Active labor market programs: a review of the evidence from evaluations

The study reports evidence based on recent evaluation of active labor market programs, in developed countries, as well as on developing, and transition economies. While a number of unresolved technical issues, and a variety of data problems in specific surveys, and administrative information, tend to affect reliability for guiding public policy, some generalizations about active labor programs can be made. These programs reveal that public works programs can help disadvantaged groups, providing poverty/safety nets, but are ineffective instruments, in the pursue of permanent employment, whereas, job search assistance has positive impacts, and is cost-effective, although this assistance does not seem to improve employment, nor wages. In addition, training for long-term unemployed, may be helpful under an improving economy, but cost-effectiveness is usually disappointing, and, retraining has proven to be more expensive, and ineffective than job search assistance. Likewise, youth training provides no positive impact on employment prospects, and cannot be a substitute to education systems failures. Micro-enterprise development, and wage subsidy programs are usually associated with displacement effects, unlikely to have positive impacts. Modest programs, sound impact evaluation techniques, and cost-effectiveness are strongly recommended.