Activation and active labour market policies in OECD countries: stylised facts and evidence on their effectiveness

Abstract

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

Active Labour Market Policies of Selected European Countries and Their Competitiveness

“…The literature provides a confirmation of a hypothesis that the effective activation of ALMPs programs may lead to a decline in unemployment rate (Baily & Tobin, 1977;Martin, 2014 (2013) widen the study and claim that the ALMPs expenditures lead to a decrease in unemployment rate, which is persistent over the time. The OECD produced a study in 2009 to monitor the impact of ALMPs on unemployment dynamics.…”

“…In the first part of the analysis, we followed the development of the expenditures on ALMPs in % of GDP, an indicator of participation rate as participants stocks to ALMPs in % of the labour force (like Van Vliet & Koster, 2011;Medeiros, 2007;Martin, 2014). EES aims at lower unemployment and higher employment levels by real targeting of ALMPs.…”

“…From the point of ALMPs, the most used ones are the PES and program participation (Martin, 2014). Martin & Grubb (2001) consider PES and administration to be the most efficient measure too.…”

“…Despite that, comparing the participation rate data with the expenditures on ALMPs, we get implicit results of the average duration of ALMPs funding. Martin (2014) states that the variety of ALMPs expenditures among the countries are the result of differences in the average duration of ALMPs measures. A decrease in ALMPs expenditures, respectively their stagnation, may reflect the pressure on the sustainability of fiscal consolidation, the pressure on reduction of public debts or state budgets deficits.…”

Young People Living with Unemployed Parents during a Labour Market-Crisis: How Do Portugal and Scotland Compare?

“…However, in relation to unemployment protection, data from OECD and Eurostat show that after the recession, public spending efforts on active labour market policies (programmes that support jobseekers and unemployment benefit beneficiaries with enhanced access to training, skills development and psychosocial support) as a per cent of GDP have decreased in Portugal along with decreased spending on passive labour market policies (unemployment cash benefits and related paid benefits) (Martin 2015).…”