4.12 Employment and reemployment policies, by the nature of the shock causing displacement

106 e mployment in Crisis

of—necessary structural, institutional, and regulatory reforms. A further limitation on the provision of these services in response to crises is that in countries across the world, public employment services suffer from poor funding and low investment in their implementation capacity, and private programs suffer from limited supply. Even countries in Latin America with long track records of administering public employment assistance programs, such as Argentina, Colombia, and Peru, fail to fund them properly (ILO 2016). This lack of resources leads to low coverage and difficulties in implementing and tailoring programs to the needs of different groups.

A renewed policy emphasis on reemployment support will require four elements rarely associated with traditional ALMPs: (a) specificity to the shocks that caused unemployment or to the particular needs of job seekers; (b) coherence and coordination with other parts of the social protection and labor system (most obviously the unemployment insurance or other income support plan); (c) monitoring of their implementation and evaluation of their impact; and (d) adequate resources from national budgets.

Figure 4.12 conceptually organizes shocks experienced by labor market participants and proposes sets of interventions (other than income support) that are best suited to getting people back to work after each type of shock. Crises such as the 2008–09 global financial crisis, because they affect an entire country, are classified as transient systemic shocks (on the top left). They differ from permanent systemic shocks (on the top right), which consist of disruptions driven by structural transformations (such as climate change, the widespread adoption of new technologies, and changes in trade policy) that destroy certain occupations and create new ones with different skill sets. Shocks also differ from those that are transient but idiosyncratic

FIGURE 4.12 Employment and reemployment policies, by the nature of the shock causing displacement

• Bank hours • Job sharing • Furlough • Retention subsidies

• Information • Intermediation • Search support • Skills renewal

Source: Adapted from Packard et al. 2019. Transient and systemic Financial crises Natural disasters Permanent and systemic Structural and technological change

Information and coordination

Transient and idiosyncratic Structural unemployment and churn Permanent and idiosyncratic Occupational transition and structural exclusion • Reskilling • Mobility assistance • Earnings insurance • Credit

• Reskilling • Productive inclusion • Credit • Demand subsidy

t ow A rd A n i ntegr A ted p oli C y r esponse 107

to individuals or households (bottom left), such as increased competition, more flexible dismissal procedures, structural churn, and cyclical fluctuations that lead to more frequent separation and reemployment or to variations in earnings. Finally, permanent idiosyncratic shocks (bottom right) call for policies to facilitate longer-unfolding transitions from lower- to higher-productivity jobs, particularly in lagging areas and regions, or out of long-term unemployment and inactivity (Packard et al. 2019; Robalino, Romero, and Walker 2020). However, as this study shows, crises can leave long-lasting scars, and thus some of their impact is not transitory but long-term (tending toward permanent). Therefore, programs typically associated with permanent systemic shocks, such as reemployment and reskilling support, should be considered in response to crises.

Mixed record of reemployment assistance services

A recent review by Card, Kluve, and Weber (2017) synthesizes the findings of more than 200 recent studies of active labor market programs. The authors distinguish between three postprogram time horizons and use regression models to determine the programs’ estimated effects, for studies that model the probability of employment, and the sign and significance of the estimated effects for all the studies in their sample. They conclude that the average effects of ALMPs are close to zero in the short run but that the effects become more positive two to three years after completion of the programs. The time profile of these impacts varies by the type of program, with larger average gains shown by programs that emphasize human capital accumulation. There is also systematic heterogeneity across groups, with larger impacts for women and for participants coming from long-term unemployment.

The combination and intensity of interventions required to successfully get people back to work could be different for each type of shock. The standard reemployment services (dealing with information and skill constraints) should continue to include counseling, various types of training, job search assistance, intermediation, and various forms of wage subsidies. However, the combination of services required to support those transitioning between similar types of jobs when an individual firm downsizes will be different from those needed to support people displaced by structural changes, such as trade liberalization or the widespread adoption of new technologies, which affect whole industries and places. Probably the most difficult interventions are those needed to facilitate transitions out of very-low-productivity activities (such as subsistence agriculture or own-account work in household enterprises). In these cases, if ensuring access to quality public services and adequate connective infrastructure is not enough, traditional active labor measures may need to be combined with “demand-side” interventions to mobilize investment and create new job opportunities (Robalino, Romero, and Walker 2020). This approach is being followed and evaluated in several countries (box 4.4).

Beyond short-term income support: Policy actions to get people back to work and reskill them

Employment policies are the traditional response to the challenges of reemployment and reskilling. However, most LAC countries spend very little on active labor measures: about 0.5 percent of GDP. Even those that spend at higher levels have rather poor track records of performance (McKenzie 2017). For instance, among 90 youth employment programs in the LAC region that were rigorously evaluated, only 30 percent had positive effects on employment rates or earnings, and these effects were small (Kluve et al. 2016; Robalino and Romero 2019). Moreover, there were no significant differences in effectiveness between types of programs (for example, training versus job search assistance). Most active labor measures managed by public employment offices have not been evaluated. But their institutional capacity is usually lacking, they face severe constraints in terms of human and financial resources, and their