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1 Institutional moral hazard in the multi-tiered regulation of unemployment Belgium – Background paper Kim Lievens & Frank Vandenbroucke December 2015 This document reflects views only authors and European Commission cannot be held responsible for any use that may made information contained therein Please refer to this as follows: K F (2015) support ‘Institutional Moral Hazard Multi-tiered Regulation Unemployment Social Assistance Benefits Activation – A summary eight country case studies’ Abstract has been written preparation a research project funded by (on Feasibility Added Value Benefit Scheme contract VC/2015/0006) adds detailed analysis following deliverable project: studies; but it was not We concept ‘institutional hazard’ analyse intergovernmental relations within welfare states specifically domain unemployment-related benefits related activation policies (the ‘regulation unemployment’) is one separate studies focuses on The Belgian insurance system represented classic example institutional hazard: federally financed while regions were charge did have inherent incentives do so effectively possible To mitigate situation federal regional governments concluded cooperation agreement 2003 which introduced minimum requirements beneficiaries constitutional reform pushes existing logic devolution even further retained Keywords: hazard; states; relations; insurance; social assistance; Active Labour Market Policies; activation; policy; 2 Belgium1 thank Jan Vanthuyne Tom Bevers extensive very useful exchanges List Abbreviations ALMPs Policies HVW Hulpkas voor Werkloosheidsuitkeringen (public fund) OCMW/CPAS Openbaar Centrum Maatschappelijk Welzijn/ Centres Publics d’Aide Sociale (municipal centre SA) PES Public Employment Services RMI/DIS law … recht op maatschappelijke integratie/droit à l’intégration sociale (law ‘the right integration’) RVA/ONEM Rijksdienst Arbeidsvoorziening/Office National de l’Emploi (federal PES) RWB Regionale Werkloosheidsbureaus (offices at district level) SA UI Insurance VDAB Vlaamse Dienst Beroepsopleiding en Arbeidsbemiddeling (Flemish Introduction multi-layered Over course several decades series reforms devolved ever more powers authorities On hand level holds important competences with regard functioning labour market particular field security legislation (including benefits) other also wide regarding market-related issues such organisation (ALMPs) matching demand supply through (regional) public employment services After complex negotiations between government three (and parallel many rounds discussion partners) cooperative framework follow-up unemployed formally agreed 2004 different levels In 2013 new Cooperation Agreement negotiated latter will last specific kind; from onwards Belgium’s architecture changes context round so-called Sixth State Reform part evolution same challenges policy inspired Agreements; devolves political responsibility individuals living means-tested completely Thus we enter era consequences discussed sections 3 an exclusive competence Belgium: duration eligibility criteria are solely determined Trade unions play role practical administration intermediaries individual branch managed Arbeidsvoorziening (RVA)/Office (ONEM) main implementation i e deciding entitlement claimants determining their issuing payment orders bodies addition monitors makes sure violations prevented they occur sanctioned operates via 30 offices (Regionale or RWB; order avoid confusion Regions translate ‘regionale’ here ‘district’) process files decide done (uitbetalingsorganismen) fund (Hulpkas HVW) auxiliary funds linked trade get compensation costs based formula takes into account number cases Apart appeal disputes no influence whatsoever decision granting depends upon (VDAB FOREM Actiris ADG) (de Deken 2007) Figure dotted lines channels over exchanged Bruxelles Formation Arbeitsamt) exchange crucial assist finding job organise training programmes (failing take offer participate programme can reason suspending 4 Institutions actors Source: 2007 VDAB: Flemish Region Dutch-speaking inhabitants Brussels; RDBB: office Formation: institution overseeing vocational French-speaking BGDA-ORBEM (now called Actiris): Brussels Region; FOREM: Walloon (C: search assistance (FOREM Consultation F: Formation)); Arbeitsamt: German-speaking population eastern districts Hoge Raad Werkgelegenheid: advisory coordinating among Regions; FOD Werkgelegenheid Arbeid Sociaal Overleg: Federal Service Dialogue; RVA/ONEM: Office; RWB: offices; PWA: local agencies; ACV: Christian union (auxiliary body); ABVV: socialist ACLVB: liberal HVW: body; FSO: body redundancy payments (results under RVA/ONEM) mere fact person subject scheme salaried persons does give concerned must prove sufficient worked days equivalent during reference period some conditions met normative remains competence; led power respect countries two respects First principle unlimited Second unrelated load incorporates inactive who would entitled proper (long-term) invalidity early retirement pension Consequently comparatively big (see Table 4) general high certainly financially household medium- long-term sense somewhat resembles Austrian UA (in principle) fairly low generosity 5 notion ‘unlimited duration’ needs qualification though counts stipulate implies obligations: searching accepting ‘adequate offers’ being ready cooperate Individuals seen fail these obligations years article 80 benefit exclude if considered ‘abnormally long’ 1990s relatively lost With hindsight mechanism said rather brutal its (exclusion often without prior warning should look work) highly selective (it applied sub-category mainly women) effective terms (since incorporated strategy) Article replaced broader scope covers all initially restricted under-50s) nuanced application (with gradual sanctions) preventative than punitive effect critical note might say deployed still reach out (or least sufficiently) ‘stock’ Hence reality replacing art mechanisms sanctions control changed much overall strictness moderate (Figure 2) due relaxed availability suitable work combined strong reliance It however nature Overall Langenbucher p 27 6 Strictness 0 Average 8 cases7 leefloon/revenue d’intégration sociale) plays residual Belgium; budgets caseload marginal (compared unemployment) Those qualify up now fall back concerning municipal discretionary municipalities reflected differences approach laws rules conditionality measures versus supply-driven external partners (Hermans 2005) budgetary roughly formulated starting 50/50 division These administered (Openbare Centra Welzijn OMCW/Centres CPAS) centres run incomes members depend status means-test applies types income claimant: transfers real estate alimentation earned spouse parents (as long young claimant family allowance) children patrimony applicant reduced ‘abnormal way’ past five Already since 1980s3 features clear-cut distinction funding administrative management sanctioning when meet make them eligible employment) another (but effort Special Law August 1980 laggard actual shift passive occurred late systematic conforming 1997 guidelines Strategy implemented By time had created considerable tensions governance culminating departure Before there ‘preventative’ attempt activate entrants across regions; ‘curative’ (activating stock unemployed) disparate Conference September paved way change basic principles laid down April goal better coordinate instruments (counselling training) recipients rights rebalanced Within intensified guidance provided annual maximum contribution €24 million allocated according distribution key points listed 9 Main Communities active monitoring intensify unemployed: For inflow unemployment: before sixth month people (< age 25) 12th adult (≥ b point received mentioned a: months letter c where necessary soon sets own assess efforts jobseekers thus longer rely data (transmissions; cf infra) ongoing actions disrupt counselling targets full (meaning after full-time studies) Data ICT-based both directions doing burden minimised provide inter alia communication of: Information contacted ii outflow iii exemptions registration jobseeker Job offers four six