.0, other adults a weighting of 0.55, and children a weighting of 0.47 (for further information see 2000). As the choice of equivalence scales might affect the level of the distribution of equivalent income, it is not possible to compare levels of inequality (nor income levels between households) between the two countries. Also, it is more advisable to compare the development of relative differences between households than to look at the absolute differences between them. However, as e.g. (1999) has pointed out, trends are less likely to be affected by the choice of equivalence scale and thus evolution over time can be compared. First an overall picture of trends will be displayed, followed by an examination of decomposed trends. 1 Although there is agreement that it is important to be able to compare incomes between different households, and that this is best done using consumption-unit scales, it has often been pointed out that there is no one right scale. Different scales have been used in both and . Figure 30 displays inequality in equivalent factor incomes (i.e. wage and capital income) in and between 1991 and 1997.2 The trends look very similar; there is a clear tendency of increasing inequality in incomes in both countries when taxes and transfers are not taken into account. This is not a 1990s phenomenon, however, as inequality in factor incomes has increased trend-wise in since the 1960s, and in since the 1980s. Gini-coefficients for equivalent factor incomes in and –97 Sources: Statistics data by Uusitalo 1999, SCB data by 2000. From the point of view of the actual welfare of individuals, inequality in equivalent disposable income (factor income plus transfers minus taxes adjusted by the equivalence scale) is more important, and also interesting because it reveals the impact of the welfare state. Comparing disposable equivalent income, the relatively stable situation between 1991 and 1993 should first be noted. Since 1993 this relative stability has turned into a trend of increasing inequality in both countries. (Figure 31.) 2 For earlier development see et al. All time series presented here start from 1991 to avoid the effect of the 1990/91 tax reform in . There was a change in 1994 in the way income distribution statistics are compiled in and therefore figures for 1991-93 and 1994-97 are not comparable in the strictest sense. However, as the effect is not that strong (gini- coefficient for factor income changed from 0.458 to 0.466 for 1994 with the move from the old system to the new), no corrections are done here. 88 Economic welfare SOU 2000:83 Gini-coefficients for disposable equivalent income in and , 1991–97 Sources: Statistics data by Uusitalo 1999, SCB data by 2000. Overall, the figures (if one ignores the fluctuation for in 1994 caused by changes in taxation rules for realising capital gains) on income distribution show relatively similar trends for both and when the latest data are added. In both countries income inequality increased, especially during the latter part of the period. It remains to be seen whether this is a phenomenon created by the economic recovery phase or if there is a more profound shift in progress. Yet, even if increasing differences emerge, it should be remembered that in international comparisons and still have among the most equal income distributions in the world. Moreover, the overall redistributive effect of the two welfare states looks quite similar (Figure 32). A closer look reveals that the redistri- butive effect of transfers is somewhat stronger in , whereas the redistributive effect of taxes accounts for a greater reduction in the gini-coefficient in . Here, the difference between the countries has persisted. Redistributive effect of transfers and income taxes in and –97 Sources: Statistics data by Uusitalo 1999, SCB data by 2000. In terms of the effects of the economic changes over the decade, it is vital to note that income inequality did not change during the period of the biggest economic problems and rapidly rising unemployment. Rather, income inequality started to increase after the recession, since the turnaround in the economy. This development can at least partly be explained by the role of transfers and taxes. At the time of the recession the redistributive role of transfers and taxes grew. The compensating impact of income transfers has been most important. Uusitalo (1997) has pointed out that even with the cutbacks in income transfers in , their redistributive effect continued to increase (until 1994). This conclusion seems to apply to the Swedish situation, too. When the economy started to again, factor incomes started to form a bigger part of the disposable income at the same time as the volume of transfers declined. Uusitalo (1999) explains this as partly an effect of decreasing unemployment and partly of cutbacks in transfers. In the growing differences in disposable income since 1995 result largely from an increase in disposable incomes among the tenth decile (10 percent of the population with the highest incomes). There is not much change for the lowest decile, and on average, disposable household equivalent income for all households has remained stable. The increase in incomes for the highest decile is mainly due to a marked increase in capital incomes (Figure 33). Disposable average equivalent household incomes in 1990–97, 1997 prices Source: Uusitalo 1999. A not fully comparable figure (Figure 34) for also shows that the increasing inequality is mainly due to a pronounced rise in incomes among the highest decile (at least for 1993–97) (see also SOU 2000:3: 106). The relative growth in incomes of the highest decile appears to be a faster in in the period 1993–97, although the data disparities should be remembered. In both countries average disposable incomes were on a higher level in 1997 than . In the border value of disposable income defining the lowest decile appears to have lowered, while in average disposable income for the first decile has stayed at almost the same level. Disposable equivalent household incomes in (capital gains included), 1993–97, percentile values in thousand SEK in 1999 prices Source: 2000. Development based on socio-economic groups, household types and age The above development is derived from aggregate data and deciles (the population divided into ten equal groups according to size of income). An examination based on population groupings reveals more about the development in different socio-economic groups, households and age groups. The findings of (2000) study for the commission identify three losers during the 1990s in : youth, lone-parents and families with more than three children. The following data is not strictly comparable due to differences in income distribution statistics, and therefore the data are reported country by country. Looking first at all socio-economic groups in , it can be confirmed that the major changes in the distribution of income first occurred between 1991 and 1992, and then again between 1996 and 97 (Figure 35). Between 1991 and 1992 disposable equivalent income fell for all socio-economic groups, except pensioners. In fact, for those of pension age the development during the economic crisis years was positive, as their disposable equivalent income increased every year between 1989 and 1993. After 1992 two groups stand out: the self- employed increased their incomes markedly while those of the long- term unemployed fell. For other groups the development between 1992 and 1995 was quite stable. A clear increase in incomes occurred for all groups between 1996 and 1997, particularly among the self-employed (who have thus considerably improved their incomes since 1993) and upper white-collar group. While there was also some increase for the long-term unemployed between 1996 and 1997, their overall situation has deteriorated since 1992. (Uusitalo 1997, 1999.) Disposable equivalent household income by socio-economic group in 1990–97, thousand in 1997 prices Source: Uusitalo 1999. For , a table by (2000) reveals an overall picture where those outside the labour market – excluding old-age pensioners – had decreasing incomes between 1993 and 1997, while those in the labour market enjoyed growing incomes. The biggest fall occurred in students incomes. As in , the increase was most marked for the self-employed. In , incomes appear to have increased for all groups between 1995 and 1997. (Table 7). Disposable equivalent household income by socio-economic group in , 1993–97, median in thousands SEK in 1999 prices 1993–97, % of sickness benefits and All 20-64 year olds Source: 2000. Examining changes for different household categories, it seems that in they have been very similar. There was a marked increase in incomes in 1989–1991, a decline between 1991 and 1994, and thereaf- ter a slight improvement. The best situation is and has been for child- less couples, while single parents have had the worst of it. Again, disposable equivalent income increased for all household types until 1991. Between 1991 and 1992 all household types experienced a very similar drop in their incomes. Between 1992 and 1993 the income situation stabilised for all other households except single parents, who experienced a further year of falling incomes. Perhaps owing to the change in child benefits, between 1994 and 1995 single parents seem to have experienced the most pronounced increase in their incomes. Their situation has again stabilised since then. For couples with children the period was also difficult. Their incomes fell between 1990 and 1994 and the improvement that took place between 1994 and 1996 was not enough to return them to the income level before the recession. The last year, 1997, again shows a marked increase. All in all, disposable equivalent income for all households was almost at the same level in 1997 as in 1990. With the exception of single parents no major deviation in trends for different household types can be reported. (Figure 36.) Disposable equivalent household income by household type in 1990–97, thousand in 1997 prices Source: Uusitalo 1999. In contrast, it is interesting to note that for extracts from a table by (2000) show differences between the households (Table 8, see the original full table in 2000, Table 5). Although the different equivalence scales used should again be remembered, it is credible that single parents have the most negative situation and couples without children the highest incomes in both countries. The trends are a different though, and show that the situation of single parents in relation to other households has deteriorated more in : the average disposable income of single parents decreased continuously from 1993 to 1997. Elderly couples in turn have increased their disposable incomes. Disposable equivalent household income of some household types in –97, median in thousand SEK per consumption unit, 1999 prices Single without children, 18–29 years Single without children, 65–74 years Single parent with children aged 0–19 years Cohabitant without children, 18–29 years Cohabitant without children, Source: 2000: table 5. Finally, Table 8 also suggests that examining the development for different age groups reveals the biggest differences that occurred during the decade. Among the household data there are clear age-group differences in the development of equivalent disposable income. For instance, among one-person households in , incomes have fallen markedly for the young (below 34 years of age), whereas for pensioners (above 65 years of age) the situation looks much brighter. For those below 34 years of age incomes fell between 1990 and 1993 and have not recovered as fast as for other age groups since then. In contrast, pensioners now earn on average more than young people.