How effective are active labour market policies and public employment services? lessons for Latin America and the Caribbean

Active Labour Market Policies/Programmes (ALMPs) include a range of programme types and interventions, including training, employment incentives, direct job creation and subsidised employment . In addition, one of the most prominent ALMPs is a Public Employment Service (PES 1 ). The services provided by PES vary across countries but typically involve ‘intermediation’ services for employers and jobseekers , dissemination of labour market information and they may also play a role in coordinating other ALMPs, for example by commissioning specific training programmes and referring jobseekers to them. ALMPs can be contrasted with ‘passive’ labour market measures which involve the provision of various forms of welfare payments related to unemployment . Again, these vary f rom country to country but might include contribution funded unemployment benefits or redundancy payments and non-contributory cash transfers. In some countries PES have a role in the administration of these payments and may be involved in combining active and passive measures; as in the case where they ensure that passive beneficiaries receive intermediation or demonstrate that they meet ‘conditional - ities’ by performing job search activities or undertaking training. This latter function is more frequent where passive measures are more generous and can offset economic incentives to work. In Latin America and the Caribbean (LAC), most countries have a PES and many countries invest in a range of ALMPs , especially training programmes targeted at young people. Many countries have historically had contributory unemployment benefits but only more recently introduced non-contribu - tory cash transfer schemes which are typically not closely integrated with PES or AMLPs. Nevertheless, spending on both passive and active measures in LAC typically lags OECD averages . There is now a significant body of literature evaluating ALMP and PES effectiveness and a range of high-quality cross-country studies, systematic review and meta-analyses which summarise this litera - ture and evidence base. Despite apparently ‘mixed’ results, the consistent message that arises is that some ALMPs do work where they are well targeted, designed and funded . The empirical evidence is complex and nuanced but does broadly follow the theory: whether ALMPs work effectively is a mat - ter of being adequately funded, well-designed, appropriate participant selection and their fit with the relevant socio-economic context.
The evidence also suggests some patterns in the relative effectiveness of different forms of ALMP. PES intermediation services tend to have small positive short-run impacts consistent with their low cost and duration. Training often has negative short-run effects because of lock-in during par - ticipation, but where longer-term measurements are available these often show effects turning positive (e.g. after a year or more). Again, this is consistent with their more substantive effect on skills formation. For the LAC region positive impacts include increased employment formality . Other programme types have more variable results and there are smaller numbers of studies to draw on. This evidence suggests that the key policy question is not ‘are ALMPs effective?’ but ‘how can ALMPs be designed to meet the needs of specific groups of participants and how might this be impacted by context?’ . On this second question, there are strong clues in the literature if not definitive answers. What stands out f rom this evidence is that the answers tend to follow theory. Well designed and well-funded programmes are more effective . Programmes that meet jobseeker (including between different social groups) and employer needs are more effective. This makes specificity in programme design and participation selection hugely important. Alignment between ALMPs and their context matters . As a simple example, training programmes need to meet the current skills needs of employers and recognise the existing skills of participants. Moreover, ALMPs will work differently in times of growth and surplus employment than they will in times of recession and surplus labour supply. As such, ALMP implementation should include ongoing performance management and evaluation in a way that helps policy makers, practitioners and stake - holders understand and monitor changing programme effectiveness and make iterative programme design changes as the evidence changes.