Activation policies aimed at getting working-age people off benefits and into work have been embraced by many OECD countries. In a previous paper, I have argued that activation strategies have performed well during the Great Recession and subsequent recovery in some, but not all, of these countries. At the same time it is pertinent to look to the future and to consider what challenges what challenges the activation paradigm is likely to face over the coming decades when US and European labour markets have to cope with ageing workforces and immigration, to name but two. In this paper, I set out my views on some of the major challenges facing activation strategies in the future.
The concept of activating benefit recipients into work has become an important building block in OECD and EU countries’ strategies to fight high unemployment. The concept has evolved over time in the light of both theoretical understanding of the interactions between benefit systems, labour market institutions and active labour market policies and detailed reviews of different countries’ experiences. Activation regimes differ greatly in their scope and intensity across EU and OECD countries, reflecting their different starting points, histories, institutional settings and cultures. They all involve different combinations of eligibility criteria for benefit receipt including job-search monitoring, benefit conditionality and referral to ALMPs.
The evidence suggests that effective activation regimes work in the sense of assisting the unemployed to get off benefits and into work; the evidence also suggests that activation has been less successful in terms of promoting career progression in work. The mix of policies which determines whether the activation strategy is effective or not varies across countries. But the evidence also shows that some countries have played lip service to activation principles or failed to implement them effectively; in these cases the outcomes were disappointing. There is also evidence that it is not easy to maintain an effective activation regime over time: governments change and may be less committed to activation than their predecessors or relax the regime inappropriately when the labour market is buoyant. There is also the fact that activation regimes have proved to be most effective for UI benefit recipients and also for recipients of sole-parent benefits when assistance is provided for child care. However, the record of activating recipients of disability benefits into work is much less successful in all countries that have tried to go down this route.
Activation strategies have to adapt to existing and upcoming challenges if they are to continue to be worthwhile public investments. This paper has highlighted four such challenges. Innovative responses and rigorous evaluations will be required to enable countries to surmount these challenges.