Flemish Minister for Finance, Budget, Work, Town and Country Planning and Sport

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1 Policy Paper WORK A new labour market vision for Flanders Philippe Muyters Flemish Minister for Finance, Budget, Work, Town and Country Planning and Sport Design: Department of the Services for the General Government Policy, Communication Division November 2009 Flemish authorities

2 Executive summary At the beginning of this term of office , the Flemish labour market policy is dealing with a major challenge. The consequences of the worldwide financial and economic crisis that broke out in autumn 2008, will probably still be noticeable on the Flemish labour market until almost the end of this term of office. In two years time ( ) the Flemish unemployment rate will increase with no less than 100,000 jobseekers, or a rise of +50%. But even if the economy recovers in , the consequences of the crisis will still be noticed for a long time on the Flemish labour market. Consequently, labour market policy in Flanders urgently needs a new élan. However, during the past period of booming economy, we did not succeed in catching up with Europe s best performing regions; Flanders thus kept its average position compared to other European labour markets. Only 2 out of 3 persons among the working-age group are active, so the employment rate in Flanders is structurally too low. Our labour market is characterized by a lemon model : there is a very high labour participation among the middle-aged group and early retirement at career s end is high. Consequently, very low labour participation among the over-55s is a major bottleneck on the Flemish labour market. With only one out of three working people in the age group, Flanders ranks far below the European average of 46% and the Lisbon objective of 50%. But labour participation of other underprivileged groups such as foreigners and people with a work-limiting disability is still only 44% and 42% in Flanders, which is very low. 2 Despite this strongly increased unemployment rate and the structurally low labour participation, it is difficult to fill certain vacancies on the Flemish labour market. Surprisingly enough, the number of shortage occupations in Flanders has not decreased or has not changed since the beginning of the crisis. This paradox shows how difficult it is to harmonise supply and demand on the Flemish labour market and it points out the vast potential which is available in Flanders for a reinforced labour market activation policy. In order to respond to this challenge, this policy memorandum Labour outlines a new labour market vision for Flanders, which I would like to realise in the next years with the social partners and the other stakeholders. An integrated vision means that we will not only focus on optimising subaspects of the policy, but also establish a global vision on the essential decisive elements of unemployment instream and outstream flows. As a result, a link can be made with its own responsibilities or other authorities responsibilities. For the development of this integrated vision, we can learn from the example of a number of Scandinavian countries, however, without being able or wanting to copy it indiscriminately on the Flemish labour market. In order to be able to put this integrated labour market vision into practice, we need a reinforced partnership, both with social partners and across several policy areas and with other stakeholders, subregions, sectors and private and public bodies implementing the labour market policy. In order to be able to compensate the short and long-term consequences of the present crisis, we have to invest extra in guidance, vocational training and temporary work experience of jobseekers, both in the public and private sector. Employment incentives for specific target groups (such as a grant for employers who recruit a jobseeker) can make it easier for employers to hire personnel again when the economy recovers, especially for underprivileged groups such as elder and long-term unemployed.

3 We must not make the same mistake in the current crisis as in the past again, namely reducing labour provisions via various measures. The measures we are taking today to compensate the acute consequences of the crisis in the short term also have to be useful in the long term, and demographic forecasts are clearly showing severe ageing of the population and a reduction of labour provisions. Thus, fighting unemployment in the short term must also contribute to the crucial long-term goal namely increasing employability and labour participation. That is why periods of temporary career interruption must aim as much as possible at skills enhancement. The 3 main components of the new labour market vision for Flanders are (1) a reinforced activation policy for jobseekers, (2) investing in skills enhancement and (3) stimulating the demand for labour. A reinforced activation policy means that we will never leave the jobseeker to his own devices, but we will offer every jobseeker appropriate guidance and (vocational) training, with focus on diversity within the number of jobseekers (a tailormade provision). The guidance is always focused on the shortest way to an appropriate job, if possible in the regular economy; if this is not possible we will guide the jobseeker towards an appropriate work form in social economy. Coaching of jobseekers must focus on work experience and appropriate work ( work first ), if necessary this approach will be combined with an appropriate vocational training ( train first ). In order to compensate for the consequences of the ageing population on our labour market, a two-track policy is required: (1) stimulating labour market re-entry via a reinforced activation policy for over-50s in search of employment, and (2) extending career duration via skills enhancement of experienced employees and investing in social innovation in companies. 3 In addition to the focus on active ageing and on career end, the crisis is also an important challenge for young people at the start of their career. In order to have the connection educationlabour market proceed as smoothly as possible, we provide relevant practical experience (work experience) on a structural basis on all education levels, and we reinforce coaching of early school-leavers. The present labour market institutions traditionally strongly focus on the protection of jobs (job security). In the next years we have to make a transition towards protection of job mobility on the labour market (job security), and thus to a right to re-employment, outplacement and career advice and career guidance. Another issue is the need for social innovation on the labour market. Today, companies are taking numerous measures to temporarily adjust labour provisions, such as, for instance, the creative use of working time and career interruption regimes. In business practice, this generates innovative forms in the combination of flexibility and job security (for instance labour pools, shared employership, temporary unemployment linked to training programmes,...). In consultation with the social partners, we can have these and other forms of social innovation passed on to a higher level from the bottom-up. We have to be fully aware of the fact that the labour market policy in itself does not create the necessary jobs; that is why there is a need for entrepreneurship, innovation and an investment policy. By enterprise creation, a reinforced partnership with the economy policy area and a sound offer for employers (with special attention for SMEs) we can make sure that economic leverages will also become employment leverages.

4 The organisation of education also has a decisive effect on the functioning of the labour market. That is why during this of office I wish to focus on a continued, reinforced partnership between the policy areas work and education & training. Together with the Minister for Education and Training I intend to stake more powerfully on the recognition of competencies acquired elsewhere and on a common qualification structure. The Work and Social Economy policy areas are inextricably linked to each other. Together with the Minister for Social Economy I wish to focus during this term of office on a reinforced guidance of jobseekers to diverse social economy work forms, and also offer the necessary support to target group employees during and after this process for a successful transfer to the regular labour market. In this context, we also put a lot of work in integrated work-welfare-pathways and a systematic collaboration between public centres for social welfare and the VDAB (Flemish Service for Employment and Vocational Training) and offer a new policy framework for jobseekers for whom paid labour does not seem possible. There is also a need for enhanced co-operation with private actors. Following several pilot projects tendering, which we used in recent years to explore possibilities of market operation and public-private partnership in re-integration of jobseekers, we will ensure in this term of office, from the VDAB as Flemish labour market co-ordinator, a structural embedding and a further development of these forms of contracting out and co-operation both with commercial and non-commercial private actors. 4 During the present term of office, we also focus on enhanced interregional mobility with the Brussels Capital and the Walloon Regions, e.g. by means of intensive language support. The past has proven that the present division of powers between the federal and the regional authorities with regard to labour market policy is suboptimal. It is often unclear, it leads to complicated constructions and overlapping between measures. Moreover, federal instruments are not always suitable for a tailor-made regional policy. A further state reform could thus substantially increase the impact and the coherence of the Flemish labour market policy and could also help eliminate a number of blind spots in Flemish employment policy, such as pursuing a regional target-group policy aimed at stimulating employment. In a European comparative perspective, Flanders and Belgium spend relatively many public resources on passive benefits for (temporary) unemployment and early retirement (early retirement pension and older unemployed people), whereas public spending for guidance, training and (temporary) work experience of jobseekers is still relatively limited. Because of the crisis the pressure on these passive and federal benefit systems will increase even more in Flanders and Belgium, whereas the required reorganisation of public spending cuts make it difficult to invest extra in employment services and vocational training. Consequently, in order to find a way out of this impasse, a further state reform is necessary, with financial accountability of the Communities and Regions so as to enable them to invest in an activating labour market policy.

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