Effectiveness of policies targeting specific groups of workers

According to the OECD Employment Outlook 2006, policies targeting specific groups of workers – such as women, older workers, young people and immigrants – help to tackle the barriers to participation in the labour market. However, the analysis shows that not all measures have proven to be effective.

The 1994 OECD Jobs Strategy, which mainly focused on general reforms aimed at supporting the overall functioning of the labour market, placed little emphasis on more targeted reforms. Nevertheless, over the past decade, concern has been growing about the low employment rate of certain groups of people, such as women, older workers, young people and immigrants. The OECD Employment Outlook 2006 – Boosting Jobs and Incomes reviews policies that particularly affect the labour market performance of these groups and analyses their influence on employment rates.

Increasing women’s labour market participation

In most OECD countries, second earners are in effect taxed more heavily than single earners. This tax bias has increased during the past two decades, particularly in some southern European countries like Italy and Spain. By contrast, such a bias is smaller and has decreased in most of the Nordic countries. The OECD research suggests that a more equitable tax treatment of second earners would increase female participation in the labour market by an average of four percentage points among the OECD countries.

Policies related to family support also influence the participation of women in the labour market. According to the analysis, child benefits do not increase the rate of return to work. By contrast, childcare subsidies raise female participation in the labour market.

Another form of childcare support is the provision by most governments of maternity leave, paternity leave and parental leave. Job-protected paid leave increases the employment rate of women significantly; however, this only holds true when leave entitlements remain relatively short.

According to the report, there is a slight positive correlation between voluntary part-time work and female participation across the OECD countries. Therefore, changing the tax incentives for part-time work could stimulate female participation, but it could also encourage some women working full-time to cut their working hours.

High unemployment benefits and tax wedges discourage both part-time and full-time female employment. At the same time, unionisation promotes full-time female employment at the expense of part-time employment, while strict employment protection legislation (EPL) lowers the full-time employment rate of women.

Nevertheless, the spectacular rise in female employment recorded in several countries over the past two decades is essentially explained by education and fertility patterns, as well as by broader socio-cultural changes, rather than by the evolution of structural policies (in English and French, Excel file).

Measures targeting older workers

There is evidence that age-friendly employment policies, encompassing a three-pronged approach, can be effective in raising the employment rates of older people. The three target areas relate to:

• improving financial incentives by reducing the implicit tax on continued work and closing all pathways to early retirement;

• changing employer attitudes and practices by promoting anti-age discrimination legislation and by prohibiting mandatory retirement;

• improving employability by easing the barriers to part-time work and by retraining older workers.

The estimates point to the significant negative effects, on average, of high unemployment benefits and high tax wedges. Union density is also found to reduce older workers’ employment rates. Employment protection legislation and product market regulation (PMR) appear to have a positive effect on the employment rates of older workers.

Promoting employment prospects of young people

The study shows that the situation of young people in the labour market has not improved much over the past decade. In 22 of the 30 OECD countries, the unemployment rate of young adults, aged 20 to 24 years, is over twice that of adults aged 25 to 54 years.

The predominant strategy among the OECD countries to improve school-to-work transitions has involved reinforcing the vocational training system.

The impact of minimum wage legislation on the employment of young people is ambiguous; no clear cross-country empirical effect of minimum wages on youth employment is evident.

Targeted active labour market programmes represent an important option for early school leavers who are already out of the educational system. These programmes should focus on job-search assistance activities, which are often found to be the most cost-effective measures targeting young people.

Integration of immigrants

The study indicates that the unemployment rate of immigrants (in English and French, Excel file) is generally higher than that of natives. However, it is only slightly higher in some countries, while it is as much as three times higher in other countries. The countries with a more successful integration of immigrants have a significant proportion of highly qualified migrant workers, and humanitarian and family inflows tend to have a smaller weight in these countries.

Although the differences in employment rates (in English and French, Excel file) relative to those of natives are a cause for concern, they have been reduced significantly in many countries over the past decade.

Measures to improve the integration of immigrants in the labour market include:

• language training initiatives – in general, the combination of vocational and language training has shown to contribute to more favourable outcomes;

• programmes that ensure some recognition of qualification levels and prior work experience;

• the development of effective job networks by immigrant and employer associations.

Volker Telljohann, Maite Tapia, Institute for Labour Foundation