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

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

The Ñ“wedish 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 en Titled 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.

An evaluation of the Swedish system of active labour market programmes in the 1990s

The low unemployment rates traditionally enjoyed by Sweden have often been attributed to the country's extensive system of active labour market programmes, which have thus frequently been regarded as a model for other countries to emulate. However, unemployment grew enormously in Sweden when the country was hit by a most severe recession in the early 1990s. This paper investigates how effective the Swedish labour market programmes have been in improving the opportunities of unemployed individuals over the last decade. The analyses look at the performance of the Swedish system in its entirety, combining all the programmes into one and focusing in particular on the interactions between the unemployment benefit system and the programme system. In fact, a labour market programme in Sweden effectively comes as a bundle of two conflicting components: it is intended to equip job-seekers with marketable skills which should improve their opportunities on the labour market, but at the same time it allows to renew eligibility to generous unemployment compensation, thus reinforcing the work disincentive associated with the unemployment insurance system. Using extensive information on the labour market history of more than 110,000 individuals followed for five years, the presence of short- and long-term programme effects is investigated in terms of a number of outcomes, including employment and unemployment benefit collection. More specifically, the analyses relate to how unemployed individuals joining a programme per-form, on average, compared to a hypothetical state where they would have waited longer job-searching in open unemployment. Overall, the impact of the programme system is found to have been mixed. Unemployed individuals who go sooner on a programme (compared to later or never), though remaining initially locked-in in the unemployment system for around six months, subsequently enjoy a higher probability of being in employment for up to at least five years. By contrast, the fact that programme participation en Titles individuals to renewed unemployment compensation creates strong incentives to remain within the official unemployment system. Individuals who have joined a programme are thus found to be more likely to return to benefit-compensated un- employment, to re-enter more programmes in the future, or to alternate between benefits and program participation over time than if they had searched longer as openly unemployed. The positive effect on employment does in fact arise because the programmes considerably reduce the chances of being unemployed outside the official unemployment system.Active labour market programmes, evaluation

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

Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS

Regression, matching, control function and instrumental variables methods for recovering the impact of education on individual earnings are reviewed for single treatment and sequential multiple treatments with and without heterogeneous returns. The sensitivity of the estimates once applied to a common dataset is then explored. We show the importance of correcting for detailed test score and family background differences and of allowing for (observable) heterogeneity in returns. We find an average return of 27% for those completing higher education versus anything less. Compared to stopping at 16 without qualifications, we find an average return to O-levels of 18%, to A-levels of 24% and to higher education of 48%.

The Role of Credit Constraints in Educational Choices: Evidence from NCDS and BCS70

Education