Would Active Labor Market Policies Help Combat High U.S. Unemployment?

By Nie, Jun; Struby, Ethan | Economic Review (Kansas City, MO), Summer 2011 | Go to article overview

Would Active Labor Market Policies Help Combat High U.S. Unemployment?


Nie, Jun, Struby, Ethan, Economic Review (Kansas City, MO)


Two years after the end of the 2007-09 recession, the unemployment rate in the United States remains above 9 percent--roughly double its pre-recession level.

This elevated level of unemployment has a cyclical and a structural component. The cyclical component reflects weakness in the demand for goods and services, which makes employers reluctant to expand their payrolls. By contrast, the structural component reflects potential mismatches in the labor market. These mismatches may include the types of jobs being created versus the skills of unemployed workers, and locations of new jobs relative to unemployed workers. Because their causes are different, addressing structural problems in the labor market requires strategies that are different from those that address cyclical problems.

U.S. labor market policies historically have focused on providing unemployment insurance during downturns. These programs have provided financial support for unemployed workers on the premise that the cyclical downturns would prove to be temporary. Because these programs do not directly help workers find jobs, they are called passive labor market policies.

By contrast, active labor market policies seek to increase the probability that unemployed workers will find jobs through more direct approaches, such as training and job-search assistance for unemployed workers, and incentives to employers for expanding their workforces. In a number of foreign countries, these policies have been used extensively to combat structural unemployment. Would active labor market policies be an effective tool to help combat high unemployment in the United States?

This article examines the experiences of a sample of countries in the Organization for Economic Cooperation and Development (OECD) that have a history of using active labor market policies. The analysis finds that two types of active programs can be particularly effective: training programs that equip unemployed workers with skills in demand and job-search assistance that matches unemployed workers with employers. Beyond these two program types, there is little evidence that other active programs (such as employment incentives and direct job creation) reduce unemployment significantly. These findings--together with evidence that the U.S. labor market currently suffers from a certain amount of structural unemployment--suggest that the United States could benefit from more training programs and job-search assistance.

The first section describes the passive and active labor market policies used in OECD countries. The second section uses cross-country data to estimate the ability of active labor market policies to reduce unemployment. The third section discusses the implications for the United States.

I. LABOR MARKET POLICIES IN OECD COUNTRIES

Many OECD countries previously have confronted stubbornly high unemployment, even during periods of economic growth. In Europe, the phenomenon was so prevalent that it was called "eurosclerosis." Partly as a result of these historical experiences, OECD countries have instituted different labor market policies to help deal with persistent unemployment.

Economists typically divide labor market policies into passive and active policies. The policies differ in their approach to supporting unemployed workers and the conditions under which they are likely to be most effective. This section reviews the various passive and active labor market policies and describes some of their benefits and drawbacks.

Passive labor market policies

Unemployment benefits and early retirement benefits comprise the bulk of passive labor market policies (PLMP) in use across OECD countries (Chart 1). Unemployment benefits are intended to provide income support for workers who are experiencing a period of joblessness or involuntary work reduction. The most common unemployment benefit is unemployment insurance (UI), which is payable to unemployed workers with some kind of work history and who satisfy other criteria. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Would Active Labor Market Policies Help Combat High U.S. Unemployment?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.