Active labour market policies (Core element 7 of the Global Employment Agenda

1. Active labour market policies (Core element 7 of the Global Employment Agenda Presented by Mostefa Boudiaf Turin, 9 July 2007 Prepared by Maria Sabrina De GobbiILOEmployment Policy Unit - Employment Strategy Department « Trade Union Training on Employment Policies with a focus on Youth Employment »

2. 2. ILO legal instrument of reference:Convention No. 122 of 1964 What: It deals with employment policies and urges governments of ratifying countries to formulate and implement, in close collaboration with the social partners - employers and workers - an active policy promoting full, productive and freely-chosen employment. How: Governments report regularly to the ILO on national efforts to meet the obligations set by the Convention and the results achieved. The ILO studies the reports and recommends appropriate measures to strengthen the policy impact on the labour market.

3. 3. Labour market policies:Active and passive Active labour market policies: comprise a range of policies to improve the access of the unemployed to the labour market, such as • employment search assistance; • labour market training; • subsidized employment, • public works; • assistance to self-employment initiative. Passive labour market policies: consist of income transfers that compensate earnings loss experienced by certain individuals or groups in the labour force, such as • unemployment benefits (UBs); • early retirement compensation.

4. 4. ActiveLabour market policies:Global spending on (ALMPs) in the world Industrialized countries: on average over 8 per cent of the labour force in 2000 with country differences ranging from 2 per cent in the U.K. to 22 per cent in Denmark. Transition countries: highest in Estonia, Hungary and the Russian Federation reaching 25 per cent. Large variations from country to country. Latin America: about 5 per cent with large variations from country to country. East Asia: some countries have not developed proper ALMPs. Others use public works in particular. Figures on participation rates are not available.

5. 5.Active labour market policies:Global spending on ALMPs in the world European countries: In the nineties, about 1.2 per cent of GDP was spent on ALMPs. Transition countries: About 0.3 per cent of GDP was spent on ALMPs, but training usually falls under expenditure on education. Latin America: About 0.4 per cent of GDP is spent on ALMPs, with a large share of the budget used for youth training. East Asia: After the crisis of the late nineties, the Republic of Korea spent 0.3 per cent of GDP on ALMPs. Northern Africa: Algeria and Tunisia spend over 1 per cent of national GDP on ALMPs.

6. 6. Active labour market policies: Employment services What they are: offices facilitating the match between unemployed people and available positions. They best perform when they combine three tasks: • job placement (including through counselling and guidance); • benefit payments; • placing participants in active programmes. Job search assistance is one of the most cost-effective measures of ALMPs. Employment services are increasingly being: • decentralized; • contracted out; • transformed into self-service centres thanks to internet.

7. 7.Active labour market policies:Training OECD countries: evaluations of public training programmes show the different features of training in different countries and lead to mixed results for participants, sometimes even negative results. Increasing emphasis is being placed on life-long learning. Transition countries: training has been largely used to retrain and re-employ workers while moving from a planned to a market economy. Placement rates vary between 35 per cent in Bulgaria to 90 per cent in the Russian Federation. Latin America: training has been used especially for the youth through programmes combining acquiring skills needed in the private sector and work experience in private jobs subsidized by the Government. East Asia: training is usually financed by the Government and increased after the financial crisis of 1997. Africa: training is being organized for the youth, to teach skills in SMEs and for the informal sector.

8. 8. Active labour market policies:Public works They are jobs created in the public sector by municipalities and have a socially beneficial role. They can be used as • a reintegration tool (OECD and transition countries); or • an anti-poverty tool (developing countries). OECD countries: public works were very popular in the eighties, but after evaluations giving negative results, have been considerably cut down. Transition countries: evaluations have given rather discouraging results showing that less than 10 per cent of individuals employed in public works manage to obtain a regular job afterwards. Short-term public works are not perceived as attractive. Latin America: public works have not given positive results. Some programmes of this type have been closed down. They are mostly used as an anti-poverty tool. East Asia: public works are the most used ALMP. They have been increasingly used after the financial crisis of 1997 as an anti-poverty tool. Africa: public works are in use in all countries, especially during periods of economic downturns and natural disasters.

9. 9.Active labour market policies:Employment subsidies They are used for vulnerable groups. They can be: • short-term or long-term; • tax exemptions from social security payments or tax payments. OECD countries: employment subsidies are largely used despite mixed results. They discourage workers to look for a regular job, but they seem to favour the recruitment of the long-term unemployed and they are more effective than public works. Transition countries: they are largely used with good results (about 50 per cent of beneficiaries obtain a regular job). Some programmes have been interrupted due to the lack of funds. Latin America: they are used for specific sectors (forestry and SMEs). • East Asia: they are used only in Malaysia, the Republic of Korea and the Philippines. They are not common because of their high cost.

10. 10.Active labour market policies:Self-employment and small enterprise creation To be successful, these programmes must be targeted at the short-term unemployed and rather well-educated individuals. They must include counselling and mentoring besides financial support. OECD countries: such programmes show good results with a survival rate of 50-70 per cent after three years. They also seem to be highly cost effective. Transition countries: they are not very common. The main difficulty is access to credit. Latin America: although the SMEs sector is very wide, governments provide little support for self-employment. East Asia: support to self-employment is provided mainly through facilitating access to credit.

11. 11.Active labour market policies: Targetting specific groups Employment promotion programmes and ALMPs often target specific vulnerable groups, such as: • youth; • women; • the very poor; • the disabled; • retrenched workers.

12. 12. Employment promotion policies in Egypt:from informal to formal employment Since 2001, the Egyptian Government has launched a job-creation programme to promote youth formal employment, with the following characteristics: • microloans under favourable conditions; • for already-existing handicrafts enterprises; • to recruit young employees formally.

13. 13.Employment promotion policies in Egypt:from informal to formal employment: Some additional information: For a 10,000 Egyptian pound loan, one young person must be hired formally (loan = 40,000 Egyptian pounds = 4 people hired formally). Usually, most formally recruited persons were already working in the enterprise informally.

14. 14. Employment promotion policies in Brazil:A job for young first-job seekers In October 2003, the President of Brazil launched an employment programme for young first-job seekers with the following characteristics: • low-skilled young people aged 16-24 from poor families; • in need of a first job; • may register their names in local public offices; • where enterprises provide a list of their vacancies.

15. 15. Employment promotion policies in Brazil:A job for young first-job seekers Some additional information: Local public offices provide enterprises with a list of job-seekers for available positions, but enterprises themselves select candidates proposed. Salaries of new young employees under this programme are subsidized by the State. In three months (October-December 2003) 2,000 positions were made available.

16. 16.Employment promotion policies in Chile:Matching training programmes to the needs of enterprises In 1991, the Chilean Government launched a large training programme for the promotion of youth employment with the following characteristics: • young people preferably aged 16-24 from poor families; • in need of a job; • may register their names in local public offices; • to participate in training programmes; • for both waged employment and self- employment.

17. 17.Employment promotion policies in Chile:Matching training programmes to the needs of enterprises Some additional information: Besides theoretical courses, training programmes also consist of practical experience in private firms for at least three months. Training institutions are private entities selected through public tenders. Training institutions are responsible for establishing contacts and making arrangements with private enterprises for internships. Some 60 per cent of young participants find a job after training.

18. 18.Employment promotion policies in China:focusing on re-employment Since1997, the Chinese Government has launched some re-employment programmes for laid-off workers from State-owned enterprises with the following characteristics: • re-employment service centres have been established in all State- owned-enterprises; • re-employment training programmes have been set up; • training programmes to start a business have been organized; • community service employment opportunities have been promoted; • self-employment has been encouraged; • further assistance after the initial support of re-employment services has been provided. Some 65 per cent of laid-offworkers found a job after participating in re-employment programmes.