1. INTRODUCTION

1.1 Objectives of the study

• which different policy approaches and strategies exist in a range of countries to tackle the problem of long-term unemployment;



• which methodologies and techniques have been used to evaluate the different policy measures;



• what the evaluation literature tells us about the overall effects of measures of different types, and in different combinations on the labour market chances of the target group (the long-term unemployed); and



• what conclusions can be drawn about the strengths and weaknesses of different evaluation approaches, and what proposals can be put forward for developing effective target-oriented approaches to answer the central question, 'how does active labour market policy affect the labour market chances of the long-term unemployed?'.

1.2 Target-oriented versus programme-oriented evaluation

'Traditionally, labour market policy evaluation has been characterized by a strong focus on individual policy instruments and programmes. The impacts of these single purpose programmes have been assessed in a top-down approach by contrasting explicit programme goals with measurable programme outcomes. In these conventional approaches, policy formation and implementation processes have been treated largely as a black box.
... In this way programme evaluations have tended to neglect the incentives created by the interaction of different policy interventions and the cumulative impact of policy regimes on the disposition and observable behaviour of the relevant actors in the target area....
...To overcome the shortcomings of the programme-oriented evaluation approach, we propose a new approach: 'target-oriented policy evaluation' ....Instead of merely attempting to measure the impacts of a certain policy programme along the dimensions of its immediate pre-specified programme objectives, the target-oriented approach takes as its point of departure broadly defined policy goals or targets. Examples of such policy targets are increasing individual options for labour market participation, facilitating the school-to-work transition and increasing employment opportunities for the hard-to-place. With target-oriented evaluation research, then, one analyses which policies and policy combinations may be best suited for achieving these targets under different socioeconomic conditions as well as within different policy regimes.
... In contrast to conventional, programme-oriented approaches, target-oriented evaluation research adopts a bottom-up perspective, which entails viewing policy impacts from the angle of the relevant agents. These agents include the people to whom the policy is addressed and their receptiveness to or rejection of a particular policy (policy adoption); the agents involved in, and responsible for, policy implementation; and the decision-makers in the political arena, who are core actors in the process of policy formation.'

• research in Ireland on the effects of active labour market schemes (summarised in O'Connell and McGinnity, 1997);
  
  
• a Swedish study, also focusing on the impact of labour market policies on a youth target group (Ackum Agell, 1995);



• a recent British study (White et al., 1997) which looks at the impact of a range of measures on the job-finding chances of the long-term unemployed;
  
  
• an evaluation of a range of active measures for the unemployed in the eastern Länder of Germany (Hübler, 1997).

In addition, we attempt to draw, in so far as the existing research permits, on some of the other key insights of target-oriented evaluation. In particular we adopt the principle that wherever possible, evaluation should attempt to open the 'black box', and to understand not just what impact a measure or programme has, but the factors contributing to that impact. In so far as a scheme has an impact, policy-makers need to understand not only how big the impact is, and how much it cost, but which elements of the programme were critical to contributing to it (e.g. where a scheme incorporates a range of interventions, such as counselling, work experience and training elements, it is important to understand the relative contribution of each element to the scheme's overall impact). Equally it is important to understand how much of the impact can be attributed to the institutional context, and the operation of the programme delivery agents etc. (it is common to find, for example, when comparing ostensibly similar schemes in different national or local contexts, that the local management and institutional context are critical in determining programme effectiveness).

Thus we hope, by bringing together the findings from a range of evaluations, in different contexts and institutional environments, to extend the limited conclusions which emerge from individual programme evaluations taken in isolation. Keeping the target-oriented perspective in mind as an 'ideal' however, we also consider, towards the end of the paper, some of the practical and methodological issues which need to be tackled in developing future evaluations of measures for the long-term unemployed in the target-oriented direction.

The study draws on existing comparative work, including that of the author (Meager and Morris, 1996), as well as other recent exercises conducted for the OECD (Fay, 1996), and the European Commission (European Commission, 1995).

1.3 Long-term unemployment; the nature and extent of the problem

Long-term unemployment remains one of the most persistent, and in quantitative terms, serious, social issues facing many industrialised economies. To take the Member States of the European Union as an example, the extent of the problem has been well documented.⁽²⁾ Almost exactly half of the unemployed in the Union, some nine million people, have been unemployed for a year or more (Figure 1 shows recent trends in unemployment and long-term unemployment among the 15 EU Member States). Within this group around 60 per cent have been unemployed for at least two years.

Figure 1 - Unemployment and long-term unemployment (E15)

Whilst there has been some fluctuation in the share of unemployment which is long-term, for the Union as a whole, this share has not fallen below 41 per cent (which was achieved in 1992) for many years. Although the incidence of long-term unemployment is somewhat lower than the EU average in the new Member States (Finland, Austria and, especially Sweden), long-term unemployment has risen persistently across the Union since 1992.

Certain groups in the workforce are disproportionately prone to long-term unemployment. Continuing with the example of the European Union, across the Union, and in most Member States, female long-term unemployment rates have been higher than male.⁽³⁾ Further, in most countries, there is clear evidence that older workers are over-represented in long-term unemployment compared with their share of total unemployment (this over-representation would be even greater, but for high rates of withdrawal from the labour force due to early retirement). Older workers becoming unemployed are more likely to remain unemployed than younger workers, and in many countries the data suggest that older workers losing their jobs in traditional industrial sectors are particularly at risk of long-term unemployment. In European countries at least, although youth unemployment rates are typically higher than the average, unemployed young people (under 25) are generally less likely than those in other age groups to become long-term unemployed (although there are exceptions, especially in southern Europe).

In most countries, long-term unemployment has fluctuated over the economic cycle, and tends to move with overall unemployment levels. The rate of long-term unemployment varies considerably between countries, however, (as the data for EU Member States in Figure 2 illustrate), and although there is a positive relationship between unemployment and long-term unemployment rates, this relationship is by no means a perfect one; as Figure 2 shows, countries with similar rates of overall unemployment may have very different rates of long-term unemployment and vice versa.

Figure 2 - Unemployment rates and long-term unemployment rates (1995)

Or, to express the issue slightly differently, countries vary considerably in terms of the share of unemployment which is long-term unemployment. Figure 3 shows, for example, that in 1995, four EU Member States (Sweden, the UK, Greece and Belgium), with similar rates of overall unemployment, slightly below the EU average, had vastly different shares of long-term unemployment (varying from Sweden with 20 per cent to Belgium with 62 per cent).⁽⁴⁾

Figure 3 - Unemployment rates and shares of long-term unemployment (1995)

This suggests that even where prevailing macro-economic circumstances constrain national governments from achieving full employment goals, some countries may have much to learn from others about active labour market policies to minimise long-term unemployment and the associated social exclusion.⁽⁵⁾ Caution needs to be exercised, however, in concluding that Member States with high levels of active labour market expenditure (e.g. Sweden and Denmark) have thereby 'solved' the problem of long-term unemployment.⁽⁶⁾ Whilst large scale active measures are likely, by definition, to reduce recorded long-term unemployment, the level of 'hidden' long-term unemployment may remain high, due to the 'carousel' effect of individuals moving repeatedly between unemployment and active measures. Participants in measures are often not counted as long-term unemployed during their participation, and if they return to unemployment after participation, they are reclassified as short-term unemployed.

It is, however, clear that national performances with regard to long-term unemployment vary considerably. Recent research for the European Commission (DGV),⁽⁷⁾ using Labour Force Survey and administrative data to estimate the likelihood of a 'representative' individual leaving unemployment, after given durations of unemployment, suggests that the main source of variations in rates of long-term unemployment between Member States is variations in outflow rates rather than inflow rates; it is the speed with which people leave unemployment, rather than the rate of entry to unemployment which is important. The key question, therefore, is not which policies are most effective in stopping people becoming unemployed, but rather which are most effective in maintaining the 'employability' of the unemployed so that they are less likely to flow into long-term unemployment. The same study also shows a considerable decline, in most Member States, with increasing duration of unemployment, of an individual's probability of leaving unemployment. In designing appropriate policy interventions, and deciding on the timing of measures (i.e. at what point in an unemployment spell should measures be applied), and the relative importance of preventative measures and re-integrative measures, we need to understand the process by which people become long-term unemployed, i.e. what explains the declining probability of leaving unemployment observable in aggregate data? We discuss, in section 2.3 below, the alternative explanations for this process, the evidence which exists for them, and some of the policy implications.

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