Abhatoo - Centre Nationale de Documentation

Since the last recession, creating jobs and combating high unemployment have become a key priority for most OECD Member countries. OECD labour ministers at their meeting in January 1992 endorsed a plan of action based on the concept of active labour market policies. These policies have evolved significantly since the early 1960s and cover a range of objectives and programmes - economic as well as social. Labour market expenditures are sizeable in most countries and can be expected to generate a variety of economic and social consequences. One component of these expenditures is designated as “active measures”, i.e. those aiming at improving access to the labour market and jobs, job-related skills and labour market functioning.

It would be a massive undertaking to assess all the economic and social effects of active labour market programmes in any depth. Because the range of outcomes possible at both the macroeconomic and microeconomic levels is wide, different types of evaluation are needed to meet the various demands of policy-makers. In view of the diversity of objectives and methodological complexities, it is worth noting that even with the best application of available data and methods, evaluations are likely to remain partial and incomplete. Moreover, it should be understood that the concept of active labour market policies is much broader than the actual programmes examined here. For example, tax policies aimed at mobilising labour supply fall within the framework of active policies but are not part of the labour market budget data considered.

This chapter has a much more modest target. It takes the expenditures on active programmes as the departure point and examines their impact. Given the size of labour market budgets, it can be expected that they would have some impact at the target-group or microeconomic level. However, these effects percolate into the macroeconomy: programmes such as direct job creation, selective wage subsidies or training not only alter the mix of employment in favour of specified groups of workers, but also can influence the relationship between inflation and unemployment. One of the key rationales for active labour market programmes is that under appropriate circumstances they can reduce the inflationary consequences of higher rates of employment in the short run and, in the long run, help lower structural unemployment. The mechanisms and conditions through which these effects might arise are discussed further in Section C.

The purpose of this chapter is twofold: to look at some of the macroeconomic effects of active labour market spending, and to supplement this with a review of selected evaluations of individual programmes from the target-group perspective. Section B describes the size and structure of spending on active programmes in OECD countries. Section C begins by analysing the mechanisms through which macroeconomic effects might arise. The two variables selected for examination here are employment and wages, although other variables such as productivity can be affected as well. The section then provides a brief review of the rather limited empirical literature in this area, and presents some new empirical results. Section D examines the nature of the programme- level evaluation studies and the particular effects reviewed in the literature. The scope is restricted to those impact studies which examine the effects on employment probabilities and, in a few cases, on earnings. The review does not, of course, pretend to be comprehensive. Conclusions are contained in Section E.