Active Labor Market Policies: Lessons from Other Countries for the United States

Abstract

US labor force participation has been weak in recent decades, especially during the recovery of the financial crisis of 2007–09. This paper examines several programs that governments in other advanced industrial countries have established to help jobless workers continue to seek employment, not drop out of the labor force, and ultimately find jobs. These programs more actively support out-of-work citizens by facilitating matches between workers and firms, helping workers in their job searches, and sometimes creating jobs when none are available in the private sector. The evidence presented in this paper concludes that job placement services, training, wage subsidies, and other labor adjustment policies can be used to successfully help workers find employment and remain tied to the labor market. By contrast, direct job creation through public works projects and other government programs are less effective in helping workers over the long run.

Keywords: active labor market policies, placement services, training, wage insurance, education

JEL Classification: J6