Program evaluation provides an overview of the effectiveness of a variety of policies that have been tested in diverse settings across various countries. The knowledge provided suggests whether or not the individual and the economy fair better without the measures studied.
Government schemes that compensate workers for
the loss of income while they are on short hours (known as short-time work
compensation schemes) make it easier for employers to temporarily reduce
hours worked so that labor is better matched to output requirements. Because
the employers do not lay off these staff, the schemes help to maintain
permanent employment levels during recessions. However, they can create
inefficiency in the labor market, and might limit labor market access for
freelancers and those looking to work part-time.
When hiring new workers, employers use a wide
variety of different recruiting methods in addition to posting a vacancy
announcement, such as adjusting education, experience or technical
requirements, or offering higher wages. The intensity with which employers
make use of these alternative methods can vary widely depending on a firm’s
performance and with the business cycle. In fact, persistently low
recruiting intensity partly helps to explain the sluggish pace of the growth
of jobs in the US economy following the Great Recession of 2007–2009.
Public works programs in developing countries can
reduce poverty in the long term and help low-skilled workers cope with
economic shocks in the short term. But success depends on a scheme’s design
and implementation. Key design factors are: properly identifying the target
population; selecting the right wage; and establishing efficient
implementation institutions. In practice, rationing, corruption,
mismanagement, and other implementation flaws often limit the effectiveness
of public works programs.
Temporary agency work has expanded in most
advanced economies since the 1990s, but its growth has been controversial.
Some argue that these jobs offer experience and contact with potential
employers, serving as a path to regular employment, particularly for
low-skilled workers. Others view them as traps, fostering low-wage, unstable
employment and providing little experience and few contacts.
Economists once believed firms do not pay to
develop occupational skills that workers could use in other, often
competing, firms. Researchers now recognize that most firms benefit from
investing in apprenticeship training. Evidence indicates that financial
returns to firms vary. Some recoup their investment within the
apprenticeship period, while others see their investment pay off only after
accounting for reduced turnover, recruitment, and initial training costs.
Generally, the first year of apprenticeships involves significant costs, but
subsequently, the apprentice’s contributions exceed his/her wages and
supervisory costs. Most participating firms view apprenticeships as offering
certainty that all workers have the same high level of expertise and
ensuring a supply of well-trained workers during sudden increases in demand
and to fill leadership positions.
Mentoring programs such as Big Brothers Big
Sisters of America have been providing positive role models and building
social skills for more than a century. However, most formal mentoring
programs are relatively novel and researchers have only recently begun to
rigorously evaluate their impact on changing at-risk youth’s perspectives
and providing opportunities for them to achieve better life outcomes. While
a variety of mentoring and counseling programs have emerged around the world
in recent years, knowledge of their effectiveness remains incomplete.
The fiscal sustainability of state pensions is a
central concern of policymakers in nearly every advanced economy.
Policymakers have attempted to ensure the sustainability of these programs
in recent decades by raising retirement ages. However, there are concerns
that keeping older workers in the workforce for longer might have negative
consequences for younger workers. Since youth unemployment is a pressing
problem throughout advanced and developing countries, it is important to
consider the impact of these policies on the employment prospects of the
It is not difficult to find statistics showing
that teenage childbearing is associated with poor labor market outcomes,
but why is this the case? Does having a child as a teenager genuinely affect
a woman’s economic potential—or is it simply a marker of problems she might
already be facing as a result of her social and family background? The
answer to this question has important implications for policy measures
that could be taken to improve women’s lives.
Most public expenditure on childcare in the US
is made through a federal program, the Child Care and Development Fund
(CCDF), established as part of landmark welfare reform legislation in 1996.
The main goal of the reform was to increase employment and reduce welfare
dependence among low-income families. Childcare subsidies have been
effective in enabling parents to work, but apparently at some cost to the
well-being of parents and children.
Unemployment benefits often reduce incentives to
search for a job. Policymakers have responded to this behaviour by setting
minimum job search requirements, by monitoring to check that unemployment
benefit recipients are engaged in the appropriate level of job search
activity, and by imposing sanctions for infractions. Empirical studies
consistently show that job search monitoring and benefit sanctions reduce
unemployment duration and increase job entry in the short term. There is
some evidence that longer-term effects of benefit sanctions may be
Regulation of the minimum age of employment is
the dominant tool used to combat child labor globally. If enforced, these
regulations can change the types of work in which children participate, but
minimum age regulations are not a useful tool to promote education. Despite
their nearly universal adoption, recent research for 59 developing countries
finds little evidence that these regulations influence child time allocation
in a meaningful way. Going forward, coordinating compulsory schooling laws
and minimum age of employment regulations may help maximize the joint
influence of these regulations on child time allocation, but these
regulations should not be the focus of the global fight against child
Organisation for Economic Co-operation and
Development countries spend, on average, an equivalent of 0.4% of their
gross domestic product on active and passive labor market policies. This is
a non-negligible sum, especially in times of strained government budgets.
Meetings with case workers—who can provide advice and information on what
jobs to look for, and how to search, and give moral support, as well as
monitor search intensity—are a simple and effective option for policymakers
to help the unemployed find work.
Social assistance programs are intended to
improve people’s well-being. However, that goal is undermined when eligible
people fail to participate. Reasons for non-participation can include
inertia, lack of information, stigma, the time and “hassle” associated with
applications and program compliance, as well as some programs’
non-entitlement status. Differences in participation across programs, and
over time, indicate that take-up rates can respond both positively and
negatively to policy change. However, there are clearly very identifiable
ways in which relevant agencies can improve take-up.
Reducing youth unemployment and generating more
and better youth employment opportunities are key policy challenges
worldwide. Active labor market programs for disadvantaged youth may be an
effective tool in such cases, but the results have often been disappointing
in Organisation for Economic Co-operation and Development (OECD) countries.
The key to a successful youth intervention program is comprehensiveness,
comprising multiple targeted components, including job-search assistance,
counseling, training, and placement services. Such programs can be
expensive, however, which underscores the need to focus on education policy
and earlier interventions in the education system.
Youth unemployment has increased in many
industrialized countries following the recent global recession. However,
this reflects not only the cyclical shock, but also the crucial role of
institutions in structuring the transition from school to work. Vocational
training, in particular in a dual form combining vocational schooling and
structured learning on-the-job, is often considered to be one of the most
important policy solutions in combating youth unemployment. The evidence
available supports this perception, but the institutional requirements of a
successful training system also have to be taken into account from a policy
The labor market position of older workers is
cause for concern in many industrialized countries. Rapid population aging
is challenging pension systems. The recent economic crisis has forced many
older adults out of the workforce, into either pre-retirement or
non-employment. Encouraging people to work longer and fostering the
employability of older workers have become priorities for policymakers.
Training specifically designed for older workers might help attain these
goals, since it may refresh human capital and reduce the pay–productivity
gap. Training older workers might also benefit employers and society as a
Automation and globalization have brought about a
tremendous increase in productivity, but also accelerated job destruction, systemic
risks, and greater income inequality. Current social policies may not be adequate for
achieving the goals of redistributing the gains from automation and globalization,
providing efficient buffers against economic shocks, and advancing the reallocation of
jobs and skills. Under certain circumstances, an unconditional basic income might be a
better alternative for achieving those goals. It is simple, transparent, and has low
administrative costs, though it may require higher taxes.
The cost of children is a critical parameter
used in determining many economic policies. For instance, correctly setting
the tax deduction for families with children requires assessing the true
household cost of children. Evaluating child poverty at the individual level
requires making a clear distinction between the share of family resources
received by children and that received by parents. The standard ad hoc
measures (equivalence scales) used in official publications to measure the
cost of children are arbitrary and are not informed by any economic theory.
However, economists have developed methods that are grounded in economic
theory and can replace ad hoc measures.
The economic and psychological literatures have
demonstrated that early investments (private and public) in children can
significantly increase cognitive outcomes in the short and long term and
contribute to success later in life. One of the most important of these
inputs is maternal time. Women’s participation in the labor market has risen
rapidly in most countries, implying that mothers spend less time with their
children and that families rely more on external sources of childcare. This
trend has raised concerns, and an intense debate in several countries has
focused on the effectiveness of childcare policies.
Workers participating in firm-sponsored training
receive higher wages as a result. But given that firms pay the majority of
costs for training, shouldn’t they also benefit? Empirical evidence shows
that this is in fact the case. Firm-sponsored training leads to higher
productivity levels and increased innovation, both of which benefit the
firm. Training can also be complementary to, and enhance, other types of
firm investment, particularly in physical capital, such as information and
communication technology (ICT), and in organizational capital, such as the
implementation of high-performance workplace practices.
Often, economic policies are directed toward
outcomes that are measured as counts. Examples of economic variables that
use a basic counting scale are number of children as an indicator of
fertility, number of doctor visits as an indicator of health care demand,
and number of days absent from work as an indicator of employee shirking.
Several econometric methods are available for analyzing such data, including
the Poisson and negative binomial models. They can provide useful insights
that cannot be obtained from standard linear regression models. Estimation
and interpretation are illustrated in two empirical examples.
Long-term unemployment can lead to skill
attrition and have detrimental effects on future employment prospects,
particularly following periods of economic crises when employment growth is
slow and cannot accommodate high levels of unemployment. Addressing this
problem requires the use of active labor market policies targeted at the
unemployed. In this context, hiring subsidies can provide temporary
incentives for firms to hire unemployed workers and, when sensibly targeted,
are a very cost-effective and efficient means of reducing unemployment,
during both periods of economic stability and recovery.
The main goal of secondary school education in
developed countries is to prepare students for higher education and the
labor market. That demands high investments in study duration and
specialized fields to meet rising skill requirements. However, these demands
for more education are in opposition to calls for early entry to the labor
market, to lengthen working lives to meet the rising costs associated with
an aging population and to enable the intergenerational transfer of skills.
One way to lengthen working lives is to shorten the duration of secondary
school, an option recently implemented in Canada and Germany. The empirical
evidence shows mixed effects.
Can entrepreneurship programs be successful
labor market policies for the poor? A large share of workers in developing
countries are self-employed in low-paying work or engage in low-return
entrepreneurial activities that keep these workers in poverty.
Entrepreneurship programs provide business training and access to finance,
advisory, and networking services with the aim of boosting workers’ earnings
and reducing poverty. Programs vary in design, which can affect their impact
on outcomes. Recent studies have identified some promising approaches that
are yielding positive results, such as combining training and financial
The trend towards labor market flexibility in
Europe has typically involved introducing legislation that makes it easier
for firms to issue temporary contracts with low firing costs, while not
changing the level of protection that is in place for permanent jobs. This
has created a strong “dualism” in some European labor markets, which might
affect turnover, wage setting, and human capital accumulation. In view of
this, some economists propose replacing the existing system of temporary and
permanent contracts by a single open-ended contract for new hires, with
severance pay smoothly increasing with tenure on the job.
The combination of changing sleep patterns in
adolescence and early school start times leaves secondary school classrooms
filled with sleep-deprived students. Evidence is growing that having
adolescents start school later in the morning improves grades and emotional
well-being, and even reduces car accidents. Opponents cite costly
adjustments to bussing schedules and decreased time after school for jobs,
sports, or other activities as reasons to retain the status quo. While
changing school start times is not a costless policy, it is one of the
easiest to implement and least expensive ways of improving academic
Active labor market programs continue to receive
high priority in wealthy countries despite the fact that the benefits appear
small relative to the costs. This apparent discrepancy suggests that the
programs may have a broader purpose than simply increasing employment—for
instance, preventing anti-social behavior such as crime. Indeed, recent
evidence shows that participation in active labor market programs reduces
crime among unemployed young men. The existence of such effects could
explain why it is the income-redistributing countries with greater income
equality that spend the most on active labor market programs.
Population aging in many developed countries has
motivated some governments to provide wage subsidies to employers for hiring
or retaining older workers. The subsidies are intended to compensate for the
gap between the pay and productivity of older workers, which may discourage
their hiring. A number of empirical studies have investigated how wage
subsidies influence employers’ hiring and employment decisions and whether
the subsidies are likely to be efficient. To which groups subsidies should
be targeted and how the wage subsidy programs interact with incentives for
early retirement are open questions.
Numerous economic studies have considered the
relationship between class size and student achievement, the majority of
which have focused on elementary schools in the US and Europe. While the
general finding is that smaller classes are associated with increased
student achievement, a few high-quality studies find no relationship.
Further, empirical research on the costs and benefits of smaller classes
concludes that other education policies, such as tutoring, early childhood
programs, or improving teacher quality would be better investments.
Many countries are experiencing increasing
inflows of immigrant students. This raises concerns that having a large
share of students for whom the host country language is not their first
language may have detrimental effects on the educational outcomes of native
children. However, the evidence is mixed, with some studies finding negative
effects, and others finding no effects. Whether higher concentrations of
immigrant students have an effect on native students differs across
countries according to factors such as organization of the school system and
immigrants’ socio-economic background.
A considerable share of the labor force consists
of underemployed part-time workers: employed workers who, for various
reasons, are unable to work as much as they would like to. Offering
unemployment benefits to part-time unemployed workers is controversial. On
the one hand, such benefits can strengthen incentives to take a part-time
job rather than remain fully unemployed, thus raising the probability of
obtaining at least some employment. On the other hand, these benefits weaken
incentives for part-time workers to look for full-time employment. It is
also difficult to distinguish people who work part-time by choice from those
who do so involuntarily.
Children from disadvantaged families have lower
levels of school readiness when they enter school than do children from more
advantaged families. Many countries have tried to reduce this inequality
through publicly provided preschool. Evidence on the potential of these
programs to reduce inequality in child development is now quite strong.
Long-term studies of large publicly funded programs in Europe and Latin
America, and newer studies on state and local prekindergarten programs
implemented more recently in the US, find that the programs do improve
outcomes for young children, particularly for those from disadvantaged
Even in OECD countries, where an increasing
proportion of the workforce has a university degree, the value of basic
skills in literacy and numeracy remains high. Indeed, in some countries the
return for such skills, in the form of higher wages, is sufficiently large
to suggest that they are in high demand and that there is a relative
scarcity. Policymakers need robust evidence in order to devise interventions
that genuinely improve basic skills, not just of new school leavers entering
the market, but also of the existing workforce. This would lead to
significant improvements in the population that achieves a minimum level of
literacy and numeracy.
Female labor market participation rates have
increased substantially in many countries over the last decades, especially
those of mothers with young children. This trend has triggered an intense
debate about its implications for children’s well-being and long-term
educational outcomes. The overall effect of maternal and paternal employment
on children’s cognitive and educational attainment is not obvious: on the
one hand, children may benefit from higher levels of family income, on the
other hand, parental employment reduces the amount of time parents spend
with their children.
Turning unemployment into self-employment is a
suitable alternative to traditional active labor market policies in many
developed countries. Start-up subsidies can assist unemployed workers in
setting up their own business. This option can be especially interesting for
people whose work is undervalued in paid employment or in situations where
job offers are limited because of group-specific labor market constraints or
structural changes. Furthermore, start-up subsidies are potentially
associated with a “double dividend” if the subsidized businesses prosper,
strengthen the economy, and create additional jobs in the future.
Many OECD countries have, or have had, a policy
that exempts older unemployed people from the requirement to search for a
job. An aging population and low participation by older workers in the labor
market increasingly place public finances under strain, and spur calls for
policy measures that activate labor force participation by older workers.
Introducing job search requirements for the older unemployed aims to
increase their re-employment rates. Abolishing the exemption from job search
requirements for these workers has been shown to initiate higher outflow
rates from unemployment for the older unemployed.
Women’s labor force participation has rapidly
increased in most countries, but mothers still struggle to achieve a
satisfactory work−life balance. Childcare allows the primary caregiver,
usually the mother, to take time away from childrearing for employment.
Family policies that subsidize childcare and increase its availability have
different effects on female labor supply across countries. For policymakers
to determine how well these policies work, they should consider that policy
effectiveness may depend on country-specific pre-reform female employment
and earnings, and childcare availability, costs, and quality.
High risk of poverty and low employment rates
are widespread among low-skilled groups, especially in the case of some
household compositions (e.g. single mothers). “Making-work-pay” policies
have been advocated for and implemented to address these issues. They
alleviate the above-mentioned problems without providing a disincentive to
work. However, do they deliver on their promises? If they do reduce poverty
and enhance employment, can we further determine their effects on indicators
of well-being, such as mental health and life satisfaction, or on the
acquisition of human capital?
Laws on age at school entry affect student
achievement and often change for a number of reasons. Older students are
more mature and ready to learn. This can have positive impacts on academic,
employment, and earnings outcomes. The costs of holding children back
include another year of childcare expenses or income forgone by the
caregiver parent. Entering the workforce one year later also has
implications for lifetime earnings and remittances to governments.
School-entry policies could be a useful tool in increasing student
achievement, but the short- and long-term impacts need to be better
About one in five workers across OECD countries
is employed part-time, and the share has been steadily increasing since the
beginning of the economic and financial crisis in 2007. Part-time options
play an important economic role by providing more flexible working
arrangements for both workers and firms. Part-time employment has also
contributed substantially to increasing the employment rate, especially
among women. However, part-time work comes at a cost of lower wages for
workers, mainly because part-time jobs are concentrated in lower paying
occupations and sectors, while the impact on firms’ productivity is still
not very clear.
Temporary work agencies use training as a
recruitment and retention argument when qualified labor is scarce. However,
short job assignments present a major obstacle for employers and employees
to increase investment in training. As temporary agency workers are mainly
low-qualified and often previously unemployed, paid work in combination with
training should lead to more sustainable employment. Adjustments in labor
market institutions could make the provision of training more attractive for
both staffing agencies and temporary agency workers.
Entrepreneurship is essential to job creation
and to productivity growth and therefore is an important matter for
government policy. However, policymakers face a difficult challenge because
successful growth for a few firms—which cannot easily be identified in
advance—is accompanied by widespread failure for most other new firms.
Predicting which firms will fail and which will succeed is nearly
impossible. Instead of futilely trying to pick winners, governments can play
a useful role in facilitating the growth of the most promising firms by
setting the conditions for efficient trial-and-error experimentation across
Childhood obesity has been rising steadily in
most parts of the world. Popular speculation attributes some of that
increase to rising maternal employment. Employed mothers spend less time at
home and thus less time with their children, whose diets and physical
activity may suffer. Also, children of working mothers may spend more time
in the care of others, whose childcare quality may vary substantially. While
a majority of US studies support this hypothesis and have clear policy
implications, recent studies in other countries are less conclusive, largely
because institutional arrangements differ but also because methodologies
Unemployment not only causes material hardship but can also
affect an individual’s sense of identity (i.e. their perception of belonging to a specific
social group) and, consequently, feelings of personal happiness and subjective well-being.
Labor market policies designed to help the unemployed may not overcome their misery: wage
subsidies can be stigmatizing, workfare may not provide the intended incentives, and
flexicurity (a system that combines a flexible labor market with active policy measures), may
increase uncertainty. Policies aimed at bringing people back to work should thus take the
subjective well-being of the affected persons more into consideration.
In addition to the heart-breaking human costs,
violent civil rebellion is a cause of chronic economic under-development.
Employment programs with former combatants and at-risk youth have improved
their livelihoods, but not their support for non-violence and respect for
law. Rebel groups provide security and social benefits that formal
employment does not offer, possibly making switching out of rebellion into
formal employment unappealing. However, a jobs program that addressed the
psycho-social motivations to join rebel groups resulted in significant
reductions in crime and violence. This is an important step forward in our
understanding of how to lure people away from violent rebellion.
Developing countries often face two well-known
structural problems: high youth unemployment and high inequality. In recent
decades, policymakers have increased the share of government spending on
education in developing countries to address both of these issues. The
empirical literature offers mixed results on which type of education is most
suitable to improve gainful employment and reduce inequality: is it primary,
secondary, or tertiary education? Investigating recent literature on the
returns to education in selected developing countries in Africa can help to
answer this question.
Time plays an important role in both the design
and interpretation of evaluation studies of training programs. While the
start and duration of a training program are closely linked to the evolution
of job opportunities, the impact of training programs in the short and
longer term changes over time. Neglecting these “dynamics” could lead to an
unduly negative assessment of the effects of certain training schemes.
Therefore, a better understanding of the dynamic relationship between
different types of training and their respective labor market outcomes is
essential for a better design and interpretation of evaluation studies.
Numerous studies have investigated whether the provision
and generosity of parental leave affects the employment and career prospects of women.
Parental leave systems typically provide either short unpaid leave mandated by the firm,
as in the US, or more generous and universal leave mandated by the government, as in
Canada and several European countries. Key economic policy questions include whether, at
the macro level, female employment rates have increased due to parental leave policies;
and, at the micro level, whether the probability of returning to work and career
prospects have increased for mothers after childbirth.
Expenditures on job placement and related
services make up a substantial share of many countries’ GDP. Contracting out
to private providers is often proposed as a more efficient alternative to
the state provision of placement services. However, the responsible state
agency has to design and monitor sufficiently complete contracts to ensure
that the private contractors deliver the desired quality of services. None
of the recent empirical evidence indicates that contracting out is
necessarily more effective or more efficient than public employment
Activation programs, such as job search
assistance, training, or work experience programs for unemployed workers,
typically initially produce negative employment effects. These so-called
“lock-in effects” occur because participants spend less time and effort on
job search activities than non-participants. Lock-in effects need to be
offset by sufficiently large post-participation employment or earnings for
the programs to be cost-effective. They represent key indirect costs that
are often more important than direct program costs. The right timing and
targeting of these programs can improve their cost-effectiveness by reducing
Standardized testing has become the accepted
means of measuring a school’s quality. However, the associated rise in
test-based accountability creates incentives for schools, teachers, and
students to manipulate test scores. Illicit behavior may also occur in
institutional settings where performance standards are weak. These issues
are important because inaccurate measurement of student achievement leads to
poor or ineffective policy conclusions. The consequences of mismeasured
student achievement for policy conclusions have been documented in many
institutional contexts in Europe and North America, and guidelines can be
devised for the future.
A statistical association between more education
and better health outcomes has long been observed, but in the absence of
experimental data researchers have struggled to find a causal effect.
Schooling reforms such as raising school leaving age, which have been
enacted in many countries, can be viewed as a form of natural experiment and
provide a possible method of identifying such an effect. However, the
balance of evidence so far is that these reforms have had little impact on
long-term health. Thus, policymakers should be cautious before anticipating
a health effect when introducing reforms of this nature.
Since the 1970s, many countries have established free or highly
subsidized education for all preschool children in the hope of improving children’s learning
and socio-economic life chances and encouraging mothers to join the labor force. Evaluations
reveal that these policies can increase maternal employment in the short term and may continue
to do so even after the child is no longer in preschool by enabling mothers to gain more job
skills and increase their attachment to the labor force. However, their effectiveness depends
on the policy design, the country context, and the characteristics of mothers of
The objective of providing vocational training
for the unemployed is to increase their chances of re-employment and human
capital accumulation. In comparison to mandatory course assignment by case
workers, the awarding of vouchers increases recipients’ freedom to choose
between different courses and makes non-redemption a possibility. In
addition, vouchers may introduce market mechanisms between training
providers. However, empirical evidence suggests that voucher allocation
mechanisms prolong the unemployment duration of training participants. But,
after an initial period of deterioration, better long-term employment
opportunities are possible.
The quantity and quality of educational
investment matter for labor market outcomes such as earnings and employment.
Yet, not everyone knows this, and navigating the education system can be
extremely complex both for students and their parents. A growing economic
literature has begun to test whether interventions designed to improve
information about the costs and benefits of education and application
processes have an effect on students’ behavior. So far, findings have been
mixed, although the positive findings arising from some very carefully
targeted interventions give cause for hope.
Public schemes for sickness benefits and disability insurance
are often criticized for the lack of incentive they provide for preventive and reintegration
activities by employers. To stimulate the interest of employers in engaging with these
schemes, several modes of privatization could be considered, including the provision of
sickness benefits by employers, “experience rating” of disability insurance costs, employer
self-insurance, or insurance by private insurance providers. These types of employer
incentives seem to lower sickness rates, but they also come at the risk of increased
under-reporting and less employment opportunities for workers with disabilities or bad health
conditions. Policymakers should be aware of this trade-off.
Skills are widely regarded as being necessary
for boosting productivity, stimulating innovation, and creating new jobs,
while skill mismatches are often cited as being responsible for a lack of
dynamism in the labor market. However, heavy investments in technical and
vocational training programs are seldom a “silver bullet.” Recent evidence
on skill building not only points to the core importance of foundational
skills (both cognitive and social) for success in the labor market, but also
emphasizes how jobs themselves can lead to learning and shape social
competencies that, in turn, ignite innovation and create more jobs.