Swedish active labour market programmes in the 1990s: overall effectiveness and differential performance

The 'Swedish model' of active labour market programmes is investigated in relation to some crucial institutional features with two aims: examining how successful it has been in the context of the high unemployment atypically experienced by Sweden in the 1990s and trying to derive some general lessons as to which type of programme works best. The effectiveness of the programmes in improving the labour market prospects of unemployed participants is assessed in terms of their impact on individual employment probability and collection of unemployment benefits over time. The evidence as to the overall effectiveness of the programmes is rather mixed, with individuals joining a programme subsequently enjoying higher employment rates but also a higher probability of drawing unemployment benefits over time than if they had searched longer in open unemployment. The renewed eligibility to unemployment compensation following participation in a programme appears to be a most critical driving force behind these results. In fact, when comparing the programme effects for individuals entitled to unemployment benefits to the programme effects for non-entitled individuals, the positive effect on participants' employment prospects disappears, being instead replaced by a much higher probability of benefit collection. Still, the various programmes may have differential effects, making it interesting to quantify the relative performance of the six main types of Swedish programmes that were available to adult unemployed workers entitled to unemployment benefits in the 1990s: labour market training, workplace introduction, work experience placement, relief work, trainee replacement and employment subsidies. The best performer is by far employment subsidies, followed by trainee replacement. The main finding that those programmes most similar to regular employment rank unambiguously highest has however to be appraised in the light of the macroeconomic literature, which has documented large and negative displacement and dead-weight effects exactly for these types of programme

Employment Retention and Advancement (ERA) demonstration: The impact on workers outcomes, DWP Research Report 759

The Employment Retention and Advancement (ERA) intervention was explicitly intended and designed to make a difference once participants were in work; evidence on its impact on the retention and advancement of its intended beneficiaries - i.e. workers - is thus of critical interest. This report analyses the impact that ERA has had on a variety of outcomes experienced by working members of the New Deal for Lone Parents and Working Tax Credit target groups, as well as on the tax year earnings of working members of the New Deal 25 plus target group. Impacts on workers’ outcomes have been assessed both while the programme was in operation and afterwards. Findings relating to the later point in time are of special policy interest, as they are the ones relevant for judging whether ERA’s impacts on workers have been maintained or else have quickly faded once the in-work assistance and financial incentives were withdrawn

The returns to education: a review of the empirical macro-economic literature

The idea of positive educational externalities is that the benefits of individually acquired education may not be restricted to the individual but might spill over to others as well, accruing at higher aggregation levels, in particular at the macro-economic one. We offer an extensive summary and a critical discussion of the empirical literature on the impact of human capital on macro-economic performance, with a particular focus on UK policy. Key findings include: (1) Taking the studies as a whole, there is compelling evidence that human capital increases productivity. Although there is an important theoretical distinction between the augmented neo-classical approach and the new growth theories, the empirical literature is still largely divided on whether the stock of education affects the long-run level or growth rate of the economy. A one-year increase in average education is found to raise the level of output per capita by between 3 and 6 percent according to augmented neo-classical specifications, while it would lead to an over 1 percentage point faster growth according to estimates from the new-growth theories. (2) Over the short-run planning horizon (4 years) the empirical estimates of the change in GDP for a given increase in the human capital stock are of similar orders of magnitude in the two approaches. (3) The impact of increases at different levels of education appear to depend on the level of a country’s development, with tertiary/higher education being the most important for growth in OECD countries. (4) Education is found to yield additional indirect benefits to growth (in particular, by stimulating physical capital investments and technological development and adoption). More preliminary evidence seems to indicate that type, quality and efficiency of education all matter for growth. The most pressing methodological problems are the measurement of human capital; systematic differences in the coefficient of education across countries (in particular between developing and developed countries) and reverse causality. We also make recommendations for future research priorities

Ethnic parity in labour market outcomes for benefit claimants

A significant gap exists in the UK between the employment rate for Ethnic Minorities and that for Whites. From a policy perspective, it is important to know whether this gap is due to differences in the characteristics of White and Ethnic Minority groups (which reduce the employability of Ethnic Minority groups relative to Whites) or whether it results from some form of discriminatory behaviour in the labour market. In this paper, we use administrative data to estimate ethnic differences in employment and benefit receipt amongst individuals who began claiming a Jobcentre Plus benefit in 2003. In contrast to much of the previous UK literature, we use a number of different quantitative techniques to estimate this gap, and show that in a lot of cases the estimates obtained are very sensitive to the techniques used. We argue that for the questions we are interested in and the data we have, propensity score matching methods are the most robust approach to estimating ethnic parity. We compare this preferred approach with estimates derived using alternative approaches commonly used in the literature (generally regression-based techniques) to determine the extent to which more straightforward methods are able to replicate those produced by matching. In many cases, it turns out not to be possible to calculate satisfactory quantitative estimates even with matching techniques: the characteristics of Whites and Ethnic Minorities are simply too different before the Jobcentre Plus intervention to reliably estimate the parameters of interest. Moreover, for a number of the groups, results seem to be very sensitive to the methodology used. This calls into question previous results based on simple regression techniques, which are likely to hide the fact that observationally different ethnic groups are de facto being compared on the basis of parametric extrapolations. Two groups for which it was possible to calculate reasonably reliable results are incapacity benefit (IB) and income support (IS). For these groups we find that large and significant raw penalties almost always disappear once we appropriately control for pre-inflow background and labour market characteristics. There is also a good degree of consistency across methodologies

The human capital transition and the role of policy

Along with information and communication technology, infrastructure, and the innovation system, human capital is a key pillar of the knowledge economy with its scope for increasing returns. With this in mind, the purpose of this chapter is to investigate how industrialized economies managed to achieve the transition from low to high levels of human capital. The first phase of the human capital transition was the result of the interaction of supply and demand, triggered by technological change and boosted by the demands for (immaterial) services. The second phase of the human capital transition (i.e., mass education) resulted from enforced legislation and major public investment. The state’s aim to influence children’s beliefs appears to have been a key driver in public investment. Nevertheless, the roles governments played differed according to the developmental status and inherent socioeconomic and political characteristics of their countries. These features of the human capital transition highlight the importance of understanding governments’ incentives and roles in transitions