Active Labour Market Policy in the European Union

This report deals with Action 5 of the White Paper Follow-Up process and analyses feasible steps or improvements already undertaken by Member States and the Community at large to "make better use of public funds for combating unemployment". Public funds devoted to labour market policies play a vital role in achieving employment intensive growth. The White Paper on Growth, Competitiveness and Employment of the Commission of the European Communities proposes a full-scale overhaul of employment policies and a shift of the balance of public expenditure decisively in favour of active labour market policies. Part one of the report approaches in a more analytical way the dynamics of active labour market policies in the Member States. On the basis of the concept of active versus passive expenditure the current balance and recent shifts in this balance are compared across European Union Member States. Along the line of OECD-definitions and data collection efforts of active and passive public expenditure a comparative assessment of overall public expenditure and selected subject areas is accomplished. Particular attention is devoted to (1) funds allocated to public employment services, (2) public expenditure devoted to the integration of the young and (3) the long-term unemployed. Micro-level evaluations of active labour market policies on both the national level and through the Communities ERGOprogramme have shown that income maintenance components of active measures are an important "sine qua non" condition for active labour market policies to succeed. However, there exists an intrinsic incentive versus obligation trade-off for the level of compensation while participating in a programme. In a second part possible priority areas for more active labour market policies are identified. Improved counselling and assistance to job-search efforts can reasonably be expected to have the most immediate effects on reducing unemployment compared to training or job creation programmes. Direct job creation programmes will continue to play a role in getting people back to work, mainly for the long-term unemployed. However, the "additionality principle" for such public programmes, i.e. not to create unfair competition to private sector firms, needs to be respected. The concluding remarks stress the eminent role of active labour market policies in addition to macro-economic policies to work against exclusion within and from the labour market. The design of new labour market policies or the revision of already operational policies have still some scope to be better targeted and work more stringently toward the equalisation of labour market opportunities for women, members of ethnic minorities and handicapped people.