Friday,12 August 2022
Euro-Ibero-American space for dialogue on social, professional and academic innovation
HomeOpinionColumnHow active are we and how do we respond to unemployment?

How active are we and how do we respond to unemployment?

Labour market policies comprise a range of financial and practical policy interventions that can help people when they face difficulties in the labour market. They aim to bring the unemployed and the inactive into employment and help people in low-quality or threatened jobs find better employment opportunities.

Labour market policies are varied and include job searching mechanisms, training, start-up incentives and income support (unemployment benefits). A set of these policies are grouped together as "active measures" or activation policies and include training, employment incentives, supported employment, rehabilitation, and direct job creation.

Total spending on Labour Market Policies varies significantly across Member States: from more than 3% of GDP in Denmark, Ireland and Spain to less than 0.5% of GDP in Lithuania, and Romania. These spending levels are not a simple reflection of the number of unemployed or inactive people; they reflect different policy choices. This can also been seen from the extent to which countries differ in their allocation of spending across three types of interventions: "services" (e.g. job searching assistance), active "measures" or activation policies (e.g. training) and "supports" (e.g. unemployment benefits).

LMP spending responded to unemployment over the double dip recession but more so in 2009-2010 than in 2011-2012, when it was considerably less reactive to the downturn: In general, total LMP expenditure increased in 2009 and 2010 following the onset of the crisis (Chart 2). This was to be expected after a very large increase in unemployment in 2009. However, spending behaved somewhat differently in the second part of the crisis: even though unemployment increased in 2011 and 2012, expenditure on LMP decreased or increased proportionally less than unemployment and less than in 2009.

Spending on “measures” and “supports” follows different patterns: in 2009 when LMP expenditure rose more than 40%, it strongly favoured “supports” (e.g. unemployment benefits). In 2010, it was mainly “measures” that showed a small increase. Again in 2012 and 2013, where LMP expenditure increased, it was on “supports”, while expenditure on “measures” decreased.

This sequencing in spending as can be observed for the majority of Member States makes sense: as people lose their job, they need immediate income support in the form of cash benefits. The questions is whether activation policies kick in quickly enough to avoid that people lose their skills and become discouraged from participating in the labour market.

Authors: A. Xavier is the deputy head of unit and P. Badea statistician in the unit Thematic Analysis of DG EMPL.

Editor´s note: this article is part of a regular series called "Evidence in focus", which will put the spotlight on key findings from past and on-going research at DG EMPL.

The views expressed in this article are those of the author and do not necessarily reflect the views of the European Commission.

Of interest