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Stefán ÓlafssonUniversity of Iceland
Nordic Conference on Innovation in Vocational Rehabilitation
Nordic Council of Ministers, Reykjavík, April 2005
Work and Activation in the Icelandic Welfare State:An International Comparison
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Contents
• Work and activity in Iceland in an International Comparison
–Employment participation–Retirement–Disability
• General character of the Icelandic Model• Changing environment in Iceland and growth of disability pensioners•Policy changes in the West
–From Passive to Active Policies
•Policy Outcomes: Resisting Marginalization
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Work and Activity:Iceland in Comparison
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Employment Participation% males and females, at working age
0
10
20
30
40
50
60
70
80
90
100Ic
elan
da
Sw
itzer
land
Nor
way
Den
mar
k
Sw
eden
Uni
ted
Kin
gdom
Net
herla
nds
New
Zea
land
Can
ada
Uni
ted
Sta
tes
Aus
tral
ia
Aus
tria
Japa
n
Fin
land
Por
tuga
l
Irel
and
Ger
man
y
Luxe
mbo
urga
Fra
nce
Spa
in
Bel
gium
Gre
ece
Italy
Tur
key
% p
eo
ple
of
wo
rkin
g a
ge
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Female Work Participation% of females, at working age
0
10
20
30
40
50
60
70
80
90
Icela
nda
Norway
Sweden
Switzer
land
Denm
ark
Canad
a
Unite
d Kin
gdom
New Z
eala
nd
Finlan
d
Unite
d Sta
tes
Nethe
rland
s
Austra
lia
Austri
a
Portu
gal
Ger
man
y
Japa
n
Franc
e
Irelan
d
Luxe
mbo
urga
Belgiu
mSpa
in
Gre
ece Italy
% o
f w
orki
ng a
ge f
emal
es
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Senior ParticipationPeople aged 55-64, at work, year 2003
0
10
20
30
40
50
60
70
80
90
100
Icela
nda
Sweden
Norway
Switzer
land
New Z
eala
nd
Japa
n
Denm
ark
Unite
d Sta
tes
Unite
d Kin
gdom
Canad
a
Portu
gal
Austra
lia
Finlan
d
Irelan
d
Nethe
rland
s
Gre
eceSpa
in
Ger
man
y
Franc
eIta
ly
Austri
a
Belgiu
m
Luxe
mbo
urga
% w
orki
ng a
ge p
opul
atio
n
Near absence of early retirement in Iceland
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Senior ParticipationAverage age of retirement 1997-2002
50
55
60
65
70
75Ic
elan
d
Irel
and
Japa
n
Por
tuga
l
Sw
itzer
land
Uni
ted
Sta
tes
Nor
way
Den
mar
k
Sw
eden
Tur
key
OE
CD
Can
ada
Spa
in
New
Zea
land
Uni
ted
Kin
gdom
Gre
ece
Aus
tral
ia
Italy
Ger
man
y
Luxe
mbo
urg
Fin
land
Fra
nce
Net
herla
nds
Aus
tria
Pol
and
Cze
ch R
epub
lic
Bel
gium
Slo
vak
Rep
ublic
Hun
gary
Men
Women
OE
CD
Soc
iety
at a
Gla
nce
2005
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Active for Work?In work or seeking work, 2003
0
10
20
30
40
50
60
70
80
90
100
Icela
nda
Switzer
land
Norway
Denm
ark
Sweden
Unite
d Kin
gdom
Nethe
rland
s
New Z
eala
nd
Canad
a
Unite
d Sta
tes
Austra
lia
Austri
a
Japa
n
Finlan
d
Portu
gal
Irelan
d
Ger
man
y
Luxe
mbo
urga
Franc
eSpa
in
Belgiu
m
Gre
ece Italy
% p
opul
atio
n at
wor
king
age
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Activation and Disability Prevalence
OECD 2005 and 2003
0102030405060708090
100
Icelan
da
Switzer
land
Norway
Denmar
k
Sweden
United
King
dom
Nethe
rland
s
Canad
a
United
Stat
es
Austra
lia
Austri
a
Portu
gal
Germ
any
Franc
eSpa
in
Belgium Ita
ly
Employment participation Unemployment Disability prevalence age 20-64
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Disability and early retirement recipiency rates% of working-age population
OE
CD
Em
ploy
men
t Out
look
200
3
0
2
4
6
8
10
12
14
Franc
e
Austri
a
Belgiu
m
Denm
arkUK
Ger
man
y
OECD m
ean
Canad
aUSA
Nethe
rland
s
Japa
n
Sweden
Austra
lia
Icela
nd
Spain
Irelan
d
New Z
eala
nd
% o
f a
ge
s 1
6-6
4
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Disability Prevalence in the Nordic Countries 1995-2002Disability pensioners as % of ages 16-64
0
1
2
3
4
5
6
7
8
9
10
Denmark Finland Iceland Norway Sweden
Dis
abili
ty p
ensi
oner
s as
% o
f 16
-64
year
s
1995
2000
2001
2002
Nososko 2004
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General character of the Icelandic Welfare Model
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Icelandic Welfare ModelIceland has a mixed welfare system:
• Welfare services – Similar as in Scandinavia• State hospitals – health care• State schools – public housing system• Day care services• Social services other
• Social security – Anglo-Saxon influences• Rather low benefits• Great use of income-testing• Poverty alleviation aimed• Equalization effects not as large as in Scandinavia
• Emphasis on self-help in the culture
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Social Expenditures as % of GDP OECD 2001
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00Ir
ela
nd
Unite
d S
tate
s
Canada
New
Zeala
nd
Austr
alia
Spain
Icela
nd
Luxem
bourg
Port
ugal
Unite
d K
ingdom
Neth
erlands
Pola
nd
Gre
ece
Fin
land
Norw
ay
Italy
Austr
ia
Sw
itzerland
Belg
ium
Fra
nce
Germ
any
Denm
ark
Sw
eden
% a
f V
LF
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USA Germany Scandinavia IcelandWelfare goals obtained:• Insurance coverage Small Considerable Large Large• Quality of benefits Low Class-specific Large Low• Use of means-testing Large Limited Limited Large• Public welfare services (health, day care... Small Small Large Large• Extent of poverty in society Large Medium Small Small-med• Equality of living conditions Low Medium Large Large• Equality of sexes Medium Low Large Large• Effect of class structure Large Large-med Small Small•
Quality of 3 Welfare Regimes and Iceland
Comparative overview
Scandinavia obtains welfare goals best – by far
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Changing Environment in Iceland
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Higher Unemployment Level during the 1990s
0
1
2
3
4
5
6
7
8
9
10
Unemployed as % of labour force
%
Heimild: Þjóðhagsstofnun og Hagstofa Íslands
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Increasing Prevalence of Disability in Iceland
0
1
2
3
4
5
6
7
8
9
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
% p
op
ula
tion
16
-64
Men
Women
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Relationship Between Unemployment and Disability Prevalence
Incidence of disability and the rate of unemployment Females 1992-2003
0,0000,1000,2000,3000,4000,5000,6000,7000,8000,900
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Nýg
engi
50-
75%
öro
rku
0
1
2
3
4
5
6
Atv
innu
leys
i kve
nna
%
Incidence of disability (50-75%)
Unemployment rate (%)r=0,6
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Relationship Between Unemployment and Disability Prevalence
Incidence of disability and the rate of unemployment Males 1992-2003
0,000
0,100
0,200
0,300
0,400
0,500
0,600
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Nýg
engi
50-
75%
öro
rku
0
1
2
3
4
5
6
Atv
innu
leys
i kar
la
Incidence of disability (50-75%)
Unemployment rate (%) r=0,63
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Increasing Long-Term Unemployment in Iceland during the 1990s
0
5
10
15
20
25
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
% o
f un
empl
oyed
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Relationship Between Long-Term Unemployment and Disability Incidence
0
200
400
600
800
1000
1200
1400
1600
1800
2000 2001 2002 2003
Num
ber
Incidence of disability 75%
Long-term unemployed (6 months+)
r=0,85
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Some reasons for increasing number of disability pensioners in Iceland
•Benefits are not particularly high compared to wages in the labour market•Disability benefits are however high compared to other benefits in the system
•Sickness benefit 25.000 Íkr./month•Unemployment benefit 90.000 -- •Disability benefit 120-150.000 --
•Incentives are for the long-term sick and unemployed to convert to disability pension•Less than 1% return to labour market per year• >>>Disability trap is a real danger!•Also: Increasing pressure in the labour market
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Policy Change and Policy Outcomes
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From Protection to Participation
The policy shift of the 1990s:•Change of thinking – change of needs:
•Towards the Active Society-Third Way Pol.•From Welfare to Workfare•Clinton: End of “Welfare” as we know it
•Cost containment of the welfare state•Great rise of early retirement + aging problem•Low employment participation of the disabled•Concerns with...
•Unemployment•Marginalization•Social exclusion
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Types of Welfare States
Esping-Andersen´s Three Models (1990 og 1999) + 1
• American Model• Minimalist, little protection, small role in soc.• Big role f. private sector, firms provide benefits
• German Model • Employment related rights, class-based rights• Not very egalitarian; very expensive form
• South-European Model • Less advanced Bismarckian, class-based rights,• Family has large role, not particularly egalitarian
• Scandinavian Model • Rights as citizen rights, public protection, good quality
of subsistence security and welfare services
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State Spending aimed at New Risksin different Welfare RegimesActivation and Services, 1980-1999
Services for elderly and disabled
Services for families
Active labour market support
Services for elderly and disabled
Services for families
Active labour market support
Scandinavian 1,77 1,60 0,88 2,73 1,78 1,67Continental 0,46 0,38 0,13 0,75 0,74 1,14
Liberal 0,53 0,29 0,28 0,59 0,33 0,74
South European
0,08 0,04 0,02 0,25 0,37 0,47
EU 15 0,65 0,55 0,25 0,98 0,83 1,00
Iceland 2,20 1,10 0,10
----------------1980----------------- --------------1999----------------
Peter Taylor-Gooby 2004
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Active Labour Market Policy Expenditures as % of GDP in 2001
OE
CD
Soc
iety
at a
Gla
nce
2005
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6D
enm
ark
Net
herla
nds
Sw
eden
Fra
nce
Bel
gium
Ger
man
y
Fin
land
Nor
way
Spa
in
Irel
and
Por
tuga
l
OE
CD
-30
Sw
itzer
land
Aus
tria
Italy
New
Zea
land
Aus
tral
ia
Slo
vak
Rep
ublic
Can
ada
Uni
ted
Kin
gdom
Japa
n
Gre
ece
Uni
ted
Sta
tes
Pol
and
Luxe
mbo
urg
Icel
and
% o
f G
DP
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Expenditures on all Disability-Related Programs as % of GDP in 1999
OE
CD
200
30
1
2
3
4
5
6
Norway
Sweden
Nethe
rland
s
Polan
d
Portu
gal
Denm
ark
Ger
man
y
Austri
a
Icela
nd
Switzer
land
Spain
Italy
Belgiu
m
Franc
e
Unite
d Kin
gdom
Turke
y
Austra
lia
Unite
d Sta
tes
Canad
a
Korea
Mex
ico
% o
f G
DP
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From Protection to Participation
Routes to Activation or Employment Retention-some options:1. Accomodated work (regulations, job retention)
2. Subsidised work (economic incentives as compensation for lower productivity)
3. Supported work (personal assistance, job coaching, job search...)
4. Sheltered work (special workshops...)
5. Reserved work (priority for special groups in jobs)
6. Vocational rehabilitation (training, rehab, education)
Other options: Lower benefits and/or restrict eligibility
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Focus and timing of Vocational Rehabilitation and Training
(Quasi) Compulsory
Intermediate approach
Entirely voluntary
Any time possible (also
very early)
Austria DenmarkGermany
SpainSweden
-- --
Intervention not very early
Austria DenmarkNorwaySpain
Switzerland
BelgiumNetherlands
Polland
AustraliaFrance
ItalyKorea
UK
Only after long-term sickness
-- Turkey CanadaMexico
PortugalUSA
Focus on vocational rehabilitation
OECD 2003
Timing ofvocationalrehabilitation
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Activation PoliciesCf. Duncan Gallie et. al. 2004
Difference between USA and European policies• Benefits are more generous in Europe (except in South)• (Activity rates are though not lower in North)• Work-for-benefits was only one of options in Europe• Schemes also offered employment in subsidized jobs
• Temporary contracts in publicly created jobs• Training and education was offered• Non-Work activities also offered (voluntary work)• People would not lose all benefits for non-compliance• “Activityfare” rather then “Workfare” (Gallie)
• More concern in Europe for Integration and HRD• The USA model involved greater labour market discipline>>>• Benefit reveivers were considerably reduced in numbers, like lone
mothers (-2,4millions, thereof 1,4m went to work).
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Activation PoliciesCf. Duncan Gallie et. al. 2004; Zeitlin et.al. 2003
Evaluation of successes of activation policies:1. In USA + many countries benefit receivers went down2. Mixed effects on expenditures3. Activation measures (and poverty relief) reduce social
exclusion experiences significantly4. The social inclusion obtained is though often restricted5. Employment effects of activation were often important, but
still less than hoped for (minority got sustainable jobs)6. So employment effects are on the whole positive but modest7. Lack of work motivation was not a significant cause of
unemployment, but youths without work experience had fragile motivations
8. Removing disincentives of welfare benefits is not the all important factor
9. Crafting programs for special needs is more important
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OECD PoliciesTransforming Disabilities into Abilities
Evaluation of activation and social policies of member countries in 2003:
1. No country has an outstandingly successful program
2. Many countries are though doing good things3. High benefit levels and active labour market
policies can produce win-win combinations4. High benefits can increase recipients numbers5. Poverty alleviation is important (poverty increases
trapping of people in passivity and problems)
6. Character of programs is important
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OECD PoliciesTransforming Disabilities into Abilities (2003)
Policy recommendations for disability:1. Introduce culture of mutual obligations2. Recognize the status of the disabled
independently of work and income situation3. Design individual work/benefit packages for
disabled persons4. Promote early intervention5. Involve employers in the process6. Restructure benefit systems to remove
disincentives to work7. Reform program administration8. Improve coordination of transfer schemes
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Thank you!Stefan Olafsson
University of Iceland