Connecting People With Jobs Evaluating Latvia's Active Labour Market Policies

Description

Foreword Acknowledgements Acronyms and abbreviations Executive summary Assessment and recommendations Latvia’s labour market has recovered from the large shock of the financial crisis Long-term unemployment is one of the main challenges for Latvian labour market policy Latvia’s menu of Active Labour Market Policies (ALMPs) has expanded in recent years, but comparatively few unemployed persons register and participate Profiling of unemployed persons and sanctions could be used more effectively Unemployment benefits decline over time and the level of social assistance is low Dependency on unemployment and GMI benefits is limited Co-operation of municipalities and the public employment service has strong potential for the activation of social assistance recipients Growing numbers of persons with disabilities may need additional support to return to sustainable employment Training has remained an important component of Latvia’s menu of ALMPs Specialised econometric techniques are needed to evaluate training Both formal and non-formal training have positive effects on individuals’ labour market outcomes While trainings’ effects are heterogeneous, there are positive effects for virtually all sub-groups Combining training with other ALMP measures increases its impact on labour market outcomes Training is provided through vouchers to promote choice and competition Some voucher recipients may need more support to ensure they can effectively exercise choice Special effort is needed to promote competition between training providers in certain remote and rural areas Latvia’s voucher system may leave individuals unsure about their status, potentially compounding lock-in effects Large differences between regions imply gains to inter-regional mobility An ALMP programme contributes significantly to greater regional mobility of unemployed persons While families might need more support for mobility, young and single persons should face greater obligations to move The programme for entrepreneurship can access an untapped potential of entrepreneurs among unemployed persons A well-targeted programme of subsidised employment is offered to vulnerable groups Participation in the subsidised employment programme implies some administrative burden for employers The subsidised employment programme has a positive effect on employment Latvia’s rich administrative data should be used for regular monitoring and impact assessment of ALMPs Chapter 1. Trends and challenges in the Latvian labour market Recent labour market trends: from crisis to stagnating recovery The recession strongly reduced employment and increased unemployment During the recovery, unemployment halved but stagnated above pre-crisis levels Some sectors thrive but others have not recovered Not all unemployed have benefited from the recovery Discouraged workers remain comparatively frequent The increase in labour demand is accelerating Shortages of skilled labour contrast with rather low wage differentiation Macro and micro-level characteristics of unemployment in Latvia Remaining unemployment may be largely structural Two-fifths of the unemployed have been unemployed for more than one year Interregional differences in unemployment are large Unemployment rates are higher for youth and older men Many long-term unemployed lack education or work experience References Database references Chapter 2. Design and delivery of Latvia’s labour market policies Active labour market policies Participation in active labour market policies is very low in Latvia Recently introduced ALMP programmes focus on disadvantaged groups Training is largely provided through vouchers A shift from public works to employment incentives and rehabilitation Participation in ALMP is agreed in Individual Job Search Plans The profiling tool could be used more effectively in practice Unemployment insurance and social benefits Unemployment benefits may be too high for some and too low for others The level of social assistance is comparatively low The number of disability benefit recipients is growing quickly A high tax wedge limits labour supply incentives Sanctions are strict but cannot be applied gradually The role of the State Employment Agency in ALMP Almost all SEA staff possess a tertiary education Low registration of jobseekers and vacancies limits the SEA’s role in matching Many long-term unemployed persons have little incentive to register Engaging employers more in the work of the SEA requires trust SEA caseworkers play a crucial role especially for the long-term unemployed Performance in the SEA is managed through objectives at various levels Activating recipients of social assistance also depends on municipalities Recent efforts foster more co-operation between the SEA and municipalities Several policy levers can help make Latvia’s labour market more inclusive References Database references Chapter 3. Latvian labour market policies for skills and employability Introduction Developing skills in Latvia Certain skills are in shortage in Latvia Despite skills shortages, inter-occupation earnings premia are low compared with the OECD average Relatively few Latvians attain Vocational Education and Training With the youth population in decline, the number of young people enrolled in tertiary education has fallen Learning on the job has historically been rare in Latvia, although its coverage has broadened recently Vocational Education and Training and tertiary education have been reformed to promote uptake A specialised Training Commission also helps align education and training with future skills shortages Training is a tenable strategy for activating the unemployed in Latvia Description and evaluation of Latvia’s main training programmes for the unemployed The evaluation focuses on substantive formal and non-formal trainings Linked administrative data paint a detailed picture of individuals’ participation in ALMPs and their labour market outcomes Individuals often participate in multiple Active Labour Market Policy measures Complex patterns of participation in training necessitate a pragmatic econometric approach Training participants differ from non-participants along key observable characteristics Simply comparing the ever trained with the never trained portrays training programmes in a negative light Using appropriate econometric techniques, both formal and non-formal trainings have long-lasting positive impacts on employment The impact of training differs for particular sub-groups of unemployed people The effects of training are sensitive to how training is combined with other ALMP measures Implementation of training programmes in Latvia Training is provided through a voucher system in Latvia Vouchers may give training participants more choice and improve provision Voucher recipients require information Partly restricting voucher recipients’ options may better align their motives with those of the government Disadvantaged groups may need help exercising effective choice Some remote and rural areas may require support to promote competition Voucher systems may compound lock-in effects Conclusion Notes References Database references Annex 3.A. Additional figures Annex 3.B. Additional tables Chapter 4. Encouraging mobility and entrepreneurship in Latvia’s regions Regional labour market differences Different labour market conditions in regions imply different needs for ALMP Mobility of the unemployed between Latvian regions Young unemployed exhibit a low willingness to commute but a rather high willingness to move within Latvia Mobility requirements for unemployed persons can better reflect their situation High housing costs act as a brake on mobility Evaluation of the programme for regional mobility Participants are typically younger than 35, unmarried and not highly educated Eligibility rules can be used to identify the impact of the programme The programme has succeeded in raising mobility A positive impact is found for recipients of social assistance but not necessarily for persons with disabilities Support for mobility can be scaled up in a targeted way The potential of entrepreneurship for unemployed persons in Latvia’s regions An untapped potential of entrepreneurs exists among the unemployed in Latvia Assessment of start-up subsidies for the unemployed Completion of the programme is associated with increased employment rates Long-term unemployed and persons with disabilities have good chances of being granted start-up subsidies Start-up subsidies create rare opportunities in regions with poor job prospects References Database references Annex 4.A. Additional table Chapter 5. Activating Latvia’s most vulnerable groups Introduction Latvia’s most vulnerable groups and factors shaping their situation Characteristics of LTU versus other unemployed persons Benefit dependency is likely to be low, except for disability benefits Unemployment benefits cannot lead to benefit dependency Dependency on GMI benefits seems limited More beneficiaries use GMI as either a short-term support measure or as longer term support People transition between benefits and labour market statuses Programmes for subsidised employment Employment subsidies are available for vulnerable groups and youth A well-developed system of support for unemployed youth Only a small share of employers use the subsidies Repeated participation is kept to a minimum Data-related limitations need to be acknowledged Who are the programme participants? Programme duration varies by target group Subsidised jobs differ substantially from non-subsidised ones Combining different employment-support programmes Labour market outcomes of programme participants Impact evaluation of employment subsidies Stylised facts and trade-offs in the existing literature Methodological choices and issues for discussion Selecting outcome indicators A positive and persistent effect is found on the likelihood of employment The programme is less effective for some groups of unemployed A positive effect on earnings is found three years after an unemployed person becomes eligible for participation Assisting unemployed persons with disabilities The public works programme is useful for some groups of unemployed Using linked administrative data to evaluate the effectiveness of ALMPs Notes References Database references Annex 5.A. Additional figures Blank Page