Identifying factors that determine the success of service integration reforms

Do separate social and unemployment services still make sense in a changing world? If not, how and how much should they be integrated? We have taken a hard look.

Technological development, demographic trends and globalization have increased the vulnerabilities of the labour force, which were deepened by the most recent financial crisis. The crisis has intensified labour market volatility and augmented fiscal and political pressures to improve the efficiency of public services in most EU Member States. As unemployment protection systems had been designed for a world of stable jobs, these challenges clearly call for change. The new social risks can only be tackled by a joined-up system of well-coordinated employment and social services for working-age benefit recipients.

Recognising the challenge, the EU has promoted the integration of services in a series of strategic documents and recommendations. However, the response by Member States has so far been rather modest. There are also differences in the depth and sophistication of recent reform initiatives.

The sluggish response of Member States may partly be explained by the difficulty of the task itself. First, though the coordination of services is largely a technical issue to be resolved by experts, it can be easily politicized. This is because it is closely linked to the value-laden goals of activating benefit recipients or detecting benefit fraud, and it may also involve a curtailment of municipal autonomy. Second, in welfare systems where social services are provided in a decentralised system of local (municipal or non-governmental) providers, the design and implementation of integration reforms may require lengthy negotiations with a high number of stakeholders. Lastly, even in centralised systems, it is a daunting task to harmonise the work of a range of institutions that operate under different financial conditions, follow different goals and cultivate different organisational and professional cultures.

In short, integration reforms require political commitment, as well as time and considerable design and implementation capacity in the central government, which may not be available in all Member States.

These insights come from a comparative study of recent reform initiatives, commissioned by DG Employment of the European Commission, based on a detailed description and comparison of reform episodes from 12 countries implemented between 2003 and 2014.

Beside exploring the barriers to integration reforms, the study presents a cost-benefit analysis of selected reforms, and a practical checklist of design and implementation issues to support policy makers. Lastly, it describes two reform pathways. The ambitious pathway might be relevant for countries where existing services are well-developed and accessible, and the reform capacity of the public administration is relatively high. The cautious pathway can serve as a model for member states where employment and social services are less advanced or highly fragmented, as well as for countries where the capacity to implement institutional reforms is constrained by constitutional barriers or by the limited capacities of public administration.

The Budapest Institute (BI) won a tender in partnership with Eftheia and the ICON Institute to carry out this research. BI provided the lead expert in the comparative analysis and contributed to the cost-benefit analysis, where ICON took the lead. Eftheia was responsible for overall management and the coordination of country experts.