Evidence for making a cheap and effective twist
to labor market policies for unemployed workers
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.
While most effects are positive, they tend to be
modest and fade over time—in addition, some mentoring programs can
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.
Can job search requirements and job search
assistance help the unemployed find better jobs faster?
In many countries, reducing unemployment is
among the most important policy goals. In this context, monitoring job
search by the unemployed and providing job search assistance can play a
crucial role. However, more and more stringent monitoring and sanctions are
not a panacea. Policymakers must consider possible downsides, such as
unemployed people accepting less stable and lower-paying jobs. Tying
“moderate” monitoring to job search assistance may be the essential
ingredient to make this approach successful.
How do they affect re-employment rates and flows
into states of inactivity for older unemployed workers?
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.
Analyzed public employment agencies were at
least equally as successful as private ones in placing unemployed
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
Job search monitoring and benefit sanctions
generally reduce unemployment duration and boost entry to employment in the
Unemployment benefits reduce incentives to search
for a job. Policymakers have responded to this behavior 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. However, there is some
evidence that longer-term effects of benefit sanctions may be negative.
Vouchers can create a market for training but
may lengthen participants’ unemployment duration
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.
Comprehensive programs that focus on skills can
reduce unemployment and upgrade skills in OECD countries
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.