IZA World of Labor
key topic

Fighting long-term unemployment

Long-term unemployment refers to those people who are out of work and have been actively seeking employment for at least 12 months. Unemployment can have adverse effects on the economy and on the well-being and life satisfaction of those who are out of work. But, what factors prolong unemployment? And, which measures help shorten unemployment spells and enable people to find more stable jobs that better match their skills and qualifications?

  • Public or private job placement services—Are private ones more effective?

    Analyzed public employment agencies were at least equally as successful as private ones in placing unemployed workers

    Gesine Stephan, August 2016
    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 services.
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  • Unemployment and happiness

    Successful policies for helping the unemployed need to confront the adverse effects of unemployment on feelings of life satisfaction

    Rainer Winkelmann, October 2014
    Many studies document a large negative effect of unemployment on happiness. Recent research has looked into factors related to impacts on happiness, such as adaptation, social work norms, social capital, religious beliefs, and psychological resources. Getting unemployed people back to work can do more for their happiness than compensating them for doing nothing. But not all unemployed people are equally unhappy. Understanding the differences holds the key to designing effective policies, for helping the unemployed back into work, and for more evenly distributing the burden of unemployment resulting from economic restructuring.
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  • The impact of monitoring and sanctioning on unemployment exit and job-finding rates

    Job search monitoring and benefit sanctions generally reduce unemployment duration and boost entry to employment in the short term

    Duncan McVicar, July 2014
    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 negative.
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