This policy briefing focuses on how to improve activation approaches to integrate unemployed people into the labour market. It explores current practices applied by public employment services, analyses interrelated factors at play in Western Balkan countries and Turkey and concludes with recommended approaches for more coherent activation policies.

1. ISSUE 08 DECEMBER 2011
OPTIMISING ACTIVATION POLICIES TO INTEGRATE
UNEMPLOYED PEOPLE INTO THE LABOUR MARKET
EU’s Instrument for Pre-Accession Herzegovina, and the former Yugoslav
Assistance and has led to a gradual Republic of Macedonia. The labour
modernisation of employment policies markets are characterised by persistent
and services. Improving activation informal employment in the form of
policies is one of the main challenges undeclared or under-declared labour and
facing the Western Balkan countries and vulnerable self-employment. Tailor-made
Turkey. It is a challenge that calls for demand and supply-side measures are
customised approaches that take specific needed to enhance the effects of
conditions into account. activation
Successful activation policies combine
obligations and support measures to This policy briefing focuses on how
photo: Ian W Scott
motivate and empower unemployed to improve activation approaches to
people. Support measures include integrate unemployed people into
information, counselling and guidance, the labour market. It explores current
better placement and referral services, practices applied by public
training measures, support for self- employment services, analyses
employment and other forms of active interrelated factors at play in
High employment rates and income labour market measures. Job seekers’ Western Balkan countries and Turkey
security are key to economic rights and responsibilities are clearly and concludes with recommended
development and robust fiscal budgets. defined and communicated to registered
approaches for more coherent
They are also important in establishing unemployed individuals; non-compliance
is sanctioned by cuts in cash benefits or activation policies. It addresses
inclusive labour markets accessible to
vulnerable groups. elimination from the unemployment primarily policymakers and
register. Such carrot and stick approaches practitioners in the candidate
Increasing employment rates is a target have proved to be successful in many EU countries and potential candidate
of Europe 2020, a strategy for smart, countries. However, conditions in the countries for European Union (EU)
sustainable and inclusive growth. Its goal Western Balkan countries and Turkey are accession. It may also be relevant to
is to increase the employment rate for different. any country aiming to upgrade its
people aged 20 to 64 to 75% by 2020. employment policies and services.
To achieve this, the EU’s employment The economic crisis resulting from the
guidelines highlight the importance of global financial crisis of 2007/08 led to The findings of this policy briefing
‘increasing labour market participation of increased unemployment rates in are based on the joint work
women and men, reducing structural Croatia, Montenegro and Serbia, while conducted with a community of
unemployment and promoting job Albania and Turkey managed to reverse practice on activation, which was
quality’. They also emphasise that negative labour market trends. established in 2009 within the
activation is key to increasing labour framework of the European Training
market participation. Countries should Employment rates in the region are far Foundation’s (ETF) Mutual Learning
‘step up social dialogue and tackle labour below the EU average, with only Croatia Programme. The ETF together with
,
market segmentation with measures coming relatively close. The primary experts and practitioners from the
addressing precarious employment, reasons for this are low female public employment services in
underemployment and undeclared work’ employment rates (lowest in Kosovo*
Western Balkan countries and Turkey,
(Council of the EU, 2010). and Turkey, where less than one quarter
of the female working-age population is analysed the current activation
The EU strategy also establishes the employed) and low youth employment approaches and framework
framework for candidate countries and rates. Long-term unemployment is high conditions and elaborated policy
potential EU accession candidates. This in many countries. Youth unemployment options to improve activation results
process is supported and funded by the is alarmingly high in Kosovo, Bosnia and
DEFINITION benefit recipients who are able to work, to participate in
active labour market measures and to search actively for a
Activation is a combination of mutually supporting policies job. The aim of activation is to get job seekers into jobs that
formulated to increase the capabilities and motivation of provide them with an adequate income, thereby helping
unemployed people (registered unemployed) or welfare them to avoid poverty and exclusion
* Under UNSCR 1244/1999, hereinafter ‘Kosovo’.

2. DEMAND-SIDE CHALLENGES developing workers in small and support measures (Croatia, Serbia and
medium-sized enterprises. This may be Montenegro are the exceptions). Given
Factors that affect the demand for labour an impediment to innovation and further the limited resources of the public
and the effectiveness of activation business development and growth. employment services and the limited
policies include total labour costs, the number of vacancies, it is difficult to
legal and administrative procedures As a result of these factors, the level of implement obligations such as
related to hiring workers, irregular formal sector vacancies is low, despite monitoring job search activities or
employment practices and possible the fact that this is a key condition for imposing sanctions if job seekers decline
sanctions for such practices. successful activation and job placement job offers.
by public employment services
For many people in the region it does not In many Western Balkan countries,
make financial sense to work in the receiving benefits is contingent upon
formal sector if they can access SUPPLY-SIDE CHALLENGES being registered as unemployed – a
unemployment-related benefits and logical requirement. All countries, with
work in the informal economy at the Labour supply relates to the available the exception of Kosovo, offer an
same time. The irregular payment of skills of the workforce as well as working unemployment insurance scheme with
wages and defaulting on social security conditions, the competitive price of unemployment cash benefits. However,
contribution payments is a widespread labour in the informal economy and the coverage is limited (only a few of the
practice and creates a strong alternative, non-work-related financial registered unemployed receive cash
disincentive to work, especially for more resources available. Low net wages at benefits). Wage replacement rates are
highly qualified individuals in the the lower end of the qualification scale low and the maximum duration of such
workforce. curtail the supply of labour in the formal schemes is 12 months (with some
sector. This contrasts with the availability exceptions for pre-retirement schemes).
Relatively high labour costs discourage of social benefits combined with These factors result in a situation that
employers from hiring and reduce the informal employment. offers little income security and
potential demand for labour. Cost issues motivates people to work in the informal
and administrative procedures can lead A number of key challenges face the sector, even though they are registered
to the employment of shadow (informal) region in this regard. The eligibility as unemployed. Attempts to legalise
workers, a phenomenon that reinforces criteria for registering as unemployed are low-waged work and make this
the segmentation of the labour market. relatively liberal, but the focus is compatible with the receipt of
Limited sanctions for employers who generally on the individual’s status as an unemployment benefits are still at an
work outside the regulatory environment unemployed person, rather than as a job early stage.
and employ informal workers and an seeker and someone able to work. The
acceptance of non-compliance with public employment services’ Unemployed people can avail of many
fiscal obligations and labour legislation unemployment registers are structured other social benefits but accessing them
help to sustain the system. in such a way that inactivity and is a complex procedure. Many are small
employment in the informal economy and seemingly insignificant but they do
When hiring, employers prefer make it very difficult for these services add up. The institutions granting the
individuals with relevant work to fulfil some of their usual goals and benefits rarely work together. We can
experience, but discriminate against functions. Legislation does not conclude from this that the social
older workers, women and people with distinguish clearly between employed, security system generally functions by
lower qualifications. unemployed and inactive. Public providing benefits for various purposes
employment services do not always through multiple institutions. Unless
Managerial skills are also an issue, identify those who are employable and these income support measures are
particularly with regard to deploying and those who need different kinds of redesigned to make work more attractive
and to better target those in need,
unemployment levels will remain
excessively high and public employment
services will remain overloaded with
benefit administration.
All countries offer vocational training and
re-training and facilitate the uptake of
various basic or generic skills as part of
their active labour market measures.
Even though the measures and numbers
of participants have increased over the
last few years, they still fall far short of
what is needed. The low skill levels of
the working-age population, particularly
among unemployed and inactive people,
make activation difficult and expensive.
photo: austinmills
The public employment services’ staffing
levels and budgets required to ensure
reasonable coverage of passive and
active labour market measures are
extremely limited

3. ISSUE 08 DECEMBER 2011
EFFECTIVE ACTIVATION
Any possibility of effective reform requires an integrated
approach to activation, covering supply and demand issues as
well as support measures and individual obligations. While
photo: Let Ideas Compete’s photostream
public employment services are mainly responsible for
activation measures, they cannot be expected to act alone.
Their most obvious partners are relevant ministries, social
partners, social welfare centres, education and training
providers, local authorities and employers.
The limited demand for labour in the formal sector is the main
impediment to activation. Tackling this is a priority. Economic
development, regional, industrial, fiscal, investment and
entrepreneurship development policies need to be reformed to
strengthen competition, increase labour mobility, create a
vibrant entrepreneurial environment and a stable regulatory
framework, which facilitates enterprise creation, innovation and
growth.
opportunity to legalise their status. Social welfare or health
Apart from establishing a macro-economic environment to insurance should not be contingent on being registered as
encourage job creation, governments must implement longer- unemployed. Positive examples of schemes that separate
term policies to curb the informal economy. As long as only health insurance from the unemployment register can be found
some beneficiaries pay insurance premiums, contribution rates in Croatia and Turkey.
must be kept high, leading to increased labour costs.
Employers who do not pay contributions to the social security
system must be sanctioned. Incentives for employers to move
Public employment services’ resources,
into more lucrative sectors and making (formal) work pay may capacities and service delivery
motivate employers and employees to take up formal
employment. Policies to make certain categories of workers, Public employment services need more resources for passive
such as new labour market entrants, less expensive to employ and active labour market measures. The caseload of staff
should be implemented. Some countries have already working with clients should be reduced. Staff should be moved
introduced employment incentive schemes to stimulate the from administrative duties to work directly with clients. The
recruitment of specific target groups (Croatia and Turkey). activation rate (percentage of registered job seekers
participating in active employment measures) should be
On the supply side, the nature of the current skills of job increased. The effects of active labour market measures should
seekers poses the biggest challenge to more effective be regularly evaluated and funds should be strategically
activation. Furthermore, public employment services have to directed to the most effective approaches.
address other issues to break the vicious circle of low demand
for labour, limited incentives to take up formal work and long Female employment rates need to be increased. Gender
spells of unemployment. These are summarised below. mainstreaming approaches should be applied to ensure that
both women and men in the working-age population participate
pro rata in all measures. This must be combined with targeted
Eligibility and profiling of registered approaches for disadvantaged women (low-skilled women,
unemployed people women with family responsibilities). Support services for
specific vulnerable groups could be outsourced to non-
The public employment services’ registers should remain open governmental organisations, for example.
to all who wish to find work for whatever reason. However,
registration must be restricted to individuals able and willing to In order to improve their reputation as a service provider, public
work according to the International Labour Organisation (ILO) employment services should provide better services to
definition. They should be seen as job seekers rather than employers. A new approach that considers employers as
unemployed people. Changes in legislation are needed in some partners and customers of the public employment services
Western Balkan countries to distinguish between employed, could cover services such as recruitment support (by pre-
unemployed and inactive individuals. This is the only way to selecting suitable candidates). Subsidies could be offered for
monitor the activity status of registered unemployed people. hiring hard-to-place job seekers rather than imposing quota
systems with sanctions for non-compliance. This implies a
Some countries also need to profile people who register as change of mindset in some employment services – providing a
unemployed. Profiling systems help to identify individual service to employers instead of fulfilling an administrative
employability, assess the risk of long-term unemployment and function. The development of a communications and service
the level of assistance needed and target the appropriate strategy vis-à-vis employers, preferably with specialised
services (Weber, 2011). Currently, only Croatia and Montenegro counsellors for employers could also be envisaged.
keep records of who has marketable skills and who needs
simple support measures (such as vocational guidance, advice Activation approaches should include both obligations and
on how to look for a job, job fairs and activities in job clubs) and support measures. Support measures are needed to increase
who is hard to place and in need of the most support. Profiling employability and provide basic income security for job
the unemployed requires sufficient staff capacities. seekers, thus making informal sector income unnecessary.
This must be accompanied by more stringent measures to
Those who are registered as unemployed but are actually tackle informal employment and ensure that job seekers are
working in the informal economy should be given the actively searching and available for work.

4. ISSUE 08 DECEMBER 2011
Skills matching market. The employment service is possibly the only institution
that could set up such a labour market information system for
Labour market training is a cornerstone of active labour market human resource needs.
measures adopted by public employment services in all the
Western Balkan countries and Turkey. Training measures need Conclusion
to be more effective and results measured in terms of job
placement rates. It is essential that training programmes Overall, there is no easy way of making activation approaches
provide qualifications needed by the labour market. This, in more effective. Activation needs to be embedded in a policy
turn, requires that they are implemented in close cooperation mix that tackles informal employment, invests in demand-
with employers. Skills mismatches can only be reduced if the driven skills, increases the scope and effectiveness of active
training content is based on a reliable skills needs analysis. The labour market measures and modernises social security
systematic screening of economic sectors is needed to identify systems. Public employment services in the candidate
crucial occupations and monitor changing skills needs. Training countries and potential EU candidate countries can learn from
providers should plan their training programmes based on good practices and failures in EU countries, but they can learn
these analyses and engage in ongoing dialogue with employers even more from each other. Mutual learning within the
and analysts on current and future skills needs (employment framework of regional and international public employment
partnerships, human resource development centres and sector services networks can make an important contribution to
councils). improving activation policies
There is a need for a system that systematically collects and
transfers information from the local to the national labour
photo: John ‘K’
REFERENCES
Council of the European Union, ‘Council Decision of 21 October 2010 OECD (Organisation for Economic Cooperation and Development),
on guidelines for the employment policies of the Member States’, ‘Activating the unemployed: what countries do’, OECD
Official Journal of the European Union, L 308, 24 November 2010. employment outlook, Paris, 2007.
Crnkovic-Pozaic, S. and Feiler, L. (European Training Foundation), ÖSB Consulting and Vienna Institute for International Economic
Activating the unemployed: optimising activation policies in the Studies, Developing efficient activation approaches and identifying
Western Balkans and Turkey, ETF working paper, Turin, 2011. elements for regional cooperation in the Western Balkans, Final
report for DG Employment, Contract No VC/2010/0028, 2010.
European Commission, Modernising social protection for greater
social justice and economic cohesion: taking forward the active Weber, T., Profiling systems for effective labour market integration,
inclusion of people furthest from the labour market, COM(2007) Thematic synthesis paper for the European Commission mutual
620 final, Brussels, 2007. learning programme for public employment services, May 2011
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