Employers and the Implementation of Active Labor Market Policies

Abstract

Active labor market policies (ALMPs) are an important instrument for governments in dealing with the new challenges of globalization, flexibilization, and individualization of labor markets. Politics and research has focused on the supply-side of the labor market, that is, regulating the rights and obligations of the target groups of ALMPs (mainly unemployed and inactive persons). The role and behavior of employers is under-researched and under-theorized in the vast literature on ALMPs and industrial relations. In this article, we analyze ALMPs from the employers’ perspective by examining the determinants of firms’ participation in providing wage subsidy jobs for the unemployed. First, we examine the historical background to the introduction and development of wage subsidy schemes as an important ALMP instrument in Denmark. Second, we derive theoretical arguments and hypotheses about employers’ participation in ALMPs from selected theories. Third, we use data from a survey of Danish firms conducted in 2013 to characterize the firms that are engaged in implementing wage subsidy jobs and hypotheses are tested using a binary logistical regression to establish why firms voluntarily engage in reintegrating unemployed back into the labor market. We find that the firms which are most likely to participate in the wage subsidy scheme are characterized by many unskilled workers, a higher coverage of collective agreements, a deteriorating economic situation, a Danish ownership structure, and are especially found in the public sector. This shows that the preference formation of firms is more complex than scholars often assume.