Mutual Learning Programme

Mutual Learning Programme DG Employment, Social Affairs and Inclusion The Netherlands Reducing Long-term unemployment in The Netherlands: profiling, networking and incentivizing Seminar/Learning Exchange on Improving measures to implement the Recommendation on integration of longterm unemployed into the labour market Croatia, 9-10 November 2017 Written by Nynke de Groot, School of Business and Economics, Vrije Universiteit Amsterdam November, 2017

EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Unit A1 Contact: Emilio Castrillejo E-mail: EMPL-A1-UNIT@ec.europa.eu Web site: http://ec.europa.eu/social/mlp European Commission B-1049 Brussels

EUROPEAN COMMISSION Mutual Learning Programme DG Employment, Social Affairs and Inclusion Directorate-General for Employment, Social Affairs and Inclusion Seminar/Learning Exchange on Improving measures to implement the November, 2017 Croatia, 9 and 10 November 2017

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Table of Contents 1 Labour market situation in the Netherlands... 1 2 Assessment of the policy measure... 3 3 Assessment of the success factors and transferability... 7 4 Questions... 8 5 References... 9 Annex 1: Summary table...10 Annex 2: Examples of relevant practice...12

1 Labour market situation in the Netherlands Compared to other EU countries, the benefit scheme for unemployed individuals in the Netherlands is relatively generous (OECD, 2017). For example, in the first 60 months following unemployment the average EU household in 2015 would receive benefits with a replacement rate of about 52% of the previous wage, while the average Dutch household would receive 70% of the previous wage. In contrast, the average Croatian household would receive only 42% of the previous wage in the first 60 months after unemployment 1. Given the generosity of the Dutch unemployment benefit scheme, one might expect relatively high unemployment rates in the Netherlands. However, as Figure 1 shows the Dutch unemployment rate is low compared to the EU average. During the last economic crisis, the Dutch unemployment rate gradually increased from 3.7% in 2008 to 7.4% in 2014. Between 2014 and 2016 it decreased again to 6% in 2016. The Dutch long-term unemployment rate is also substantially lower compared to the EU average (panel 2 of Figure 1). In 2008, 0.9% of the active population was long-term unemployed, compared to 2.6% in the EU and 5.3% in Croatia. At its peak in 2015, the long-term unemployment rate in the Netherlands was 3.0%, while in that same year Croatia 10.2% were long term unemployed. Figure 1. Unemployment rate and long-term unemployment rate in European Union (28 countries), Croatia and the Netherlands. 20 Unemployment rate 20 Long-term unemployment rate 15 15 10 10 5 5 0 2007 2010 2013 2016 EU 28 Netherlands Croatia 0 2007 2010 2013 2016 EU 28 Netherlands Croatia Source: OECD. Although the Netherlands has a low unemployment rate in general, this is not the case for all groups of workers. More specifically, between 2007 and 2016 the unemployment rate of older workers between 55 and 64 years has doubled, and from 2014 onwards the Dutch unemployment rate of workers aged 55-64 exceeds the EU average (see Figure 2). Although older workers do not have a high risk of becoming unemployed, once they do become unemployed they have a high risk of staying unemployed for a long period (see panel B of Figure 2). In the years 2007 to 2015, the share of individuals aged 50-64 amongst all unemployed workers was between 37 and 51%. However, in the same period, the share of older workers amongst individuals who were long-term unemployed was substantially larger. Roughly two-thirds of the long-term unemployed is between 50 and 64 years of age. In other European countries, similar patterns exist. Between 2007 and 2016, on average 57% of the long-term unemployed in the EU was older than 50 (Eurostat, 2017). In Croatia, almost 75% of the long-term unemployed 1 Based on calculations by the OECD (2017). Replacement rate includes cash housing transfers and social assistance top-ups. November, 2017 1

was older than 50. This signals that older workers have a high risk of becoming longterm unemployed. Figure 2. Panel A: Unemployment rate of individuals between 55-64 in EU, Netherlands and Croatia (Source: Eurostat). Panel B: Share of older workers in unemployment and in long-term unemployment in the Netherlands (Source: Statistics Netherlands, data available on Statline) 14 0.8 12 0.7 10 8 6 4 2 0 2007 2009 2011 2013 2015 EU 28 Croatia Netherlands 0.6 0.5 0.4 0.3 0.2 0.1 0 2007 2009 2011 2013 2015 Share of older workers in unemployment Share of older workers amongst LTU November, 2017 2

2 Assessment of the policy measure 2.1 Registration of the jobseekers In the Netherlands, the Employee Insurance Agency (in Dutch Uitvoeringsinstituut WerknemersVerzekeringen, UWV) is responsible for the implementation of employee insurances. As such, UWV provides benefits and job search assistance to individuals who are entitled to Unemployment Insurance (UI), Disability Insurance (DI) and sickness benefits. Social assistance benefits are provided by the local municipalities. Until 2015, municipalities were only responsible for social assistance and welfare to work programs for job seekers with full ability to work. Since 2015, this responsibility has been extended to individuals who have no employment history, are partially disabled and started claiming benefits after 2015 (Vermeulen, 2015). UWV and municipalities are required to collaborate under the Act Structure of Organisation of Work and Income (SUWI) and UWV and all municipalities are organized in 35 labour market regions to establish a Single Point of Contact (SPOC) for job seekers. UWV is responsible for the national registration of job seekers and therefore, every jobseeker collecting benefits including social assistance is required to register at UWV. In addition, job seekers who are not eligible for benefits, for example because they are still employed or because they exhausted their UI benefits, can also register at UWV. UWV is also responsible for the registration of vacancies. Jobseekers registered at UWV have access to a website for jobseekers 2, where they can search for vacancies, upload their CV, take online tests on for example skills and interests and follow online courses to help them find a job. Employers also have access to this website to post vacancies and search for potential future employees. Both UWV and municipalities can also have separate administration of unemployment and social assistance benefit claimants. They also separately offer job integration agreements (JIA) and re-integration programs such as job search assistance or training. In many regions UWV and municipalities share the same building and sometimes they even share caseworkers and access to job search assistance, in other regions the job seekers are referred to either a caseworker from the municipality or UWV after their first registration at UWV. 2.2 Individual assessment: The Work Profiler As of 2015, in the 6 th -10 th week of unemployment all job seekers collecting UI benefits are invited to fill in the online Work Profiler (in Dutch: werkverkenner) of UWV. 3 This instrument is similar to the statistically assisted profiling (StAP) of HZZ in Croatia. The Work Profiler has been developed between 2006 and 2011 by UWV and the University of Groningen. The researchers wanted to develop an instrument that predicted the probability that someone will find a job in the first year after entry into unemployment. First, an extensive literature study was performed to find potential factors that predict this probability. This yielded a list of 500 factors. Next, the researchers designed a questionnaire with these 500 factors and compared the answers of long-term unemployed to those who returned to work quickly. This reduced the number of factors to 150. In the second step, another questionnaire was constructed and recently unemployed individuals were invited to fill in this questionnaire. One year later, the researchers compared the individuals who found work to those who did not, and estimated a model with the remaining factors to see which factors were predictive of finding work. They find that only 11 factors (constructed out of 20 questions) are 2 www.werk.nl 3 Job seekers receive several notifications (by e-mail and on their personal webpage) that they should fill in the Work Profiler. Caseworkers are not able to sanction job seekers if they do not fill in the Work Profiler. About 80% of the job seekers fill in the Work Profiler. November, 2017 3

predictive for work resumption within a year. In contrast to StAP in Croatia, the final model contains both hard (age, years employed in previous job) and soft (job search intention and views on return to work) factors 4. The aim of the Work Profiler is twofold. First, it should help caseworkers select the job seekers with a high risk of long term unemployed early in the unemployment spell. By using the predicted probabilities to return to work within a year based on the Work Profiler, caseworkers can select the job seekers which need more help in finding a job. The current practice is that every job seeker with a predicted employment probability of less than 50% receives a meeting as soon as possible after unemployment to determine the appropriate job search assistance. In this meeting, the caseworker and the job seeker talk about the results of the Work Profiler and the factors that hinder job finding. The caseworker creates a JIA, in which they define the goal for the job seeker, the actions the job seeker needs to take and the obligations of the job seeker. The second aim is to provide caseworkers with a diagnosis why the job seeker has a lower probability to find work and which factors hinder job finding. All job seekers including those with a high probability to return to work receive information on digital services which can help them improve the factors hindering them to return to work. For example, someone who has difficulties understanding the Dutch language will receive a link to language course; while someone who does not have contact with employers will receive information on networking. Someone with good employment probabilities does not receive direct information on the predicted probability or the personal hindering factors, but is referred to the relevant digital services which follow from the Work Profiler. The Work Profiler has recently been evaluated to improve both the accuracy of the predictions and the user-friendliness of the instrument for job seekers and caseworkers. The new Work Profiler 2.0 will include more variables (18 instead of 11), such as potential types of jobs, the acceptance to travel for work or to work irregular hours and the education level. In addition, because caseworkers said that they need more information on the extent to which a factoring is hindering a job seeker they will now receive more detailed information on this. The Work Profiler is only used to detect job seekers with a high risk of longunemployment amongst individuals collecting unemployment benefits. However, municipalities often also use less advanced instruments to trace high-risk job seekers. In most municipalities, caseworkers classify social assistance recipients according to their ability to work, based on characteristics such as age, education and how often the job seeker is in contact with others. 2.3 Job Search Assistance and Plan of Action for older job seekers Besides the online service described in paragraph 2.2, UWV provides several types of job search assistance to unemployed job seekers. Individuals with a high risk of longterm unemployment have a meeting with a caseworker, in which they discuss the best job search strategy for the job seeker and what the appropriate job search assistance would be. They write down a plan of action, the obligations (comparable with the JIA s) This caseworker does not necessarily have to be the same caseworker over the entire unemployment period, especially job seekers with a low risk of long-term unemployment are often assigned to a team of caseworkers and are in contact with several caseworkers. One specific group with a high risk of becoming long-term unemployed are older job seekers. For that reason, the Ministry of Social Affairs and Employment (SZW) launched a Plan of Action in 2013 which aims to increase employment probabilities of this vulnerable group. The Plan of Action consisted of four elements. The main element is a 4 For a complete list of the variables and a further explanation of the development of the Work Profiler see: Wijnhoven and Havinga, 2014 or Brouwer et al, 2015. November, 2017 4

job search program called Succesvol naar Werk, which translates as Successfully To Employment Program (STEP). The goal of this program is to increase the job finding probabilities of participants by improving their job finding skills and learning how to use their social network to find a job. The program involves ten group meetings of about four hours each and two short individual meetings with a trainer. Job seekers aged 50 and older are invited to participate in STEP after three months of unemployment. In the first and second meeting, the participants do a test on abilities and interests and discuss the findings of this test, to provide them with information on their capabilities and weaknesses, to see what they need to work on in the remainder of the program. In the other meetings, the participants practice networking and job interviews, discuss job search strategies, improve their CV and learn other job search skills. They also meet with a caseworker from UWV who is in regular contact with employers, to learn about potential vacancies and job search strategies. The effects of STEP have been evaluated with the use of a large-scaled randomized experiment (about 50,000 individuals, of which 10,000 in the control group). The results of the experiment are positive, participation in STEP increases the probability of finding work and significantly reduces the probability of long-term unemployment (De Groot and Van der Klaauw 2017). The effects are strongest for job seekers with secondary and higher education. The training is cost-effective, meaning that participation in STEP reduces the unemployment benefits of participants and this reduction exceeds the costs of the program. Because of the positive effects of STEP, the program has now also become available for younger job seekers with a high risk of long-term unemployment. The second element of the Plan of Action was a placement fee for temporary agencies. If a temporary agency finds employment for an older unemployed, the agency receives a fee between 300 and 1 000 (depending on the length of the contract). In 2016, the placement fee was paid about 6 700 times. The third element of the Plan of Action was an education voucher, a subsidy which older job seekers could use to pay for education which would increase their employment probabilities. Roughly 7 100 older job seekers received this subsidy in 2016. Besides these three instruments, the Plan of Action also entailed a large public campaign to stimulate employers to hire older workers and to take away the prejudices about older workers (UWV, 2017). This campaign entailed meetings with employers, commercials and the appointment of an ambassador for older job seekers. In contrast to the HZZ in Croatia which targets unemployed workers who are unemployed for at least 12 months, UWV targets job seekers who have been unemployed for at least 6 months. They have a meeting with a caseworker where they are informed that from now on, the job seekers have to accept all available jobs, regardless of the for example the required level of education or wage. 5 The aim is to stimulate job seekers to search more broadly to work, already quite early in the unemployment spell. 2.4 Employers: financial incentives and matching events UWV collaborates with employers in several ways. As mentioned before, employers can post vacancies and search for candidates in the digital database of UWV. Especially for job seekers with a high risk of long-term unemployment, there are several instruments which aim to increase the hiring of these job seekers by employers. For job seekers aged 50 and older, the nationwide campaign and the placement fee for temporary agencies was already mentioned before. Another instrument is a temporary placement. If the job seeker has a high risk of long-term unemployment, an employer can test 5 The caseworker can sanction job seekers if they do not accept a job that was offered to them. This sanction can be up to 100% of the received UI benefits. November, 2017 5

whether the job seeker is a good match for two months. During this period, the employer does not have to pay a wage and the job seeker still collects unemployment benefits. A large share of Dutch unemployed finds a job with a temporary agency. This also holds for job seekers with a high risk of long-term unemployment. For example, 27% of older job seekers who find a job are employed by a temporary agency (UWV, 2016) and amongst low educated job seekers temporary agencies account for almost half of the new jobs (UWV, 2017). Therefore, UWV is increasingly collaborating with temporary agencies. One example of this are matching events (called speeddates ). At these matching events, invited job seekers have short meetings with several temporary agencies about job opportunities. Some of the matching events are targeted at a specific group of job seekers (such as technicians or nurses) and others are general events. Preliminary evidence suggests that these matching events increase the employment probability in the month after the event by 20% but that this effect is short-lasting, one year after the event participants are not more likely to be employed than nonparticipants (Van der Klaauw and Ziegler, 2017). Another instrument that aims to stimulate employers to hire older job seekers is a subsidy for job seekers aged 56 and older. If an employer hires an older job seeker, he or she can apply for a subsidy of at most 7 000. This subsidy is also available for older job seekers who collect social assistance benefits. UWV, municipalities and employers collaborate in local employer-facilitating-points. At these points, employers can retrieve information and assistance when they want to hire someone with lower employment probabilities (such as long-term unemployed and job seekers with disabilities). Employers have access to an online portal, where they can post vacancies, find forms and information on for example financial incentives, ask questions to a caseworker specialized in employer contact and receive newsletters from UWV. Caseworkers will also approach employers themselves to find out if they have vacancies or if they have questions about for example financial incentives. There are also local information meetings where employers can retrieve information from UWV and in many regions employers and caseworkers meet on a regular basis. Finally, UWV provides employers with regional labor market information, for example the number of registered vacancies and the number of job seekers in their sector. Finally, employers (both private and public sector) agreed in 2013 that before 2026 they would create at least 125 000 additional jobs for individuals with disabilities (often longterm unemployed). Employers can receive wage subsidies when they hire these individuals. This should reduce long-term unemployment amongst this group of disadvantaged job seekers. November, 2017 6

3 Assessment of the success factors and transferability As described in the previous paragraph, the Netherlands has implemented several policy measures to prevent and reduce long term unemployment. With respect to statistical profiling, the recently developed Croatian profiling tool StAP is quite similar to the Dutch Work Profiler. The main difference is that the Dutch instrument also uses soft factors (i.e. job search intention) while StAP only uses hard factors based on administrative registration. Including soft factors in StAP would probably increase the precision of the predicted employment probabilities, but it does require additional information which has to be retrieved by a survey amongst job seekers. It is not clear whether this would be feasible for the Croatian PES. Another advantage of including additional predictors in the profiling tool, is that it provides caseworkers with more information about which factors hinders the job seeker the most. This can help the caseworker with selecting the appropriate JIAs. Similar to Croatia, the Netherlands experienced significant cuts in the budget for activation policies. Therefore, UWV reduced the number of activation programs and meetings with caseworkers while intensifying the use of the online platform where job seekers can ask questions to caseworkers, upload their CV and follow online courses. The remaining budget was allocated to those further away from the labour market (specifically older job seekers) as their risk of long term unemployment is higher. Moreover, UWV tries to profile job seekers at an early stage, so job seekers with a high risk of LTU can start with activation programs early in their unemployment spell. This seems to be a successful strategy, as the main job search program STEP for older unemployed reduces the probability of LTU and increases the outflow from UI (De Groot and Van der Klaauw, 2017). This program is now available for all job seekers with a high risk of LTU. In contrast, Croatia focused on those job seekers who are less distant from the labour market. The potential risk of providing activation activities for job seekers with higher probabilities is the presence of lock-in effects. Participants spend less time on job search because they are involved in the program, which reduces their employment probabilities. At the same time, Croatian job seekers are invited to activation programs after one year of unemployment, compared to four months in the Netherlands. The Dutch success factors of early intervention for those further away from the labour market seems to be easily transferable to Croatia and might improve the effectiveness of the activation policies (see Card et al. 2016 for an overview of ALMP for long-term unemployment). One challenge for the Croatian PES is to increase contact with employers. As described, the Dutch UWV has local offices which help employers when they want to hire someone with less employment probabilities and provides subsidies if employers hire older workers. Given that Croatia has excess labour supply and the PES has limited experience with direct employer contact, this might be difficult to immediately implement in Croatia. More transferable Dutch success factors would be the nationwide campaign to hire older job seekers (or other disadvantaged job seekers) and organizing meetings with temporary agencies and long-term unemployed job seekers. November, 2017 7

4 Questions To what extent does the generosity of the Croatian benefit scheme play a role in the high LTU-rate in Croatia? How long are unemployed workers entitled to unemployment benefits and what is their replacement rate? And are they entitled to social assistance benefits after UI and for how long? Does Croatia have any activation programs targeted at LTU with debts and if so, are these programs effective? How exactly do the caseworkers in the pilot project of StAP use StAP? Are there specific cut-offs to decide which job seekers receive assistance? Do caseworkers have access to the more detailed information on for example sector or previous entries in unemployment? How often do caseworkers meet with job seekers and how often do caseworkers refer job seekers to ALMP? What type of ALMP are available for job seekers and is participation voluntary or involuntary? Does Croatia have any hiring subsidies or placement fees? What is the share of employment with private temporary employment agencies in Croatia and are they included in the Local Partnerships for Employment? November, 2017 8

5 References Brouwer, S., R.H. Bakker and J.M.H. Schellekens (2015), Predictors for reemployment success in newly unemployed, Journal of Vocational Behavior 89:32-38. Card, D., J. Kluve and A. Weber (2016), Active labour market policies and longterm unemployment. In: S. Bentolila and M. Jansen (Eds.), Long-Term Unemployment After the Great Recession: Causes and remedies, VoxEU. De Graaf-Zijl, M., A. van der Horst and D. van Vuuren (2015), Long-term unemployment in the Netherlands, CPB Policy Brief 2015/11. De Groot, N. and B. van der Klaauw (2017), A randomized experiment on improving job search skills of older unemployed workers, Presentation at Conference Designing and Implementing Evidence-Based Active Labor Market Policies at Ministry of Social Affairs and Employment, February 2017. Eurostat (2017), Long-term unemployment rate. Webpage consulted on October 18 th 2017 at http://ec.europa.eu/eurostat/web/gdp-and-beyond/quality-oflife/long-term-unemployment-rate Muller, P., B. van der Klaauw and A. Heyma, Comparing Econometric Methods to Empirically Evaluate Job-Search Assistance, Tinbergen Institute Discussion Paper 2017-019/V OECD (2017), Benefit and Wages: Statistics. Webpage consulted on October 18 th 2017 at http://www.oecd.org/els/benefits-and-wages-statistics.htm UWV (2017), Jaarverslag 2016 (In Dutch), April 2017 Amsterdam Vermeulen, W. (2015), Decentralization of Social Policy in the Netherlands, CPB Background Document, November 2015 Wijnhoven, M.A. and H. Havinga (2014), The Work Profiler: A digital instrument for selection and diagnosis of the unemployed. Local Economy 29(6-7):740-749 Van der Klaauw, B. and L. Ziegler (2017), A Field Experiment on Labor Market Speeddates for Unemployed Workers, Presentation at Conference Designing and Implementing Evidence-Based Active Labor Market Policies at Ministry of Social Affairs and Employment, February 2017. November, 2017 9

Annex 1: Summary table Labour market situation in the Netherlands The Netherlands has a relatively generous benefit scheme The Netherlands has a low unemployment rate and also long-term unemployment Group of long-term unemployed mostly consists of older job seekers (50 and older) Unemployment benefits are provided by public benefit administration (UWV) and social assistance benefits by municipalities Large share of (older) job seekers find work at temporary employment agency Assessment of the policy measure Job seekers have to register at UWV to claim benefits. Have access to online platform Work Profiler predicts employment probabilities, activation programs targeted at job seekers with low employment probabilities Specific ALMP targeted at older job seekers: Successfully to Employment Program (STEP), placement fee, educational voucher Nationwide campaign to remove prejudices of employers against older job seekers Assessment of success factors and transferability Work Profiler uses information on soft characteristics to predict employment probabilities. Not only useful for prediction, but also to detect hindering factors. Could be implemented in Croatia, but needs survey. STEP is a cost-effective way of reducing LTU of older job seekers. Could be transferred to Croatia, but perhaps not all the elements of STEP (networking, job finding) are completely transferable to Croatia Incentives for employers to hire older and disabled job seekers (campaign, subsidies). Contact with private temporary employment agencies to place LTU on their vacancies. Transferability depends on share of employment at Croatian temp agencies. Questions To what extent does the generosity of the Croatian benefit scheme play a role in the high LTU-rate in Croatia? How long are unemployed workers entitled to unemployment benefits and what is their replacement rate? And are they entitled to social assistance benefits after UI and for how long? Does Croatia have any activation programs targeted at LTU with debts and if so, are these programs effective? How exactly do the caseworkers in the pilot project of StAP use StAP? Are there specific cut-offs to decide which job seekers receive assistance? Do caseworkers have access to the more detailed information on for example sector or previous entries in unemployment? November, 2017 10

How often do caseworkers meet with job seekers and how often do caseworkers refer job seekers to ALMP? What type of ALMP are available for job seekers and is participation voluntary or involuntary? Does Croatia have any hiring subsidies or placement fees? What is the share of employment with private temporary employment agencies in Croatia and are they included in the Local Partnerships for Employment? November, 2017 11

Annex 2: Examples of relevant practice Name of the practice: Year of implementation : Coordinating authority: Objectives: Main activities: Results so far: Successfully To Employment Program (STEP) 2013 UWV Increase employment of older job seekers and reduce long-term unemployment 10-week program of one group meeting a week with a trainer. Focus on networking, applying for jobs and improving job search skills. Randomized experiment shows that it reduces long-term unemployment increasing employment probabilities. Without the program, 38% of the older job seekers exit UI within one year. For participants, this probability is increased by 4.5% to 42.5%. Program is cost-effective (reduction in unemployment benefits exceeds the cost per participant). Name of the practice: Year of implementation : Coordinating authority: Objectives: Main activities: Results so far: Name of the practice: Year of implementation : Matching events with private temporary employment agencies 2014 UWV Increase employment of job seekers Matching event (sector-specific or general) between job seekers and temporary employment agencies Positive short term results, job seekers more likely to find employment (at temporary agency). No longer term results. Work Profiler 2013 November, 2017 12

Coordinating authority: Objectives: Main activities: Results so far: Select job seekers with low employment prospects and indicate which factors are hindering job finding Profiling tool based on 20 questions in questionnaire which predicts probability that job finding will return to work within one year. Caseworkers invite job seeker for a meeting based on Work Profiler and suggest job search assistance accordingly. Profiling tool based on 20 questions in questionnaire which predicts probability that job finding will return to work within one year. Caseworkers invite job seeker for a meeting based on Work Profiler and suggest job search assistance accordingly. Tool predicts return to employment correctly for over 70% of job seekers. Work Profiler 2.0 will be implemented in 2018. November, 2017 13