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Are retraining programs for the unemployed more effective than job search assistance? Governments of the member countries of the Organisation for Economic Cooperation and Development have considerable experience with retraining programs in a variety of industrial settings. Evaluations of these programs show that the results are disappointing, however. This article discusses the factors associated with retraining programs for two types of workers: those laid off en masse and the long-term unemployed. Evaluations indicate poor results for both groups: retraining programs are generally no more effective than job search assistance in increasing either reemployment probabilities or postintervention earnings, and they are between two and four times more expensive than job search assistance. Industrial countries spend sizable amounts on labor programs for the unemployed. In 1992 member countries of the Organisation for Economic Cooperation and Development (OECD) spent between 0.1 percent (Japan) and 2.6 percent (Sweden) of gross domestic product on labor programs. In several countries this training is "the largest category of active programs, and is often perceived as the principal alternative to regular unemployment benefits" (OECD 1994a). Countries in Eastern Europe-where the role of active labor programs is a topic of current debate-also spent between 0.2 and 3 percent of gross domestic product on these programs (OECD 1994a). Yet possibly because such assistance is viewed almost as a fundamental right in Western Europe, these programs are rarely evaluated outside the United States. This article surveys evaluations of retraining programs in the OECD countries, highlighting the shortcomings of such schemes and illustrating the payoff to investing in rigorous evaluations. We examine only the evaluations of retraining programs, so our focus is largely on adults with previous work experience rather than on unemployed school-leavers. We distinguish here between retraining schemes for workers displaced by plant closures

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.