1. The authors are grateful to participants at a workshop held at the ILO in December 1997, for comments on an earlier draft of this paper (and particularly to Bernard Gazier and Niall O'Higgins). Back to text
2. See for example, European Commission, 1996, pp. 95-97. Back to text
3. Note, that in some countries, notably Denmark and the Netherlands, the share of unemployment which is long-term is lower for women than for men, but because the overall rate of female unemployment is considerably higher than the male, the female long-term unemployment rate is also higher than the male. Back to text
4. It is worth noting that inter-country variations in the share of long-term unemployment may also reflect differences in the stage of the economic cycle which countries have reached. There is a lag in the relationship between overall unemployment and long-term unemployment. When unemployment is increasing, the numbers of short-term unemployed increase rapidly, and this takes time to feed through into the numbers of long-term unemployed. Conversely, when the economy is recovering, overall unemployment may fall faster than long-term unemployment, because fewer new people are entering short-term unemployment; at this point the share of long-term unemployment may rise, even though the numbers of long-term unemployed are falling. Back to text
5. This variation in performance has increasingly been recognised at European level, and the recent emphasis on 'benchmarking' has been reflected in an analysis of which Member States have achieved best performance in preventing long-term unemployment: (European Commission, 1997a). Back to text
6. There is, nevertheless, some evidence from cross-country macro-economic studies that the existence and scale of active labour market policies make a difference to the extent of long-term unemployment, although as discussed in section 3.4.1 below, these findings are not uncontroversial. Back to text
7. Reported in Long-Term Unemployment, an internal paper of the Commission, produced in July 1997. Back to text
8. See the discussion of these issues in Meager and Morris, 1996. Similar distinctions are also made in Gaß et al. 1995, pp. 792-800. See also Werner, 1996. Back to text
9. The typology presented in this paper draws on similar classifications found in the literature. See, for example, Gregg 1990; Disney et al. 1992; and Erhel et al. 1996. Back to text
10. Our review does not consider in detail evidence from the 'transition economies' of Eastern Europe and the former Soviet Union, partly because of the paucity of existing literature on this region, but also because as recent research has shown, active labour market policies remain, relatively under-developed in these countries (where passive expenditure predominates) -- OECD, 1996. Where relevant evaluation studies have been uncovered during the course of the research, however, we include them in our summaries below. Back to text
11. This disincentive is equivalent to a high effective rate of marginal taxation. Whilst in-work benefits may tackle this, there is, however, a risk that they will replace the 'unemployment trap' with a 'poverty trap', i.e. the disincentive now applies to those in low-paid employment, who face high effective marginal taxation rates, if they increase their hours of work, or move to better-paid employment (due to loss of, or reduction in the in-work benefit). Back to text
12. Such measures are also partly demand-side in orientation, with individuals being subsidised to create their own jobs (and ideally, jobs for others in due course). Back to text
13. For further discussion of the notion of 'activation' and the balance between sanctions and incentives, see European Commission, 1997. Back to text
14. Some commentators have described traditional active labour market policies implemented in some Scandinavian countries (notably Sweden) in terms of a 'workfare' model, although as Robinson, 1995 (p. 12) notes, this interpretation is debatable. Back to text
15. The US work is reported in Department of Labor (1994). Back to text
16. The debate and recent evidence, are well-summarised in Hasluck et al. (1996). Back to text
17. The relevant literature includes Heckman (1978), Heckman and Borjas (1980) who set out the statistical theory underlying notions of heterogeneity, and the early US empirical work includes Ellwood (1982), Chamberlain (1985), and Lynch (1985) Back to text
18. Lynch (1989), Narendranathan and Elias (1993). Back to text
19. See, in particular, Jackman and Layard (1991), but also Narendranathan and Stewart (1989); Layard et al. (1991) also argue strongly that there is significant evidence of state dependence. Back to text
20. We draw here on Meager and Metcalf (1988). Back to text
21. The finding may partly reflect the likelihood that employers with 'positive' attitudes to the unemployed were more likely to participate in government schemes. Back to text
22. As reported in Elias (1996). Back to text
23. This section draws, in particular, on Meager and Morris, 1996. Back to text
24. Many of these evaluation issues are not specific to measures aimed at the long-term unemployed, but also apply to (active) labour market policies in general. For a comprehensive international review of labour market policy evaluation issues, see Schmid et al. 1996. A clear discussion of evaluation issues, and examples of evaluation results (drawing mainly on the North American experience) can be found in Fay (1996). Layard et al., 1991 (chapter 10) also make some useful points on this topic. Back to text
25. For a discussion of the role of labour market programme monitoring, and its relation to policy evaluation, see Auer and Kruppe (1996). Back to text
26. For one of the few examples of such an intensive approach to evaluation, based on surveys within a local labour market, see the evaluation of the UK's Enterprise Allowance Scheme: Elias and Whitfield (1987), Hasluck (1990). Back to text
27. For evidence of 'creaming' in the context of the UK's main training programme for the long-term unemployed (Training for Work), see Meager (1995). Back to text
28. Useful discussions of the methodological issues can be found in Blaschke et al. (1992) and Schnellhaas (1992). Back to text
29. This approach has been adopted for a number of pilot measures in the UK; e.g. the new 'Earnings top-up Scheme', which involves a variant of the in-work benefit approach, is being evaluated this way. Back to text
30. A useful summary of this literature, together with some cross-country econometric estimates of the macro-effects of active labour market policies can be found in OECD 1993 (see especially pp. 44-53); see also Layard and Nickell (1986) for a classic text of this literature; and Calmfors (1994) for a wide-ranging and up-to-date review. Back to text
31. See, for example, OECD (1993) pp 53-68 for such a review of active labour market measures, as well as work by the present author (Meager and Morris, 1996) which reviewed much of this literature. Back to text
32. There exists, in addition, a large literature on locally-based initiatives, (see for example the reports of Phases 1 and 2 of the European Union's ERGO initiatives, as well as country reports of evaluations of European Social Fund actions). We do not attempt to summarise this literature, but simply note that a high proportion of these evaluations are of the 'monitoring' type, and do not attempt a rigorous analysis of the net effects of the measures. Back to text
33. The other key variables in the OECD analysis are measures of the level of 'job security' in different countries, and measures of the maximum level of unemployment benefits; both tending to increase the rate and incidence of long-term unemployment across countries. Back to text
34. Although it has been argued, for example in the case of some Nordic countries with long-standing and large scale subsidy programmes, that where the subsidies become institutionalised they may lead to a rigorous segmentation of parts of the labour market, ending up with some kinds of jobs being offered only on a temporary basis to eligible long-term unemployed people, thereby effectively excluding other job-seekers from these jobs (Grubb, 1994 presents such an argument). Back to text
35. House of Commons (1996) p.27. Back to text
36. We have already noted the relative paucity of examinations of employer behaviour in evaluation studies. Back to text
37. Atkinson and Meager (1994). Back to text
38. Note that the displacement issue sometimes goes wider than the displacement of private sector activities. It is sometimes argued, for example, particularly when the job-creation measures are delivered by local or municipal authorities, that there is a tendency for them to be used to conduct activities which might otherwise be carried out from the normal public sector budget. In this sense some or all of the activities are not additional, and simply represent a redistribution between one part of the public sector budget and another. Back to text
39. This information is drawn from BAG Arbeit (1996). Back to text
40. It is possible there is a selection bias problem here -- i.e. whether the participants in the two programmes are strictly comparable in terms of personal characteristics etc. As far as can be judged, from published information, however, these projects, if anything, target groups of the population in which the most disadvantaged long-term unemployed, and those with extended durations of unemployment are relatively over-represented. If this is true, the relative performance difference between the two programmes would be even more notable than the crude figures quoted here suggest. Back to text
41. It is also notable that where major effects have been observed (e.g. the Swedish experiment in the 1970s -- Delander 1978), this was in the case of a small scale experiment, and it is unclear whether the results would translate to a wider initiative. Back to text
42. Dolton and O'Neill 1996 and 1996a. Back to text
43. Biffl et al. (1996). Back to text
44. An evaluation of the 'Travel to interview scheme' in the UK by Atkinson and Hillage (1991), showed a small positive impact on participants. Back to text
45. A UK scheme for 'earnings top-up', a new in-work benefit for single people or couples without children (in work benefits already exist for low paid workers with dependent children) is being piloted for three years from October 1996 in a range of local labour markets, and a rigorous evaluation will be conducted. Back to text
46. See Meager (1993) and (1996) for summaries of these evaluations. Back to text
47. There has been an expansion of such programmes in Germany, particularly as part of the strategy to combat unemployment and encourage new enterprises in East Germany. Back to text
48. See Storey (1994) pp 277-286.Back to text
49. Much of which has been extensively summarised in Atkinson and Micklewright (1991). Back to text
50. For a systematic review of the relationships between unemployment compensation systems and labour market transitions, see Schmid and Reissert 1996. Back to text
51. Such an approach is currently being piloted in the UK, in the form of the Project Work Pilots. Back to text
52. Their study does not, however, focus purely on youth measures. Back to text
53. Under this typology, the intermediate labour market initiatives discussed in the present paper, would presumably fall at an intermediate point along this spectrum. Back to text
54. An exception is Dolton and O'Neill (1996) who look at job stability, in the context of the UK 'Restart programme', with somewhat pessimistic results. Back to text
55. The current Project Work pilots in the UK might be an appropriate example. Back to text
56. Arguably at least, the Scandinavian experience, with the development of a group of long-term unemployed who move repeatedly between open unemployment and active measures (with the latter being primarily a benefit requirement), is consistent with this view. Back to text
57. Such wider objectives, including the regeneration of local communities, are frequently an integral part of the 'intermediate labour market initiatives' discussed earlier in this paper. Back to text