Building a resilient labour market after Covid-19, new study by FGB

FGB’s study Assessment of the effectiveness of active labour market policies in crisis and post-crisis situations for the European Training Foundation explores the potential of Active Labour Market Policies (ALMPs) to mitigate the impact of the pandemic on unemployment, and shape a green and digital recovery. The target audience of this report was policy makers in ETF Partner countries.

Active Labour Market Policies are government funded programmes to improve the employment options of participants. This can involve help with searching for a job, training, subsidies and direct public employment.

The pandemic has had a huge toll on labour markets across the world, with global working hours 4-5% lower in 2020 and 2021 compared to pre-crisis levels in 2019. To put this in context, a fall of 4.8% in working hours is equivalent to around 140 million full-time jobs. This impact has not been felt equally, with middle and lower income countries experiencing larger falls in working hours. Those in so-called low-skilled jobs and female workers have also experienced the largest rises in unemployment.

To understand how ALMPs can help, we looked into the second most recent economic crisis, that of 2008. In doing this we could see how ALMPs have become a more common tool in tackling labour market downturns. States are increasingly prepared to roll out income protection schemes to keep people in work. Training schemes focused on green recovery and digitalization are also helping to transfer workers from older sectors.

We found that different contextual factors impact the effectiveness of ALMPs. For example, a low income country is better placed to launch direct job creation, start-up incentives and training rather than large job search programmes. Direct Job creation and training are also better options during an economic downturn rather than job search services. Training policies can have the greatest long term impact and are best delivered alongside targeted job counselling.

In summary, Active Labour Market Policies are an increasingly common tool to mitigate employment downturns during crises and their recovery. This is reflected in increasing funding in this area, as well as the upscaling of schemes first launched during the 2008 global financial crisis for the pandemic. ETF partner countries can build on these developments by strengthening their own implementation structures to launch programmes for a green and digital recovery.

The study was written by Łukasz Sienkiewicz (University of Gdańsk) and Jack Harmsworth (Fondazione Giacomo Brodolini).

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