EVALUATING ACTIVE LABOUR MARKET POLICIES: EVIDENCE FROM SWITZERLAND

What kind of active labour market policies are the most effective at increasing the reemployment chances of the unemployed? Writing in the la test issue of the Economic Journal, Professors Michael Gerfin and Michael Lechner evaluate a range of programmes launched by the Swiss government in 1996. Their research suggests that wage subsidies for temporary jobs are the most successful, while employment programmes (job creation schemes) and vocational training programmes may not only be ineffective: they may even have negative effects.

Unemployment increased dramatically in Switzerland in the first half of the 1990s. The government’s ambitious response encompasses a large variety of continuing programmes, intended to increase the re-employment chances of the unemployed:

• Vocational training programmes, which encompass language courses primarily aimed at foreigners, further vocational training, and computer courses.
• Employment programmes very similar to those in other European countries, such as Germany and Sweden. The jobs in these programmes are offered by non-profit organisations, which must not be in competition with private sector firms; and wages are fully paid by the placement office.
• A rather unusual wage subsidy programme for temporary jobs. The immediate objective is to encour age job seekers to accept offers for temporary jobs that pay less than their unemployment benefits by overcompensating the difference with additional payments from the unemployment insurance system. This makes the programme financially attractive for both the unemployed and the placement office. In contrast to wage subsidy programmes in other countries, the subsidised jobs are expected to be temporary and intended as stepping stones to permanent employment. And unlike the temporary jobs employment programmes, they are not in a sheltered part of the labour market.

The researchers’ evaluation shows that the subsidised temporary job is the most successful programme. Indeed, it is the only programme that increases the reemployment probability of its participants.

In contrast, employment programmes reduce re-employment probabilities compared to the wage subsidy and to not participating in any programme. These results indicate that the more regular work the participants are doing, the better the programme.

Vocational training programmes have a mixed performance. Although none of the programmes have a positive effect, further vocational training and computer courses do not look bad. In contrast, language courses appear to have negative effects.

The research also shows that it is a bad idea to send the unemployed to any programme in the initial stage of an unemployment spell. The reason for this clear: the chances of finding a job are best at that stage, and programme participation compromises those chances.

ENDS

Notes for Editors: ‘A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland’ by Michael Gerfin and Michael Lechner is published in the October 2002 issue of the Economic Journal.

Gerfin is at the University of Bern; Lechner is at the University of St. Gallen.

For Further Information: contact Michael Lechner on +41-71-224-28-14 (email: Michael.Lechner@unisg.ch); or RES Media Consultant Romesh Vaitilingam on 0117- 983-9770 or 07768-661095 (email: romesh@compuserve.com).