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According to the indicator, job availability rules are relatively strict in Luxembourg, The Czech Republic, Sweden, the Netherlands, and Australia, cf. figure 1. Countries with relatively lax rules according to the survey include Austria and Ireland.
Figure 1. Indicator of the strictness of availability rules in selected OECD-countries. 1997.
Source: Survey by the Danish Ministry of Finance, 1997-98.
Structural unemployment is affected by many other factors than job search requirements and availability rules. It is therefore not surprising, that the variation of structural unemployment rates among OECD-countries can not be explained by variations in availability rules exclusively, cf. figure 2. Preliminary econometric tests allowing for a large number of other policy-indicators do suggest, that the indicator has explanatory power in the sense that tighter rules reduce structural unemployment. Work on this will be included in a forthcoming working paper.
Figure 2. Availability rules and structural unemployment.
Source: Survey by the Danish Ministry of Finance, 1997-98, OECD, Fiscal positions and Business Cycles 61, 1997.
A possible interaction between availability rules, other labour market policies and the level of unemployment do also exist in the sense that high unemployment or counteracting policies in other areas may reduce the political focus on tight availability rules et vice versa.
Accordingly the replacement rate seems to some degree to be higher in countries with relatively strict demands on availability, cf. figure 3. This is, however, not the case for the United States and Australia which have relatively low replacement rates and at the same time relatively strict availability criteria. Denmark and France, on the other hand, have relatively high replacement rates but at the same time relatively lax availability criteria.
Figure 3. Availability rules and replacement rates.
Note: Replacement rates are from 1994 (1995 for Ireland, Sweden, and Great Britain) and correspond to the replacement rate after tax for single persons during the first year of unemployment calculated for two different levels of income – average income and 2/3 of average income.
Source: Survey by the Danish Ministry of Finance, 1997-98. Martin, J.P., Measures of Replacement rates for the purpose of International Comparison: A note, OECD economic Studies No. 26, 1996. Figure 4. Availability rules and duration of unemployment benefit.
Another factor, influencing job search behaviour and mobility, is the length of the benefit period. This varies markedly among countries, cf. figure 4.
Figure 4. Availability rules and duration of unemployment benefit.
Source: Survey by the Danish Ministry of Finance, 1997-98.
As mentioned earlier Ireland and Austria have relatively lax availability rules, but as shown in figure 4, the unemployment benefit period in these countries are relatively short, thereby giving the unemployed the incentive to search actively for jobs.
On the other hand, in Australia, the benefit period is unlimited. But in this country, the availability rules are relatively strict and combined with a relatively low replacement rate in case of unemployment. This can explain why Australia has a structural unemployment level on the average.
Most of the Scandinavian countries have relatively long benefit periods. In Denmark, however, the benefit period is conditioned on participation in ALMP’s after 2 years of unemployment. Sweden have a shorter benefit period than Norway and Denmark, but apart from the other two, entitlement to unemployment benefit can be obtained through subsidised work.
The varying mix of policy instruments across countries blurs the underlying relationship between each of the policy instruments on structural unemployment and overall labour market performance. The effects of the various policy instruments on structural unemployment can be elucidated through cross-country multiple regression on the various policy instruments. This has been undertaken with some success and will be published in a forthcoming working paper.
