Mutual Learning Programme: Autumn 2012 Seminar Can Active Labour Market Programmes reduce Long-Term Unemployment? Thematic Review Seminar on Tackling long-term unemployment effective strategies and tools to address long-term unemployment Brussels, 8 November 2012 Nicola Düll (duell@economix.org)
Challenges Cyclical unemployment turning into long-term unemployment as a consequence of ongoing weak demand for labour in a group of countries Risk of persistence of long-term unemployment Long-term social costs of long-term unemployment Reduced effectiveness of ALMPs in the given macroeconomic context What can ALMPs do?
Long-term unemployment rate in 2008 and 2011 and share of long-term unemployment in total unemployment in 2011, in % Source: Eurostat, LFS
What can ALMPs do? Level of spending on ALMP differ significantly between countries, independently from the level of unemployment. These differences reflect political priorities and the welfare state models. Risk of underfunding of ALMPs in some countries. Consequently, the focus on the type of programmes and measures as well as the activation approach differ significantly.
unemployment rate 2010 (%) Unemployment rate and expenditures on ALMPs in the EU 20 LV ES EE LT 15 SK IE EL PT 10 BG HU PL FR RO MT CZ CY SI IT DE SE FI BE DK 5 LU NO AT NL 0 0 0.2 0.4 0.6 0.8 1 1.2 1.4 ALMP-Expenditures 2010 (% of GDP) Source: Eurostat (LFS, LMP data base, ALMP expenditures refer to cat. 2 to 7)
What can ALMPs do (cont.)? Some countries have increased significantly ALMP expenditures as a response to the strong rise of unemployment. In these countries ALMP spending tended to be low before the crisis. Other countries with a low pre-crisis level ALMP spending seem to have abondoned ALMPs.
Change in expenditures on ALMP (cat.2-7) per person wanting to work (in PPS) between 2008 and 2010 in % Source: Eurostat, LMP database
Design an objective of ALMPs Refocus ALMP on those most at risk of remaining But preventive approaches remain important. Types of ALMP measures of the PES: - Measures designed to generate labour demand for disadvantaged groups (e.g. wage subsidies) in order to overcome supply-side barriers - Measures to increase labour demand through lowering labour costs and promote the expansion of a low wage sector (often through a combination of social benefits and low wages) - Direct job creation measures for hard-to-place target groups (even in a favourable labour market context) - Measures in the area of supported employment and vocational rehabilitation for jobseekers with healthrelated problems - Supply-side measures focus on the employability of the job seeker, - on the adaptation of his or her skills to labour demand - and on job search activities.
How effective are ALMPs? Training measures: - Mixed evaluation results - Positive effects tend to yield in the medium term. - Training schemes for young people help to reduce long-term social costs The effectiveness of training measures is increased through - The implementation of smaller scale schemes - Targeted on specific disadvantaged groups, and particular occupations - Training leading to a formal vocational qualification - Preparing for skills and competences which are demanded by (local) companies - Pre-vocational measures for low-skilled youth in countries with a well established dual training system - Individualised approaches
How effective are ALMPs? Wage (cost) subsidies: Overall positive employment impact for participants - If they are well targeted to disadvantaged groups (compensation for temporary lower productivity). - Results depend on employer attitudes - and labour market context Positive impact, in particular for young people, consists in maintaining or generating attachment to the labour market Mixed results for the group of unemployed as a whole Aggregate employment impact depends on: - Extent of deadweight losses, substitution and job displacement effects (increase with the scale of the programmes) - Elasticity of demand - The overall level of unemployment
How effective are ALMPs? Wage (cost) subsidies (cont) Effectiveness can be increased through - Individual coaching - Follow-up - Guidance to employers - Small scale of programmes - Target group focus
How effective are ALMPs? Direct job creation programmes: A variety of objectives and architecture of the programmes: - May relate to demand-side or supply-side strategies or combine both. - Implemented through wage subsidies or in-work- benefit schemes - Jobs need to be additional. Mixed evaluation results: - Negative employment effects in particular in case of large-scale programmes - No addtionality, substitution and deadweight effects, distorting competition - Risk of stigmatisation - Often positive impact on work habits and motivation - May reduce poverty.
How effective are ALMPs? Direct job creation programmes (Cont.): Effectiveness might be enhanced through: - A working environment close to that of the regular labour market - Include periods of training - Implementation by social enterprises and social sector companies - Integrated approaches (dealing with the other social and family problems) - Individualised approach, guidance and follow-up - Smaller scale schemes tend to be more effective
How to implement the activation strategy? - Intensify and speed-up activation process in order to reduce inflows into long-term unemployment - Reasonable caseload - Individualised guidance, follow-up - Integrated approaches and inter-institutional cooperation - Partnerships with specialised private service providers to serve hard-to-place groups - Specific attention to young people Conclusions: what can be done in a context of high unemployent? Reconsidering the objectives? - Poor prospects for large-scale expansion of labour demand through wage subsidy and job creation - but distribution of work among unemployed and rotation between employment and unemployment spells can avoid long-term unemployment trap. It cannot prevent repeated unemployment and labour market segmentation - Maintaining employability - Improve skills match - Reduce long-term social costs of long-term unemployment.
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