Municipal job activation in the firing line

In August this year Denmark's 98 municipalities became solely responsible for job activation and employment projects for unemployed people. The parties in the labour market, experts and the political opposition all warn this will only make matters worse, especially in the face of rising unemployment.

Municipal job centres were already facing serious problems before being given this new task. Many unemployed were in a queue waiting for job activation. This summer three in ten people on unemployment benefits did not receive offers of activation as fast as they were entitled to. One in five did not get invited to job information interviews within the time limit. Earlier this year the Danish Audit of the State Accounts criticised the municipalities' handling of people on unemployment benefits. It was pointed out that they failed to offer people the employment initiatives they were entitled to. The Audit also pointed to the big differences in how successful job centres were at doing their job.

One entry point for everyone

Despite people queuing up for job activation, municipalities have now been given even more responsibilities. So far the state had been responsible for people with unemployment insurance, while municipalities were responsible for those drawing unemployment benefits. Now municipalities will take care of both.

Denmark's centre-right coalition government is behind the decision. Jens Vibjerg is labour market spokesman for the main coalition partner the Liberal Party. He is convinced the reform will be a success.

"Our decision is the right one. Unemployed with unemployment insurance and non-insured unemployed share the same problem; unemployment. It's only logical to help them out in one place. And the most natural place to put that responsibility is with the municipalities, because they are the first port of call for people looking for help from the authorities," says Jens Vibjerg.

There is still no valid documentation detailing the success or otherwise of the first few months of municipal responsibility for job activation. But Jens Vibjerg is certain that they will manage the task.

"There is no doubt in my mind that the municipalities can do this. And it's not as if the state has let go completely. We will continue to have strict state control, combined with what  municipalities can offer in terms of being close to the people," he says.

Trade unions and the major employer organisations have contested several points of the reform. They feel that municipalities are too small geographically to be able to offer an efficient job activation programme for the unemployed. The parties in the labour market are worried too. They fear local politicians will be tempted to save money by holding back funding of activation programmes in favour of vote-winning areas of priority like childcare and schools. So far the state has carried the cost of job activation, but municipalities will gradually take over parts of that cost.

Too close-focused

Lars Andersen is director at the Danish trade unions' think-tank the AErådet. He is very worried about this development.

"It is far from good. The labour market doesn't stop at the border between municipalities. Many work in different municipalities from where they live, and a single municipality is far too small to help unemployed people find jobs."

Lars Andersen thinks employment policies will suffer from falling lower on the list of political priorities as a result.

"Parents will take to the streets to demonstrate against the closure of a nursery, and that makes an impression on local politicians. Nobody's going to demonstrate for the unemployed. Employment policy will loose in the fight for resources," he says.

The Confederation of Danish Industry (DI) agrees:
"Job centres were struggling to keep up already, and with the new reform we fear they won't be able to catch up. The municipalities are too small, their focus will bee to narrow and the municipal job centres have neither the resources for a close dialogue with businesses nor a strong enough economic incentive to deliver proper solutions. That could have fatal consequences in times of rapidly rising unemployment," says Thomas Qvortrup Christensen, Chief Consultant at DI.

"Discount-activation"

Employers' and workers' organisations also warn that the move to a municipal structure will lead to the loss of important knowledge about what kinds of job activation programmes actually work. Professor Henning Jørgensen at the Centre for Labour Market Research at Aalborg University is one of Denmark's leading experts on labour markets. He acknowledges the fact that municipalities are good at dealing with individual cases and at tailoring solutions for citizens. But just like the other opponents to the reform, he too thinks the municipalities lack resources and competence to implement such a grand drive for job activation. The state will reimburse municipalities for the costs of job activation, an agreement the professor calls "horrible". The rules are complicated and unfair, he says, and predicts job centres will be tempted to initiate "discount-activation" - i.e. cost-cutting exercises like sending job-seekers on courses that don't necessarily work, but that will make the municipality eligible to the state refund.

"You are re-instating boxed-in thinking. The compensation deal does not demand any kind of education or job training, and that is very worrying. Especially now that we see a lot of unemployment and we should be focusing on education," he says.

West-European trend

The professor believes Denmark's job activation reform has been inspired by the Netherlands. There, the reform has slowed down because it has not quite worked out as intended. He is puzzled as to why Denmark still wants to pursue the planned reform.

Other Nordic countries are also looking at ways of gathering all the strands of employment policies in one place, especially Norway. Henning Jørgensen thinks the Nordic countries are following a trend seen in much of Western Europe: a targeted focus on activating everyone, even the ill and old.

"The main idea is that everybody can do some kind of work, and that everybody should be made ready to serve the labour market. We are erasing the line between social policies and employment policies."

Danish municipalities have welcomed the reform with open arms. But Professor Henning Jørgensen doesn't think they've got much to cheer about. He views the reform as the greatest interference in the self-governance of municipalities for nearly 100 years. There are 28 legal paragraphs allowing the state to interfere with the municipal control of job activation.

There are detailed state instructions for how job centres must execute the job activation. All this leaves very little room to manoeuvre for the municipal clerk. Strong state control will also make the roles of the two parties less clear cut, which is unfortunate according to Henning Jørgensen. Who is responsible when unemployment rises?

"The employment minister can blame the municipalities, and they can blame the minister. We'll have fights over who's at fault," he says.

Back to the state

Danish Industry, the think tank AErådet and professor Henning Jørgensen all agree that job activation must be made a clear state responsibility once again. That will happen if voters return a social democratic government at the next election, says labour market spokesperson for the Social Democrats, Torben Hansen:

"We view labour market policy as a state responsibility, and we've been fighting the move to the municipalities. The reform fences the municipal labour market in, and each job centre will have so few unemployed in each field of expertise that it will be very difficult to give them appropriate help. We will definitely change the system when we get back into power."

The Liberal Party's Jens Vibjerg counters the criticism. He does not think municipalities are too small to handle job activation, and he is convinced the compensation deal will spur the municipalities on to do a good job with activation.