The employment and unemployment effects of Finnish active labour market programmes

Abstract

The persistence of high unemployment has placed increasing stress on the role of active labour market policies. They have been seen as the main policy tool in moving individuals from income support to employment. This thesis attempts to evaluate the effectiveness of active labour market policy in fulfilling the difficult task given to it. This is done by empirically exploring the impact of active labour market programmes on the overall level of open unemployment, participants' repeat unemployment incidence and their subsequent employment record. By this means, the thesis examines the achievement of both macroeconomic and individual goals given to active labour market policy. The main finding running through all chapters, and consequently through different estimation methods, samples and aggregation levels, is that active labour market policy improves the employment performance of the economy but it can help only so far as it goes. The beneficial effect remains far too limited to bring down the current high levels of unemployment or to wipe out the gap in labour market possibilities prevailing between advantaged and disadvantaged individuals. This is not to say that active labour market policy would not be useful in conjunction with other policies affecting unemployment, but without any support its effects will remain modest