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Measures to assist the long-term unemployed.

In the course of the recession of the early 1980's, OECD member countries instituted and developed various policy initiatives to deal with long-term unemployment. Subsequently, lessons were learned through both administrative experience and formal policy evaluation. However, the economic and demographic environments of the 1990's will be significantly different from what they were in the previous decade, chiefly because of four factors:

1. Actual output is likely ta be closer to potential output in most advanced countries. In many OECD countries, unemployment has declined substantially since reaching peak levels in the early and mid-1980's. This improvement is expected generally to continue during the next few years. If so, then economies will likely operate closer to full capacity than in the recent past.

2. The supply of labor is likely to increase less rapidly than in the previous decade. In most OECD countries, the expected growth in the supply of labor between 1987 and 2000 will be substantially less than it was between 1973 and 1987. 1n Austria, Canada, and the United Kingdom, it is likely to be less than half the rate of the earlier period. The decrease in the labor supply is due mainly (entirely in Austria, France, the Netherlands, and the United Kingdom) to an expected deceleration in the growth of the population of working age. 1n Canada, a slowing of the rate of increase of participation rates is also expected to contribute.

3. There will be a declining proportion of young people in the labor force. The number and proportion of young persons in both the population and the labor force are likely to decline. The fall in the proportion of young people (ages 15-24) is expected to be sharpest in the Netherlands (from about 20 percent of the total population in 1987 to approximately 12 percent in 2000) and in Austria (from 23.7 percent in 1985 to about 12 percent in 2000). The decline will lead to shortages in the entry-level work force, particularly in occupations that rely heavily on recruiting those leaving school.

4. Events in Eastern Europe and the former Soviet Union are likely to influence development in the European OECD countries. The long-term unemployed in European OECD countries will face competition from immigrant workers from Eastern European nations. However, offsetting this will be an increasing demand for capital and consumer goods from those same nations.

Together, the foregoing factors suggest that there will be increasing opportunities in the 1990's for reintegration of the long-term unemployed into the economies of the OECD countries.

The appropriate response

The long-term unemployed are probably best served by the implementation of a set of measures, rather than a single, solitary measure, designed to assist them. Among these measures are the following:

1. Design of benefit systems. A careful balance needs to be struck in this area between considerations of equity and considerations of efficiency. Replacement ratios need to be set at a level sufficiently high to permit the long-term unemployed (and their dependents) to maintain an acceptable standard of living, but not so high as to discourage them from accepting jobs that, although not as attractive as they had hoped to obtain, may be the best the labor market has to offer. Reintegration may be assisted by offering in-work benefits and by allowing part-time work without complete loss of benefits. Of course, benefits must be limited to those entitled to them, so that resources can be concentrated on those in genuine need and the confidence of employers and the public in the system can be maintained.

2. Employment interviews. The practice of periodically interviewing clients with the aim of finding employment for them is well established in many countries and appears to have proved its worth. However, it is necessary that clients be provided with a range of attractive prospective jobs. There is little point in calling people to interviews, unless there is a reasonable likelihood that they can find employment or, at least, through advice or counseling, increase their attractiveness to employers.

3. Community awareness and participation. The role of the community at large, and employers in particular, in assisting the long-term unemployed is becoming increasingly recognized. A number of countries have introduced publicity campaigns aimed at increasing employer awareness of the opportunities the long-term unemployed offer and encouraging employers to make more jobs available to this population. Private, nonprofit, and more recently, profit-making concerns have played an increasingly prominent role as suppliers of employment and training. Further developments in this direction are expected in the remainder of this decade.

4. Training. Education and training, carefully tailored to the abilities and requirements of clients, can play a large role in increasing the employability of the long-term unemployed. Components of such training include courses in increasing self-confidence and motivation, as well as courses in literacy, basic skills, and particularly, specific skills tailored to meet the exigencies of the job market. There is evidence that training which includes on-the-job elements is more effective than classroom training alone.

Problematic measures

Two measures to combat long-term unemployment that have proved problematic are subsidies and direct job-creation measures.

1. Subsidies, paid either to employers for recruitment purposes or to the unemployed to increase the attractiveness of otherwise marginal jobs, frequently have high "deadweight" costs and, if successful, often result in job substitution, that is, achieving employment at the expense of other groups of unemployed or of those entering the labor force. Nevertheless, they do result in the reintegration of significant numbers of Iong-term unemployed people into the economy. One variant of this approach is to offer subsidies for selfemployment, which can be regarded as promoting an "entrepreneurial environment." Even this approach, however, still has its "deadweight" cost, and it is likely to appeal only to a minority of the long-term unemployed.

2. Direct job-creation measures can be mounted rapidly, can target the long-term unemployed easily, and can maintain the self-confidence and regular working habits of those who benefit by them. However, they can be relatively costly, provide little training, and have little effect on the participant's labor market performance. Perhaps their best use is during temporary cyclical downturns or localized seasonal unemployment or for certain of the least employable subgroups, such as older people and the very long-term unemployed.

THE PRECEDING MEASURES although individually and collectively a useful and valuable response to the problem of long-term unemployment, cannot automatically be applied in all contingencies. Each country has its own unique economic environment and administrative structure that will dictate a different combination of measures to implement. Nevertheless, three strong themes emerge from the analysis. First, regular interviewing and counseling provide a foundation on which the structure of programs aiding the long-term unemployed are built. Second, the problem of long-term unemployment cannot be solved simply by imposing a policy from above; rather, it is necessary that the longterm unemployed themselves take positive action to improve their situation and that employers and the wider community understand the problem and contribute to the solution. Third, it is necessary that policy measures to help the long-term unemployed be flexible and capable of responding to a changing environment. Achieving this flexibility is aided by an understanding of the impact of those measures, derived from thorough and sophisticated evaluation.

The full report, The Long-Term Unemployed and Measures to Assist Them, Labour Market and Social Policy Occasional Papers No. 7 (Paris, Organisation for Economic Cooperation and Development, 1992), is available from the Directorate for Education, Employment, Labour and Social Affairs, 2 rue Andre-Pascal, 75775 Paris Cedex 16, France.
COPYRIGHT 1992 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Publication:Monthly Labor Review
Date:Sep 1, 1992
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