Active labour market policies in the crisis

Good interview of Jochen Kluve. He argues that to target the problem of unemployment, we should first start by providing with job search assistance programs, loosely referred to as activation.

Some form of work Subsidy programs can then be appropriate, provided that displacement effects (the reduction or crowding out of regular employment elsewhere in the economy through competition in the goods market – p15, Simon Chapple, 1999) and substitution (“displacement within a firm which hires workers from an active labour market policy” – p8, ibid ) are not to large.

If that doesn’t work, providing the unemployed with training schemes may be appropriate, ideally on a fairly long term basis. In Kluve’s view, direct job creation in the not for profit sector or local government should be avoided as it engenders nefast effects. For instance, public employment schemes targeted at the young may fail to raise their human capital on the one hand, and on the other may lead municipalities to hire the unemployed instead of more qualified candidates.

Note however that this latter claim is at odds with some of the more recent macro-evaluation literature. For instance, Estevão (2003) finds that “direct subsidies to job creation were the most effective” for raising employment rates.