Institutional Moral Hazard in the Multi-Tiered Regulation of Unemployment in Belgium – Background Paper

This paper has been written in preparation of a research project funded by the European Commission (on the Feasibility and Added Value of a European Unemployment Benefit Scheme, contract VC/2015/0006). This paper adds information and detailed analysis to the following deliverable of that research project: Institutional Moral Hazard in the Multi-tiered Regulation of Unemployment and Social Assistance Benefits and Activation - A summary of eight country case studies; but it was not a deliverable. We use the concept ‘institutional moral hazard' to analyse intergovernmental relations within multi-tiered welfare states, specifically in the domain of unemployment-related benefits and related activation policies (the ‘regulation of unemployment'). This paper is one of eight separate case studies, it focuses on Belgium. The Belgian unemployment insurance system represented a classic example of institutional moral hazard: it was federally financed while the regions were in charge of activation but did not have any inherent incentives to do so as effectively as possible. To mitigate that situation, the federal and regional governments concluded a detailed cooperation agreement in 2003 which introduced minimum requirements for the activation of unemployment insurance beneficiaries. A 2015 constitutional reform pushes the existing logic of devolution even further but retained a system of minimum requirements