The Case for Reorienting Active Labour Market Policies Towards the Demand‐Side

High and persistent unemployment has been a major blot on the economic and social record of most OECD countries since the early 1970s: the OECD average standardised unemployment rate rose from an estimated 3 per cent in 1973 to a peak of 8 per cent in 1993 before falling back to 6.4 per cent in 2000. In response to growing political concerns about the seemingly inexorable rise in unemployment, various policy blueprints were developed in the 1990s to improve labour market performance on a durable basis. Prime examples include the OECD Jobs Strategy launched in 1994 and the EU Employment Guidelines which were launched in 1997 following the Amsterdam summit. These policy blueprints assign an important role to active labour market policies. But this emphasis begs the obvious question: what is the potential contribution which active labour market policies can make as part of a strategy to combat high and persistent unemployment? In order to answer this question, it is vital to know what works among active policies and f or whom. The OECD Secretariat has been working intensively on these questions in recent years and this paper summarises the main results of our work to date. The structure of the paper is as follows. Section 1 provides some factual background on public spending on labour market policies in OECD countries over the period 1985-2000. The bulk of the paper summarises the main results of on‑going OECD research into the effectiveness of active labour market policies. This review mainly exploits two sources: (i) the recent literature on the evaluation of active labour market programme (Section 2); and (ii) in-depth country reviews and analytical studies which the OECD has conducted over the past decade on the interactions between active and passive labour market policies and the role of the public employment service (Section 3). The final section draws some conclusions.

The authors investigate three hypotheses on the influence of labor market deregulation, decommodification, and investment in active labor market policies on the employment of chronically ill and disabled people. The study explores the interaction between employment, chronic illness, and educational level for men and women in Canada, Denmark, Norway, Sweden, and the United Kingdom, countries with advanced social welfare systems and universal health care but with varying types of active and passive labor market policies. People with chronic illness were found to fare better in employment terms in the Nordic countries than in Canada or the United Kingdom. Their employment chances also varied by educational level and country. The employment impact of having both chronic illness and low education was not just additive but synergistic. This amplification was strongest for British men and women, Norwegian men, and Danish women. Hypotheses on the disincentive effects of tighter employment regulation or more generous welfare benefits were not supported. The hypothesis that greater investments in active labor market policies may improve the employment of chronically ill people was partially supported. Attention must be paid to the differential impact of macro-level policies on the labor market participation of chronically ill and disabled people with low education, a group facing multiple barriers to gaining employment.

The main goal of the present paper is to discuss how and under what circumstances, active labor market policies and adult education could assist staff to cope with stress and enhance skills and abilities to achieve employment. The high numbers of unemployed in Greece together with the long-term ineffective austerity measures and policies imposed in the country and the reduction of the social welfare state, created many multiple and complex issues that deteriorated after the pandemic. The present paper suggests that specific active labor market policies must be employed together with lifelong learning policies and programmes to ensure future developments. Greece, more than any other modern European country, was faced for several years with extreme austerity measures that affected the social, economic, and personal level. The working population and especially young people had to cope with prolonged unemployment, limited options for reentering the job market and the associated stress that follows exposure to adverse experiences. The phenomena of brain drain and brain waste, are well documented in Greek research and literature. Covid-19 pandemic was another stroke in an already unbalance economy. Lifelong learning programmes, that are meant to assist not only the working but also the general population to increase social and other skills, as a way of ensuring access to the labour market, are addressed to only a small portion of the population and usually to those who need them the least. The current paper presents the challenges that Active labor market and Lifelong policies in Greece must face in the process of coping with prolonged unemployment, brain drain and brain waste.

This article uses multilevel analysis of 24 European countries to examine the effects of macroeconomic variables (GDP and unemployment) and welfare state interventions (active and passive labour market policies) on job insecurity and job quality in Europe from the mid‐1990s until the last 2021 COVID crisis. The paper makes a distinction between the crisis of the welfare state and the reaction of welfare states to crises and connects the job quality literature with that on the transformation of the welfare state. The article introduces several innovations to the literature by looking at the impact of welfare state interventions on multidimensional job quality, distinguishing between different types of active labour market policy spending and considering the generosity of benefits. The findings show that active labour market policies (ALMPs) and passive labour market policies (PLMPs) have a positive effect in reducing job insecurity across skill groups. ALMPs and PLMPs also improved several dimensions of job quality, but mostly among manual/low‐skilled workers, while they have a negative effect on work pressure which mostly affects medium‐ and high‐skilled workers. The article concludes by discussing how, due to the reach of ALMP and PLMP interventions, the positive effects of the welfare state on job quality are concentrated among lower‐skilled workers, thereby limiting the ambition of contemporary welfare states to generate positive spillover effects on the quality of work for all workers.

This article deals with the relation between labour market regulation and the dynamics of overall employment and unemployment in continental Europe. We investigate the impact of the reforms of employment protection systems and activating welfare policies and test the integrative power of marginal labour market deregulation, assessing occupational outcomes of changing workforce exposure to unemployment and fixed-term contracts. Thus, particular attention is paid to the possible effect of ‘institutionally driven’ labour market segmentation, mirrored by the national discrepancy in employment protections of workers with distinct contractual arrangements and by the ratio of expenses on GDP in active versus passive labour market policies. We use pseudo-panel data based on European Labour Force Survey (EU-LFS) (1992–2008) and apply linear fixed effect (FE) models with lagged independent variables. The deregulation measure—the insider–outsider differentials—is based on the OECD employment protection legislation index (EPL 2013). The overall findings indicate a detrimental effect of unbalanced passive and active labour market policies, a negative trend of permanent employment, and a ‘honeymoon effect’ of partial and targeted deregulation measures whose effectiveness on overall employment, if any, appears to be progressively weakened over time. The responsiveness of employment conditions to marginal EPL variations as well as to previous ‘unstable employment situations’ is significantly higher in Southern Europe. Temporary employment, if compared with unemployment, may still play a role in reducing individual subsequent unemployment risks, but its ‘integrative effect’ is hardly confirmed if we view fixed-term contracts as a stepping stone towards stable insertion into the primary labour market.

Drawing upon the framework of life course epidemiology, this study aligns with research on the mental health consequences of significant social transitions during early adulthood. The focus is on the variation in initial labour market attachment and the development of depressiveness, assuming that a firm attachment is associated with decreasing depressiveness. The baseline investigation of the studied cohort (n = 1,001) took place during their final year of compulsory schooling at age 16. Follow-up surveys were conducted at ages 18, 21, 30, and 43. Depressiveness was measured with a five-item score. Multiple trajectory analysis, incorporating five labour market statuses observed over seven half-year periods from ages 18 to 21, was employed to categorize the cohort into six distinct groups. Among these, 'All-time education,' 'From education to employment,' 'Education and employment,' and 'From employment to education' were considered to demonstrate firm labour market attachment. Meanwhile, 'Active labour market policy' and 'Unemployment' represented less firm attachment. The trajectory of depressive symptoms among the total cohort from age 16 to age 43 exhibited a 'broken stick' pattern, reaching its lowest point at age 21. This pattern was evident in all groups classified as having a firm attachment. A substantial decrease in depressiveness was also observed in the relatively weakly attached 'Active labour market policy' group, whereas no 'broken stick' pattern emerged in the 'Unemployment' group. The disparities in the levels of depressiveness observed at age 21 remained relatively stable across the measurements at ages 30 and 43. The results were as expected, except for the observed improvement in mental health within the 'Active labour market policy' group. Supported labour market attachment during emerging adulthood can enhance mental well-being similarly to regular mainstream attachment. In terms of policy recommendations, the consistently high levels of depressiveness within the 'Unemployment' group underscore the importance of reducing long-term and repeated unemployment in young age. The findings regarding the 'Active labour market policy' provide evidence of the intervention's benefits. While the primary goal of these measures is to create jobs for the unemployed, they also include elements that contribute to participants' mental health.

This paper maps “who does what” across levels of government in OECD countries in relation to active labour market policies (ALMPs), with a focus on the role of subnational governments. It highlights recent reforms in the multi-level governance of ALMPs in a number of countries, and shows that in about two out of five OECD countries, subnational governments have some type of formal competences for delivering ALMPs. It also shows other ways subnational governments are commonly involved in such policies. This includes delivering their own labour market programmes, often targeted to those farthest from the labour market or facing multiple barriers to employment. Finally, it considers some of the benefits and drawbacks of more decentralised approaches to ALMPs and offers some general principles for managing these trade-offs across different types of governance systems.

This paper proposes an empirical analysis about the influence of some institutional factors (taxation, active and passive labor market policies, labor and goods market regulation and unions’ participation) on the component of the wage growth not explained by the productivity growth (WP gap, thereafter). We consider a 14 OECD countries Panel Data over the period 1983-2003, using four different estimations: fixed effects vector decomposition (FEVD), fixed effects (FE), random effects (RE) and feasible general least square (FGLS). Results for all estimations show that the WP gap is affected by tax wedge, active labor market policies, employment protection for temporary workers and union density, while product market regulation and passive labor market policies do not play a significant role.

Activation policies aimed at getting working-age people off benefits and into work have become a buzzword in labour market policies. Yet they are defined and implemented differently across OECD countries, and their success rates vary too. The Great Recession has posed a severe stress test for these policies, with some commentators arguing that they are at best “fair weather” policies. This paper sheds light on these issues mainly via the lens of recent OECD research. It presents the stylised facts on how OECD countries have responded to the Great Recession in terms of ramping up their spending on active labour market policies (ALMPs), a key component in any activation strategy. It then reviews the macroeconomic evidence on the impact of ALMPs on employment and unemployment rates. This is followed by a review of the key lessons from recent OECD country reviews of activation policies. It concludes with a discussion of crucial unanswered questions about activation.JEL codes:J01, J08, J68

This article is timely to evaluate Active Labor Market Policies (ALMPs) in Tunisia in 7 regions throughout the period from 2005 to 2014 with reference to OECD countries. Massive unemployment in Tunisia resisted during this period (15,3% in 2014), followed by major changes after the transition period. In order to study the efficiency levels achieved by the Tunisian Active Labor Market Policies, we propose a parametric method, namely the Stochastic Frontier Approach ‘SFA’. Our results show that the total ALMPs significantly affects the unemployment rate. Thus, the average efficiency score of ALMP in Tunisia (0,94) is lower than that of the OECD countries (0,97). The divergence is due to structural and cyclical differences, which highlights the imperative to adopt a model adequate to the specificity of Tunisia. Tunisian public employment service policies have been shown to be insignificant compared to those of OECD countries. Start-up incentives seem to be the most effective policy to reduce the unemployment rate in the OECD countries’ and Tunisia because of its low cost.

This study provides a framework to compare and classify the institutional set-up of active labour market policy (ALMP) provision across countries, which is a key determinant of how well ALMP systems can respond to changing labour market needs, e.g. in response to the COVID-19 crisis. The paper builds on an OECD-EC questionnaire on “Active labour market policy measures to mitigate the rise in (long-term) unemployment” filled in by OECD and EU countries in the last quarter of 2020. The paper presents a dashboard of the institutional set-up of ALMP provision in 43 OECD and EU countries, which classifies the ALMP systems of different countries according to their organisational set-up (i.e. division of responsibilities between key stakeholders), their regulatory set-up (i.e. key legislation regulating ALMP provision) and their capacity to deliver employment support services (i.e. resources available).

Following the predominance of macroeconomic stabilisation policies and passive income support schemes in the first phase of transition, active labour market policies (ALMPs) have now come to play a more important role in transition economies. This paper looks at the Polish experience and provides empirical evidence on the effectiveness of ALMPs. We use the Polish Labour Force Survey of August 1994 in combination with its Supplement on the Evaluation of Labour Market Policies together with data on ALMP expenditure at the regional (voivodship) level. The macroeconometric analysis of the relationship between labour market flows and ALMP expenditure shows no significant effects. The microeconometric analysis reveals that ALMPs are not particularly well targeted at the problem groups in the labour market. That is, women and people with basic vocational education do not receive enough attention. As to the effectiveness of ALMPs, the paper shows that former participants cannot expect to find employment more easily than their peers who have been unemployed but have not been in a programme. Subjective evaluations of former participants also suggest that ALMPs, but especially works programmes, have not improved their chances to find a job.

This paper reports results of an empirical study on the effectiveness of labour market policy. Data from Austria, France, Germany, Great Britain, Sweden and the United States are used to apply a simultaneous equation model with wages and employment being the endogenous variables. In order to explain employment, the amount of unemployment benefits per unemployed (passive labour market policy) and payment for wage subsidies and training per employed and unemployed person (active labour market policy) are used in addition to real wages and output. Wages and output have their expected impact on total employment. It turns out that passive labour market policy has a negative, and active labour market measures a positive, effect on the number of persons employed.

Background Many studies have shown that psychosocial work stressors have a negative impact on health. It is therefore important to understand how psychosocial work stressors can be reduced. First cross-sectional studies have shown that working conditions are influenced at the political level. With this study, we want to extend the existing studies by specifically looking at the longitudinal dimension and test if changing labour market policies are related to changes in psychosocial work stressors. Methods We used comparative longitudinal survey data from the European Working Conditions Survey (27 countries; years 2005, 2010, 2015). The measure of psychosocial work stressors is based on two established work stress models: job strain and effort-reward imbalance. To measure labour market policies we used information on active (ALMP) and passive labour market policies (PLMP). 64659 participants were eligible for the ERI analysis and 67114 participants for the analyses on job strain. Estimation results are provided by three-level multilevel regressions. Results An increase in ALMP investments lead to a decrease of ERI and therefore to an improvement in psychosocial working conditions. The analyses for the subcomponents showed that these results are mainly driven by reward: an increase in ALMP investments lead to an increase in rewards. We didn't find significant associations between ALMP and job strain and between a change in PLMP measures and the observed work stressors. Discussion The study extends current knowledge with longitudinal information by showing that an increase in ALMP lead to an increase in rewards and a decrease of ERI. These longitudinal analyses are more closely related to a causal interpretation than previous cross-country analyses. The findings of this study may have important policy implications. Our main result suggests that investments into ALMP can improve certain working conditions and therefore improve workers' health. Key messages Psychosocial work stressors have a negative impact on health. Investments into active labour market policies can improve psychosocial working conditions.

This article concentrates on youth transitions into the labour market in one EU member state, Greece. The aim is to explore ways in which the Greek state has responded to the problem of youth unemployment, looking at policies (passive and active) introduced to address this. It reveals that state policies and social norms deeply embedded in the Greek culture, rather than encouraging acquisition of ‘full-citizenship’ and financial independence, restrict young people's chances for independence from the family. As is the case in other southern European countries, in Greece, the family and informal clientelistic networks of relatives and friends have acted as the primary source of economic and social support for young people. We argue that four co-centric circles circumscribe the type of citizenship available to a young person and have implications for young people's acquisition of full citizenship and financial independence: (a) the family, (b) friends and acquaintances, (c) changes in the labour market and (d) opportunities offered to the young unemployed through passive (benefits, social assistance) and active (vocational training) labour market policies available. With regard to young peoples’ ability tobecome financially independent, these either exercise a centrifugal force, encouraging dependency upon others (especially parents and close friends) for care, guidance and support, or a centripetal force, encouraging them to assume full rights and responsibilities of adulthood.