Active Labour Market Policies: empirical evidence and Spain

The aim of this post is to show some empirical evidences of the Active Labour Market Policies (ALMP) in developed countries. It is considered that ALMP are designed to readdress the labour market imperfections and smooth the career transitions between employment-unemployment processes.

On the other hand,  it is highlighted the lack of ALMP evaluations in Spain despite the fact that the public expenditure is 0,9% of the national GDP (OECD 2011).

ALMP EXPENDITURE IN SPAINLast but not least, the regional elections are forthcoming. The ALMP policies are totally transfered to the Autonomous Comunities so it is considered important to rotate from an intuitive and liberal employment policy to another one based on the empirical evidence and the Labour Market Institutions.

The ALMP are a set of interventions aimed to increase the probability of reemployment of unemployed workers and reduce the risk of losing the job in the case of the employed workers (Cueto & Suarez 2014). An expansive definition may include those actions for workers who want to improve their labour condition and are looking for a new job or acquiring new competences (long life learning approach).

A broader approach to summarize the ALMP should include (Cazes & Verick 2013):

  1. Job Search Assistance / other employment services
  2. Training schemes
  3. Job / wage subsidies
  4. Public Employment Programmes
  5. Entrepeneur Incentives

In Spain, the ALMP provision is competence of the Regional Employment Services of the Autonomous Communities. The SOIB is the public body entitled to develop the ALMP in the Balearic Islands.

The importance of ALMP such as job search assistance, training, wage subsidies, and direct job creation in the public sector are a key element of European countries’ efforts to combat unemployment (Kluve 2010). The convenience of assess the effectiveness of the ALMP becomes more relevant in a context of scarce resources and budget constraints due the economical downturn of the last years.

Apart from some highlighted exceptions such as the studies carried by Alegre (2010), Arellano (2010), Borra & others (2012), Toharia & others (2008) or Suarez & Mayor (2012) there is a lack of evaluations focused on ALMP in Spain. In fact, one of the seminal papers in this topic, which is the meta-analysis review of ALMP evaluations conducted by Card, Kluve & Weber (2010) , only considered three Spaniard studies.

The point is that Spain is spending a huge amount of money in ALMP and there is not an employment policy based on evidence neither a transparent access to the microdata that permit researchers to analize the impact of the ALMP. Nonetheless, the Spanish Employment Strategy (EEE) has developed a set of tools to monitor the ALMP,  but it does not include effectiveness and efficacy indicators for each Regional Employment Service neither for each ALMP paid by public funds.

Furthermore, all the different measures considered in the EEE do not take into account any sort of Control groups or Instrumental Variables that could overcome endogeneity problems when you are assessing the impact of the ALMP.

There are some different methodologies to use when you want to know the impact of ALMP. The most suitable for quasi-experimental data are Matching, Regression, Regression Discontinuity, Instrumental Variables and Difference in Differences (Verick, 2013). Indeed, the meta-analisys of Card, Kluve & Weber (2010) found that the covariate adjustment method for the overall sample of 199 studies was the matching methodology in the 50,8% and the rest of the studies were based on regression models.

In plain English; a matching methodology means go to hell and spend several months before you can conclude something in terms of impact evaluation. So maybe it is time to open the databases of the regional employment services to the researchers and try to promote ALMP assessments in a coordinate way like other European Employment Bodies do.

The nitty gritty of this post is the empirical evidence of the ALMP. Even though the regional specificity of the Labour Market and the country particularities of Labour Market Institutions, the literature shows some common results in developed countries that help to understand better the importance and usefulness of ALMP.

The starting point is the research of Card, Cluve & Weber conducted in 2010. This meta-analysis of microeconomic evaluations of ALMP used a refined sample of 97 studies conducted between 1995 and 2007 in many different countries. Another important studies to take into account are provided by Betcherman, Olivas and Dar (2004), Kluve and Weber (2010) and Kluve (2006)

The main conclusions are:

  1. Job searching assistance, counselling / meeting case, achieves positive impacts in the short run. This is the cheapest ALMP but requires solid Employment Services and the effect can be limited when cyclical unemployment is high due an economic downturn or when job offers do not flourish.
  2. Training programmes achieve positive impacts in the medium run and long run more than in the short run. The main risk is the lock-in effect and the failure in the design of the programme due an inappropiate contents or  the absence of training activities on the job.
  3. Subsidized employment has not a significant impact. The deadweight loss and substitution effect are present in the literature review. However, this is the ALMP which captures the higher ratio of the Spanish ALMP Budget.
  4. Public Employment Programmes has not significant impact in improving the employment outcomes of the participants after their participation. It is a clear social protection scheme but the empirical evidence does not justify this ALMP in terms of long term employment outcomes unless the programme includes training components. However, this is one of the main ALMP used during the economical crisis in Spain (Plan E or the ancient programme defined as ¨Colaboraciones sociales¨)
  5. Entrepeneurship Incentives has a positive effect in older unemployed workers and well educated but must be balanced with the bussiness rate of survival. More impact evaluation research in this field must be done due the development stage of this ALMP in Spain.
  6. There is not significant evidence of differential effects on men versus women, so the effect of the ALMP are not biased for gender which is a good news because it means that the effect of the ALMP (positive or negative) affects in the same way to women or men.
  7. ALMP tailored to the youth are performing worse than ALMP designed for general unemployers. The evidence suggest the importance of promoting preventive actions with a wider scope than the ALMP such as Education and Social Inclusion.

To sum up, the real challenge is to be able to develope a comprehensive system that take into account the economic features of the Balearic Islands and also look for the impact evidence of the ALMP. This system will help the policymakers to take right decisions and will make worthy the public money. It is time to invest in a new generation of tailored ALMP that responds positively the needs of the labour market and above all, designed in line with the empirical evidence.

Now. The politicians have the floor.

Food for brain

Alegre, J. (2010): “Valoració de l’efecte sobre la inserció laboral dels cursos de formació professional dirigits a persones en atur”, col·lecció d’Estudis Laborals núm. 9, OTIB

Arellano F. (2010) Do training Programmes get the unemployed back to work? A look to Spanish Experience. Revista de economia aplicada. No 52.

Card, D., J. Kluve, and A. Weber (2010): “Active labor market policy evaluations: A meta analysis.” Economic Journal 129 452–477.

Cazes, S. & Verick, S. (2013). Perspectives on Labour Economics for Development. ILO, Geneva.

Cueto, B. & Suarez P. (2014): “ A review of active and passive labour market policies in Spain” MPRA

Kluve, J. “The effectiveness of European active labor market programs.” Labour Economics 17 (2010): 904–918.

Suárez, P., Mayor, M. and Cueto, B. (2012): “The accessibility to employment offices in the Spanish labor market”. Papers in Regional Science, 91(4), 823-848.

Suárez, P. and Mayor, M. (2012), “La intermediación laboral del Servicio Público de Empleo en España: un análisis regional con los datos del SISPE”, Revista del Ministerio de Trabajo e Inmigración, Serie Economía y Sociología, 96, pp. 175-194.

Rosholm, M. (2014) “ Do case workers help the unemployed?” Iza World of Labor

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3 respuestas a Active Labour Market Policies: empirical evidence and Spain

  1. Ney dijo:

    Para desarrollar y crear nuevas PAMT necesitamos conocer el impacto de las anteriores y si realmente funcionan, por eso, es tan importante la evaluación de las mismas.
    Parece que desde la UE han tirado de las orejas a España ya que empiezan a exigir a las CCAA. Es necesario un cambio en la planificación de acciones, ya que debe fundamentarse en lo que se ha comprobado que es un éxtio y dinamiza verdadermente el mercado laboral.

  2. Pingback: More on ALMP Evidence: keeping focus on it | treballaire

  3. Pingback: É urgente investir numa nova geração de medidas activas de emprego que respondam positivamente às necessidades do mercado de trabalho | A Minha Carreira

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