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Active Labor Market Programs & Activation Policies

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Active Labor Market Programs (ALMPs) have two basic objectives: (i) economic, by increasing the probability of the unemployed finding jobs, productivity and earnings; and (ii) social, by improving inclusion and participation associated with productive employment. As a consequence, they can contribute to increase employment opportunities and address the social problems that often accompany high unemployment. In addition, ALMPs are also widely used to cushion the negative effects of industrial restructuring in transition economies and help to integrate vulnerable people furthest from the labor markets. They are considered "active" programs in contrast to "passive" measures such as unemployment insurance or social transfers designed to mitigate the financial hardships of the unemployed. ALMPs include a wide range of activities to stimulate employment and productivity such as:

  • increasing the quality of labor supply (e.g. retraining);
  • increasing labor demand (e.g., public works projects); or
  • improving the matching of workers to jobs (e.g., job search assistance).

Activation policies encourage certain unemployed individuals to step up their job search after an initial spell of unemployment, with a later obligation to participate in various programs. Eventually, the activation principle makes receipt of benefit conditional on participation in programs, in the process shifting the balance between the rights and obligations of the unemployed.

Good activation policies involve:

  • Improving personal, social and vocational skills and competencies and enabling social integration;
  • Individual and flexible offer acknowledging diversity (age, experience) and relevant to the individual’s needs, wishes, and priorities;
  • Involving the resources and strengths of the beneficiary;
  • Networking with labor market services, social services, health services, housing sector, communities, etc.;
  • Cooperation and interaction between the beneficiary and the agency in the activation’s planning, design and implementation.

 The Labor Markets Group specializes in program design and evaluation techniques for employment services, training, and job creation/maintenance schemes. Activation policies include a range of new management approaches and services for the unemployed, and the Labor Team is working on an inventory (database) of employment legislation and employment services in middle and low income countries, associated with activation policies.

Related Employment Policy Primer Papers ¦ Related Employment Policy Primer Note ¦

Related Employment Policy Primer Papers

Employment Services and Active Labor Market Programs in Eastern European and Central Asian Countries (736kb pdf)
Social Protection Discussion Paper No. 0918; Publication Date: 10/09
by Arvo Kuddo
The objective of this paper is to look at employment services and labor market policies in the transition countries of Eastern Europe and Central Asia, and identify key benefits and constraints of active labor market programs, as well as the main characteristics and features of successful policy interventions. Various policy options are discussed on how to enhance public employment services but also private employment agencies which might be relevant to and suitable for the countries in the region given their macroeconomic and labor market situation. Overall, this report recommends that greater resources will be needed for active labor market programs (ALMPs) in the future. However, the emphasis should be put on improving the design and effectiveness of ALMPs, rather than on increasing spending levels only.

Structural Educational Reform: Evidence from a Teacher’s Displacement Program in Armenia (176kb pdf)
Social Protection Discussion Paper No. 0902
Arvo Kuddo
January 2009

This paper reviews the experience of Armenia with the displacement of more than 7,000 teachers during 2003–07 as part of structural reforms in general education.  In addition to supplementary severance payments, a variety of services were needed to address difficulties commonly experienced by displaced employees, including job search assistance and counseling services, provision of information on the labor market, on legal rights of job seekers, on services and service providers available, including training, relocation assistance, and so forth.  The findings of the paper suggest that the staff rationalization program has resulted in significant efficiency gains: the student-teacher ratio increased from 10.8 in 2003 to 13.9 in 2006.  The considerable reduction in staff positions has allowed the government to significantly increase nominal wages and salaries for teaching and non-teaching staff.

Impacts of Active Labor Market Programs: New Evidence from Evaluations with Particular Attention to Developing and Transition Countries (578kb pdf).  Executive Summary also available in  French (63kb pdf) and Arabic (73kb Word)
Social Protection Discussion Paper No. 0402
Betcherman, Gordon; Olivas, Karina; Dar, Amit
January 2004

In this paper, we provide an overview of the recent international experience with active labor market programs (ALMPs). Basing our evidence on the growing body of program evaluations, the authors focus on the impacts of ALMPs on the subsequent employment and earnings of participants. This paper provides an update to earlier assessments (e.g., Fay, 1996; Dar and Tzannatos, 1999; Martin, 2000; Martin and Grubb, 2001) by incorporating the results of the more recent program evaluations. It also extends these previous reviews by explicitly considering the impacts of ALMPs in developing and transition countries. While most rigorous program evaluations continue to be undertaken in industrialized countries, for the first time the authors now have a significant number of evaluations from transition and, to a lesser extent, developing countries.

Active Labor Market Programs: Policy Issues for East Asia (115kb pdf)
Social Protection Discussion Paper No. 0005
Betcherman, Gordon; Dar, Amit; Luinstra, Amy N.; Ogawa, Makoto
January 2000

A review of international experience with active labor market programs (ALMPs) and discussion of applicability to five East Asian countries: Indonesia, Korea, Malaysia, the Philippines, and Thailand, many of which implemented one or more of these programs in response to the crisis. This paper outlines key policy issues for post-crises active labor market programs.

 Active Labor Market Programs: A Review of the Evidence from Evaluations  (228kb pdf)
Social Protection Discussion Paper No. 9901
Dar, Amit; Tzannatos, P. Zafiris
January 1999

A survey of evidence based on 100 evaluations of active labor market programs, most from OECD countries. Though lessons from developed countries may not be directly applicable to developing countries, it is unlikely that these programs will be more successful in developing countries given the scarcity of administrative capacity for implementation.

Evaluating the Impact of Active Labor Programs: Results of Cross Country Studies in Europe and Central Asia  (137kb pdf)
Social Protection Discussion Paper No. 9915
Fretwell, David; Benus, Jacob; O'Leary, Christopher
June 1999

This study addresses the economic agenda of ALPs and was designed to answer the question: do active labor programs have a significant positive impact on employment and earnings, and if so for whom? This question is of considerable interest to middle income countries, which have limited resources to allocate to competing development priorities, as well as bilateral and multilateral development agencies. In addition, while there are findings from OECD research indicating that well targeted and designed ALPs may have positive impacts, there is little information available to indicate that such findings can be applied to middle income and transition economies.

Related Employment Policy Primer Note

"Active Labor Market Programs: Impact Evaluation Techniques"
Available in English (200kb pdf), French (202kb pdf) and Spanish (200kb pdf)
Employment Policy Primer Note No. 2, December 2002

"Public Employment Services: Functions and Innovations" (67kb pdf)
Employment Policy Primer Note No. 3, September 2003