ETF Policy Briefing: Optimising Activation Policies to Integrate Unemployed People into the Labour Market


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This policy briefing focuses on how to improve activation approaches to integrate unemployed people into the labour market. It explores current practices applied by public employment services, analyses interrelated factors at play in Western Balkan countries and Turkey and concludes with recommended
approaches for more coherent
activation policies.

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ETF Policy Briefing: Optimising Activation Policies to Integrate Unemployed People into the Labour Market

  1. 1. ISSUE 08 DECEMBER 2011 OPTIMISING ACTIVATION POLICIES TO INTEGRATE UNEMPLOYED PEOPLE INTO THE LABOUR MARKET EU’s Instrument for Pre-Accession Herzegovina, and the former Yugoslav Assistance and has led to a gradual Republic of Macedonia. The labour modernisation of employment policies markets are characterised by persistent and services. Improving activation informal employment in the form of policies is one of the main challenges undeclared or under-declared labour and facing the Western Balkan countries and vulnerable self-employment. Tailor-made Turkey. It is a challenge that calls for demand and supply-side measures are customised approaches that take specific needed to enhance the effects of conditions into account. activation Successful activation policies combine obligations and support measures to This policy briefing focuses on howphoto: Ian W Scott motivate and empower unemployed to improve activation approaches to people. Support measures include integrate unemployed people into information, counselling and guidance, the labour market. It explores current better placement and referral services, practices applied by public training measures, support for self- employment services, analyses employment and other forms of active interrelated factors at play in High employment rates and income labour market measures. Job seekers’ Western Balkan countries and Turkey security are key to economic rights and responsibilities are clearly and concludes with recommended development and robust fiscal budgets. defined and communicated to registered approaches for more coherent They are also important in establishing unemployed individuals; non-compliance is sanctioned by cuts in cash benefits or activation policies. It addresses inclusive labour markets accessible to vulnerable groups. elimination from the unemployment primarily policymakers and register. Such carrot and stick approaches practitioners in the candidate Increasing employment rates is a target have proved to be successful in many EU countries and potential candidate of Europe 2020, a strategy for smart, countries. However, conditions in the countries for European Union (EU) sustainable and inclusive growth. Its goal Western Balkan countries and Turkey are accession. It may also be relevant to is to increase the employment rate for different. any country aiming to upgrade its people aged 20 to 64 to 75% by 2020. employment policies and services. To achieve this, the EU’s employment The economic crisis resulting from the guidelines highlight the importance of global financial crisis of 2007/08 led to The findings of this policy briefing ‘increasing labour market participation of increased unemployment rates in are based on the joint work women and men, reducing structural Croatia, Montenegro and Serbia, while conducted with a community of unemployment and promoting job Albania and Turkey managed to reverse practice on activation, which was quality’. They also emphasise that negative labour market trends. established in 2009 within the activation is key to increasing labour framework of the European Training market participation. Countries should Employment rates in the region are far Foundation’s (ETF) Mutual Learning ‘step up social dialogue and tackle labour below the EU average, with only Croatia Programme. The ETF together with , market segmentation with measures coming relatively close. The primary experts and practitioners from the addressing precarious employment, reasons for this are low female public employment services in underemployment and undeclared work’ employment rates (lowest in Kosovo* Western Balkan countries and Turkey, (Council of the EU, 2010). and Turkey, where less than one quarter of the female working-age population is analysed the current activation The EU strategy also establishes the employed) and low youth employment approaches and framework framework for candidate countries and rates. Long-term unemployment is high conditions and elaborated policy potential EU accession candidates. This in many countries. Youth unemployment options to improve activation results process is supported and funded by the is alarmingly high in Kosovo, Bosnia and DEFINITION benefit recipients who are able to work, to participate in active labour market measures and to search actively for a Activation is a combination of mutually supporting policies job. The aim of activation is to get job seekers into jobs that formulated to increase the capabilities and motivation of provide them with an adequate income, thereby helping unemployed people (registered unemployed) or welfare them to avoid poverty and exclusion * Under UNSCR 1244/1999, hereinafter ‘Kosovo’.
  2. 2. DEMAND-SIDE CHALLENGES developing workers in small and support measures (Croatia, Serbia and medium-sized enterprises. This may be Montenegro are the exceptions). Given Factors that affect the demand for labour an impediment to innovation and further the limited resources of the public and the effectiveness of activation business development and growth. employment services and the limited policies include total labour costs, the number of vacancies, it is difficult to legal and administrative procedures As a result of these factors, the level of implement obligations such as related to hiring workers, irregular formal sector vacancies is low, despite monitoring job search activities or employment practices and possible the fact that this is a key condition for imposing sanctions if job seekers decline sanctions for such practices. successful activation and job placement job offers. by public employment services For many people in the region it does not In many Western Balkan countries, make financial sense to work in the receiving benefits is contingent upon formal sector if they can access SUPPLY-SIDE CHALLENGES being registered as unemployed – a unemployment-related benefits and logical requirement. All countries, with work in the informal economy at the Labour supply relates to the available the exception of Kosovo, offer an same time. The irregular payment of skills of the workforce as well as working unemployment insurance scheme with wages and defaulting on social security conditions, the competitive price of unemployment cash benefits. However, contribution payments is a widespread labour in the informal economy and the coverage is limited (only a few of the practice and creates a strong alternative, non-work-related financial registered unemployed receive cash disincentive to work, especially for more resources available. Low net wages at benefits). Wage replacement rates are highly qualified individuals in the the lower end of the qualification scale low and the maximum duration of such workforce. curtail the supply of labour in the formal schemes is 12 months (with some sector. This contrasts with the availability exceptions for pre-retirement schemes). Relatively high labour costs discourage of social benefits combined with These factors result in a situation that employers from hiring and reduce the informal employment. offers little income security and potential demand for labour. Cost issues motivates people to work in the informal and administrative procedures can lead A number of key challenges face the sector, even though they are registered to the employment of shadow (informal) region in this regard. The eligibility as unemployed. Attempts to legalise workers, a phenomenon that reinforces criteria for registering as unemployed are low-waged work and make this the segmentation of the labour market. relatively liberal, but the focus is compatible with the receipt of Limited sanctions for employers who generally on the individual’s status as an unemployment benefits are still at an work outside the regulatory environment unemployed person, rather than as a job early stage. and employ informal workers and an seeker and someone able to work. The acceptance of non-compliance with public employment services’ Unemployed people can avail of many fiscal obligations and labour legislation unemployment registers are structured other social benefits but accessing them help to sustain the system. in such a way that inactivity and is a complex procedure. Many are small employment in the informal economy and seemingly insignificant but they do When hiring, employers prefer make it very difficult for these services add up. The institutions granting the individuals with relevant work to fulfil some of their usual goals and benefits rarely work together. We can experience, but discriminate against functions. Legislation does not conclude from this that the social older workers, women and people with distinguish clearly between employed, security system generally functions by lower qualifications. unemployed and inactive. Public providing benefits for various purposes employment services do not always through multiple institutions. Unless Managerial skills are also an issue, identify those who are employable and these income support measures are particularly with regard to deploying and those who need different kinds of redesigned to make work more attractive and to better target those in need, unemployment levels will remain excessively high and public employment services will remain overloaded with benefit administration. All countries offer vocational training and re-training and facilitate the uptake of various basic or generic skills as part of their active labour market measures. Even though the measures and numbers of participants have increased over the last few years, they still fall far short of what is needed. The low skill levels of the working-age population, particularly among unemployed and inactive people, make activation difficult and austinmills The public employment services’ staffing levels and budgets required to ensure reasonable coverage of passive and active labour market measures are extremely limited
  3. 3. ISSUE 08 DECEMBER 2011EFFECTIVE ACTIVATIONAny possibility of effective reform requires an integratedapproach to activation, covering supply and demand issues aswell as support measures and individual obligations. While photo: Let Ideas Compete’s photostreampublic employment services are mainly responsible foractivation measures, they cannot be expected to act alone.Their most obvious partners are relevant ministries, socialpartners, social welfare centres, education and trainingproviders, local authorities and employers.The limited demand for labour in the formal sector is the mainimpediment to activation. Tackling this is a priority. Economicdevelopment, regional, industrial, fiscal, investment andentrepreneurship development policies need to be reformed tostrengthen competition, increase labour mobility, create avibrant entrepreneurial environment and a stable regulatoryframework, which facilitates enterprise creation, innovation andgrowth. opportunity to legalise their status. Social welfare or healthApart from establishing a macro-economic environment to insurance should not be contingent on being registered asencourage job creation, governments must implement longer- unemployed. Positive examples of schemes that separateterm policies to curb the informal economy. As long as only health insurance from the unemployment register can be foundsome beneficiaries pay insurance premiums, contribution rates in Croatia and Turkey.must be kept high, leading to increased labour costs.Employers who do not pay contributions to the social securitysystem must be sanctioned. Incentives for employers to move Public employment services’ resources,into more lucrative sectors and making (formal) work pay may capacities and service deliverymotivate employers and employees to take up formalemployment. Policies to make certain categories of workers, Public employment services need more resources for passivesuch as new labour market entrants, less expensive to employ and active labour market measures. The caseload of staffshould be implemented. Some countries have already working with clients should be reduced. Staff should be movedintroduced employment incentive schemes to stimulate the from administrative duties to work directly with clients. Therecruitment of specific target groups (Croatia and Turkey). activation rate (percentage of registered job seekers participating in active employment measures) should beOn the supply side, the nature of the current skills of job increased. The effects of active labour market measures shouldseekers poses the biggest challenge to more effective be regularly evaluated and funds should be strategicallyactivation. Furthermore, public employment services have to directed to the most effective approaches.address other issues to break the vicious circle of low demandfor labour, limited incentives to take up formal work and long Female employment rates need to be increased. Genderspells of unemployment. These are summarised below. mainstreaming approaches should be applied to ensure that both women and men in the working-age population participate pro rata in all measures. This must be combined with targetedEligibility and profiling of registered approaches for disadvantaged women (low-skilled women,unemployed people women with family responsibilities). Support services for specific vulnerable groups could be outsourced to non-The public employment services’ registers should remain open governmental organisations, for all who wish to find work for whatever reason. However,registration must be restricted to individuals able and willing to In order to improve their reputation as a service provider, publicwork according to the International Labour Organisation (ILO) employment services should provide better services todefinition. They should be seen as job seekers rather than employers. A new approach that considers employers asunemployed people. Changes in legislation are needed in some partners and customers of the public employment servicesWestern Balkan countries to distinguish between employed, could cover services such as recruitment support (by pre-unemployed and inactive individuals. This is the only way to selecting suitable candidates). Subsidies could be offered formonitor the activity status of registered unemployed people. hiring hard-to-place job seekers rather than imposing quota systems with sanctions for non-compliance. This implies aSome countries also need to profile people who register as change of mindset in some employment services – providing aunemployed. Profiling systems help to identify individual service to employers instead of fulfilling an administrativeemployability, assess the risk of long-term unemployment and function. The development of a communications and servicethe level of assistance needed and target the appropriate strategy vis-à-vis employers, preferably with specialisedservices (Weber, 2011). Currently, only Croatia and Montenegro counsellors for employers could also be envisaged.keep records of who has marketable skills and who needssimple support measures (such as vocational guidance, advice Activation approaches should include both obligations andon how to look for a job, job fairs and activities in job clubs) and support measures. Support measures are needed to increasewho is hard to place and in need of the most support. Profiling employability and provide basic income security for jobthe unemployed requires sufficient staff capacities. seekers, thus making informal sector income unnecessary. This must be accompanied by more stringent measures toThose who are registered as unemployed but are actually tackle informal employment and ensure that job seekers areworking in the informal economy should be given the actively searching and available for work.
  4. 4. ISSUE 08 DECEMBER 2011Skills matching market. The employment service is possibly the only institution that could set up such a labour market information system forLabour market training is a cornerstone of active labour market human resource needs.measures adopted by public employment services in all theWestern Balkan countries and Turkey. Training measures need Conclusionto be more effective and results measured in terms of jobplacement rates. It is essential that training programmes Overall, there is no easy way of making activation approachesprovide qualifications needed by the labour market. This, in more effective. Activation needs to be embedded in a policyturn, requires that they are implemented in close cooperation mix that tackles informal employment, invests in demand-with employers. Skills mismatches can only be reduced if the driven skills, increases the scope and effectiveness of activetraining content is based on a reliable skills needs analysis. The labour market measures and modernises social securitysystematic screening of economic sectors is needed to identify systems. Public employment services in the candidatecrucial occupations and monitor changing skills needs. Training countries and potential EU candidate countries can learn fromproviders should plan their training programmes based on good practices and failures in EU countries, but they can learnthese analyses and engage in ongoing dialogue with employers even more from each other. Mutual learning within theand analysts on current and future skills needs (employment framework of regional and international public employmentpartnerships, human resource development centres and sector services networks can make an important contribution tocouncils). improving activation policiesThere is a need for a system that systematically collects andtransfers information from the local to the national labour photo: John ‘K’ REFERENCES Council of the European Union, ‘Council Decision of 21 October 2010 OECD (Organisation for Economic Cooperation and Development), on guidelines for the employment policies of the Member States’, ‘Activating the unemployed: what countries do’, OECD Official Journal of the European Union, L 308, 24 November 2010. employment outlook, Paris, 2007. Crnkovic-Pozaic, S. and Feiler, L. (European Training Foundation), ÖSB Consulting and Vienna Institute for International Economic Activating the unemployed: optimising activation policies in the Studies, Developing efficient activation approaches and identifying Western Balkans and Turkey, ETF working paper, Turin, 2011. elements for regional cooperation in the Western Balkans, Final report for DG Employment, Contract No VC/2010/0028, 2010. European Commission, Modernising social protection for greater social justice and economic cohesion: taking forward the active Weber, T., Profiling systems for effective labour market integration, inclusion of people furthest from the labour market, COM(2007) Thematic synthesis paper for the European Commission mutual 620 final, Brussels, 2007. learning programme for public employment services, May 2011HOW TO CONTACT US For other enquiries, please contact: Prepared by Lizzi Feiler, ETF ETF Communication DepartmentFor information on our activities, European Training Foundation, 2012job and tendering opportunities, E Reproduction is authorised, except forplease visit our website, T +39 011 630 2222 commercial purposes, provided the F +39 011 630 2200 is acknowledged @etfeuropa