BOOK REVIEW IN ISSUES AND PROBLEMS IN CONTEMPORARY SOCIETY

Alex Christopher V. AgupeIII-21 BSE Social Science

BASIC INFORMATION OF THE BOOK

Title: Active Labour Market Policies

around the world:Coping with the consequences of

GlobalizationAuthor:Peter AuerUmit EfendiogluJanine Leschke

Copyright © International Labor Organization 2008First Published 20005

Second Edition published 2008

TABLE OF CONTENTS Introduction The ILO’s mandate for active policies The Historical background of ALMPs Definition and Functions of LMPs and ALMPs The contribution of ALMPs to the objectives of

employment creation, security in change, equity and poverty reduction.

Differences in the utiliztion of ALMPs: Developed, Transition and Developing countries

Financing ALMPs Evaluation ALMPs

ILO’S ROLE

ILO means International Labor Organization The solemn obligation of the ILO is further among the

nations of the world programmes which will achieve full employment and the raising of standards of Living and the prevention of unemployment and the provision of an adequate living wage

ILO advocates for the practice or implementation of Active Labor Market Policies

ILO believes that the adaptation of ALMPs as a policy could be the answer on the consequences of Globalization

Historical Background of ALMPs

ALMPs conceptualized and implemented in a large scale during:

o Great Depression in 1930s (Specific example: New Deal policy of USA)

o The Swedish model of Economic and Societal changes implemented in Sweden during 1950s

o Germany and France adapt ALMPs during 1970s because of Oil Price Hike in West Asia.

o When European Union was formed, ALMPs became part important policies to accompany structural change in EU economic sphere

During 1997, ALMPs became important and major part of European Employment Strategy (EES)

During 1990s, China adopt ALMPs as a permanent feature of their labour market governance.

LMPS LMPs means Labor Market Policies

Labor Market Policies are defined here as policies that provide income replacement and labor market integration measures to those seeking work, usually the unemployed, but also the underemployed and the employed who are looking for a Better job.

EXAMPLES OF LMPS

Job search assistance Training Employment Subsidies Unemployment Insurance Provisions for retirement

Active and Passive LMPs

Definition and their functions

Passive LMPso are concerned with providing replacement

income during periods of joblessness or Job search

o always corresponds to social transfers that are not conditional upon joining a training or work programme, though they usually include job search provisions that are increasingly enforced and correspond to an active element in passive policies

ALMPS

ALMPs means Active Labor Market Policies

ALMPs refers to labor market integration through demand or supply side measure.

When a country adopt ALMPs, the country would be more involve in International Labor market integration

Functions of Active and Passive LMPs

Passive LMPs The primary function of PLMPs is the matching of

labour demand and supply. The impact of this intervention on labour demand and supply can vary.

PLMPs can intervened the labour demand and supply by: Directly matching Labour demand and supply by:

Public and Private employment services Job search assistance Prospecting and registering vacancies Profiling, providing labour market information.

Creating Demand Public works Enterprise Creation Self-Employment

Reducing Supply Early Retirement

Enhancing Supply Training and Retraining

Active LMPs Active participation in Labour Market Integration Job creations in the form of public and

community work programmes Enterprise creation programmes and

Employment Subsidies This type of LMPs targets the specific groups who

are facing labour market difficulties such as younger and older people, women and those particularly hard to place such as the disabled.

It also answers the growing criticism that pure income replacement policies might entail disincentives to work once unemployment becomes on longer duration.

Labor Market flows in a Developed country

Shrinking Enterprises and Public Sector (Exit Dominated)Entry / Stable Employment/ Exit

Labour Market Entries(Reentries)

Entry /Stable Employment/ ExitExpanding enterprises and public sector(Entry Dominated)

Labour Market Intermediaries-Unemployment insurance-Labour exchange-Active Labour market Policy-Information Evaluation

Retirement

Informal Economy

Labor Market flows in a Developing country

Shrinking Enterprises and Public Sector (Exit Dominated)Entry / Stable Employment/ Exit

Retirement

Labour Market Entries(Reentries)

Labour Market Intermediaries-Unemployment insurance-Labour exchange-Active Labour market Policy-Information Evaluation

Entry /Stable Employment/ ExitExpanding enterprises and public sector(Entry Dominated)

Informal Economy

Why do we need to have an LMPs?

Because there’s an important challenge with regards in Labour market that every government or

state need to address

Every government need to address the urgent balancing of Mismatches that occurs in

the Labour Market(Both Qualitative and

Quantitative)

The contribution of ALMPs to the: Employment Creation

Security in Change

Social Equity

EMPLOYMENT CREATION

ALMPs support employment creation in two basic ways:

directly by job-creation measures (e.g public works and enterprise creation

And Indirectly by improving employability through training and by ensuring efficient labour exchanges that provide better market information and enhanced job matching

SECURITY IN CHANGE

In globalized economies, characterized by openness to trade and investment, continuous technological progress and privatization of state-owned enterprises, labour market changes are inevitable.

In many cases, these changes result not only in internal reallocation of labour but also in massive lay-offs. As a consequence, gov’ts must find ways to cope with such changes. In this respect, ALMPs are an important policy tool addressing the adverse effects of structural change and insufficient labour demand, thus creating security in Change

SOCIAL EQUITY

ALMPs contribute to equityIt provides equity by overcoming discrimination against older workers, the least qualified, ethnic groups and the disabled in business world or labor market

Differences in the utiliztion of ALMPs

In the OECD (Organization of Economic cooperation and development) countries, ALMPs have become a permanent feature of Economic and Social Policy.

For Example.In 1993, 3.63% of GDP in The EU was spent on LMPs of Which 1.13% was spent on ALMPs.In 1998, 2.8 % of GDP was spent on LMPs and 1.07% on ALMPs

o In the data shown above, EU countries favoured active over passive spending. The Passive decrease by 0.83% but Active decrease only 0.06%.

Transition countries are lower spenders on ALMPs.

In Latin America, the average of public countries on ALMPs in seven countries amounted to 0.4% of GDP in 1997. The High spenders among these seven countries were Costa Rica, Jamaica and Mexico while the low spenders were Argentina, Chile and Peru.

In Africa, Only Tunisia and Algeria who reported has an 1% of GDP spending in ALMPs the next higher to them were Egypt and Morocco 0.3% of the GDP.

ALMPs are used also in the developing country and the rest of the world but ALMPs are marginalized part of their economic plans.

Financing ALMPs

In OECD countries, 22 EU countries calculated for the estimated budget for ALMPs. They come up with 4% of the GDP as a suggested budget for the ALMPs.

But in Developing countries, Finding a source of funds for spending on a ALMPs is more difficult, complicated and if worst, impossible.

Why is it difficult to find a source of funds for ALMPs in the developing countries?

It is difficult to find a budget for ALMPs in the developing countries because we have to consider many factors; such as; Proper tax collection, Monetary Policies, Political Situation, International Aid and remittances.

How should labour market policies be financed?

First, we can financed it through the General budget which appropriated annually by the government.

Second, we can financed it by Specific wage-based social security contributions

In a developed country, neither of the two can be used but in the cased of the developing countries; that’s a long debate.

Evaluation of ALMPs

Different Models for Evaluation

Target Oriented EvaluationThis model does not only stresses the

importance of measuring the impact of policies in terms of reaching their targets but also the crucial role played by the incentives created by the interaction of different policy interventions and the cumulative impact of policy regimes on the disposition and observable behavior of relevant actors in the target area.

This evaluation model viewed as a bottom-up approach, whereby the effects of policies are viewed from the perspectives of the relevant agents and the process of policy formation and implementation as a black box.

While…

Programme Oriented Evaluation It assesses the impact of one programme

designated for a specific target,

Example of Evaluation Results (Programme Evaluation model)

*EuropeProgramme

Job search Assistance

Appear to help

Unemployed adults when economic conditions are improving.

Comments

Relatively more effective than other labour market interventions due to low intervention costs

Training for Long term Unemployed

Women and other disadvantaged groups

No more effective than job-search assistance in increasing re-employment probabilities and post-intervention earnings; two or more costly

Employment and Wage subsidies

Long-term unemployed Benefits to treatment group not significant compared with control group. Sometimes used by firms as permanent subsidy programme, High Deadweight and Substitution effects

Public works programmes Severely disadvantages groups

And unemployed in general

Good as safety net, low performance as labour market integration tool

CONCLUSION ALMPs can be used to cope with the

consequences of Globalization in labour market

In order to make AlMPs work we should evolve towards a more permanent policy instrument for the management of change rather than being a band-aid solutions in emergencies

ALMPs has a lots of functions. We must allow these functions as bridge for development not as a trap that will stun our economic progress.

ALMPs can be a solution in some economic problems but we must remember that there is no single solution for every individual, there is also no “one-size-fits-all” solution either.