Active Labour Market Policies: Let's Be Careful Out There

Graeme Scott

Most OECD nations are experiencing high and persistent unemployment. Increasing recognition of the social and economic costs of unemployment to individuals and society has led to increasing willingness to invest in unemployment prevention. In 1992 labour ministers of the OECD nations endorsed a framework that proposed a progressive shift of resources from passive income support (like unemployment benefits) to active measures directed at increasing the job prospects of unemployed people.

There has been a resulting boom in “active labour market policies” (ALMPs), but internationally these are coming under fire due to evaluations showing mixed and uncertain outcomes across the full range of expected results - from stimulating the economy to enhancing the employability of selected groups.

This paper compares the current theory of why ALMPs are a good thing with outcomes reported by recent studies. The focus is on job search assistance, welfare-to-work programmes, vocational skills development, and youth vocational training. The findings are presented, and used as the basis of a set of recommendations for active labour market policy in New Zealand.

The overall conclusion is not that ALMPs are either universally worthwhile or worthless, but that we need to be careful out there.