Blogs

Active Labor Market Programs (ALMPs) are policies and projects that assist individuals to become employed or, if already employed, to move to a better job. ALMPs can include: job search assistance; public works; training and retraining; microenterprise development; and wage subsidies.

The programs rest on the assumption that there are some failures in the labor market or in other markets (for instance, monopolies in product markets or limited financial markets) or that certain market outcomes are socially unacceptable. Thus, their success depends not just on the program design and implementation, but also on how well the economy works and how inclusive it is.

ALMPs vary in their aims and outcomes. Some programs emphasize efficiency, while others are concerned with distributional aspects or are driven by purely political considerations that lead to low or zero, if not negative, net economic impact. Furthermore, even when the problem and target groups are correctly identified, program design and implementation can be hampered by lack of administrative capacity, fraud, or abuse.

The empirical evidence of the effectiveness of ALMPs comes largely from global evaluations as there are few studies in the Arab region. And when they exist, they show, for example, that Tunisia spends the equivalent of 1 percent of its GDP on labor market initiatives—comparable to the European Union’s spending for the same purpose—but in Tunisia, the effects are limited.

Public Works Employment

Public works provide cash or food for work typically in community projects—such as building or maintaining infrastructure, including roads and schools. Government-sponsored public works are common in Algeria, Tunisia, and Morocco (promotion nationale) and through social funds elsewhere, for example, in Egypt and Yemen.

Employment Services/Labor Intermediation

Job search assistance services are found in practically all countries and are quite developed in high-income countries where they are typically combined with the payment of unemployment benefits—partly in an attempt to establish the willingness of the unemployed to get back to work.  Job search assistance is relatively low cost and usually cost-effective relative to other ALMPs. Programs that have yielded positive results generally have been implemented under favorable macroeconomic conditions. They are less effective in a recession, when few jobs are available.

Training

Training can be offered to many different groups. Results tend to be more positive for women than for men. Training for youth is less successful, but this outcome can be partly corrected by integrating training with remedial education, job search assistance, and social services. Retraining for workers who have lost their jobs tends to be more expensive and often has no positive economic impacts though there may be good social reasons for offering it, for example, to the long-term unemployed. Overall, training works best when the economy is improving and new jobs are created.

Microenterprise Development/Self-employment Support

Such programs offer credit that can be combined with additional support, ranging from training and mentoring to office space (for example, in business incubators). These programs are usually taken up by only a small fraction of job seekers and the unemployed, although this is can be the result of credit rationing. They can be funded by banks, nongovernmental organizations, social funds (Egypt and Yemen), specialized microcredit institutions (Morocco, Tunisia) even donors (Lebanon) or a combination of some of them (Morocco). When there are state guarantees or schemes such as the Grameen Bank, the take-up rate and success rate are higher.

Wage Subsidies

Wage subsidies are direct transfers to employers in the form of partial wage payments, reductions in their social contributions and/or taxes to encourage them to hire new workers or to keep employees who might otherwise be laid off. They work best when they are targeted to particular groups such as young people who need an opportunity to demonstrate their skills or the long-term unemployed who are at risk of suffering “scarring” effects from long absences from the labor market.  Their use has been limited in the Arab region but can be found in Jordan, Morocco, and Tunisia.

Zafiris Tzannatos is a senior international consultant for strategy and policy based in Lebanon. He was previously Chair and Professor of the Economics Department at the American University of Beirut. He is a former ILO advisor and has served as Advisor to Managing Director of the World Bank, where he was also Manager for Social Protection in the MENA, as well as, Leader of the Global Child Labor Program that he initiated. His publications include 14 books and monographs, and more than 200 reports and papers in the areas of labor economics, education, gender, child labor and, more broadly, social policy and development strategy. He holds a Ph.D. in Economics.