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Κοινωνική Πολιτική
Τομ. 6, 2016
Active Labour Market Policies in Greece:
Challenges and Responses During the Economic
Crisis
Galata Paraskevi - Viviane Πάντειο Πανεπιστήμιο
Chrysakis Manolis
http://dx.doi.org/10.12681/sp.10880
Copyright © 2016 Paraskevi - Viviane Galata, Manolis
Chrysakis
To cite this article:
Galata, & Chrysakis (2016). Active Labour Market Policies in Greece: Challenges and Responses During the Economic
Crisis. Κοινωνική Πολιτική, 6, 45-66.
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Active Labour Market Policies in Greece:
Challenges and responses during the economic crisis
1
Paraskevi - Viviane Galata
Professor-Advisor, Associated Educational Staff, Hellenic Open University
Postdoctoral Researcher, Social Policy Department, Panteion University
Manolis Chrysakis
Research Director, National Centre for Social Research
Abstract
The effects of recession in Greece and the austerity measures promoted in the
framework of Economic Adjustment Programmes had a devastating impact in the
labour market. Although several reforms have been introduced in the labour market
and social protection, doubts are expressed whether the solutions adopted have been
effective so far to mitigate the effects of the crisis. This paper aims to explore the role
of active labour market policies in Greece during the economic crisis and the
necessary conditions to enhance their contribution in reducing the social
repercussions of the crisis. Τhe findings from the analysis of existing literature show
that there are several challenges for promoting active labour market policies,
particularly in a recession, provided that they will not substitute the fundamental
guarantees of income replacement and that will be associated with a comprehensive
policy of job creation, while preserving the public character and the role of the state
that should not be undermined under the pretext of budgetary constraints.
Keywords: Active labour market policies, economic crisis, economic adjustment
policies, new forms of dual labour market
Περίληψη
1
An initial form of this article was presented at the 36th Annual Conference of the International Working Party on
Labour Market Segmentation (IWPMS), Long term trends in the world of work and effects of the economic crisis:
Policy challenges and responses, Athens: Panteion University of Social and Political Sciences and Hellenic Social
Policy Association, 22-24 June 2015.
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Οι επιπτώσεις της ύφεσης στην Ελλάδα και τα μέτρα λιτότητας που προωθούνται στο
πλαίσιο των Προγραμμάτων Οικονομικής Προσαρμογής είχαν καταστροφικό
αντίκτυπο στην αγορά εργασίας. Παρά το γεγονός ότι εισάχθηκαν αρκετές
μεταρρυθμίσεις στην αγορά εργασίας και την κοινωνική προστασία, υπάρχουν
αμφιβολίες κατά πόσον οι λύσεις που υιοθετήθηκαν υπήρξαν αποτελεσματικές μέχρι
στιγμής για την άμβλυνση των επιπτώσεων της κρίσης. Η παρούσα εργασία
αποβλέπει να διερευνήσει το ρόλο των ενεργητικών πολιτικών αγοράς εργασίας στην
Ελλάδα κατά τη διάρκεια της οικονομικής κρίσης και τις αναγκαίες προϋποθέσεις για
την ενίσχυση της συμβολής τους στη μείωση των κοινωνικών επιπτώσεων της
κρίσης. Τα ευρήματα από την ανάλυση της βιβλιογραφίας δείχνουν ότι υπάρχουν
αρκετές προκλήσεις για την προώθηση ενεργητικών πολιτικών αγοράς εργασίας,
ιδιαίτερα σε περίοδο ύφεσης, υπό την προϋπόθεση ότι δεν θα υποκαταστήσουν τις
θεμελιώδεις εγγυήσεις της αναπλήρωσης του εισοδήματος και ότι θα πρέπει να
συνδέονται με μια ολοκληρωμένη πολιτική δημιουργίας θέσεων εργασίας,
διατηρώντας παράλληλα το δημόσιο χαρακτήρα και το ρόλο του κράτους που δεν
πρέπει να υπονομεύονται με το πρόσχημα των δημοσιονομικών περιορισμών.
Λέξεις κλειδιά: Ενεργητικές πολιτικές για την αγορά εργασίας, οικονομική κρίση,
πολιτικές οικονομικής προσαρμογής, νέες μορφές δυαδικής αγοράς εργασίας
1. Introduction
The Greek economy suffered significant macroeconomic changes during the recession
since the end of 2009, which have aggravated chronic structural problems in the
labour market and have affected large parts of the population. The changes introduced
in the Greek labour market to ensure more flexibility and minimize labour costs do
not seem to help the country emerge from its economic crisis, while the burden of
adjustment appears to have no be distributed fairly (Avram et al., 2013, Matsaganis,
2013, Mitrakos, 2014). The evidence of this unprecedented deterioration of labour
market conditions makes the need for better and more effective social support
measures even more critical. Therefore, access to employment for the unemployed
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and safety net benefits for the long-term unemployed and the most disadvantaged
groups are priority (European Commission, 2013c). Nevertheless, doubts are
expressed whether policy responses have been effective so far, if they have
contributed to mitigate the immediate effects of the crisis on households and to what
extent they could address social concerns and preserve social cohesion under fiscal
pressures and cuts in social transfers (OECD, 2014).
In this context, the present paper aims to explore the role of active labour market
policies in Greece during the economic crisis and the necessary conditions to enhance
their contribution in reducing the social repercussions of the crisis. The issue of active
labour market policies is an attractive alternative at this conjuncture, as the current
discussion is on the appropriate solutions that could enhance the country’s ability to
respond effectively to the increased demands of social protection generated by the
crisis. In the case of Greece, the limited fiscal capacity of the country along with the
existing structural weaknesses of the economy and the welfare state has resulted to
selective social policy options, which although justified by the extensive and
emergency nature of crisis’ social repercussions cannot present convincingly their
effective and holistic support. There are serious concerns that selective social policy
options introduce new forms of dualism without solving the problems of the
vulnerable groups. In addition, the effectiveness of social policy interventions is
disputed as they can be used to substitute the fundamental guarantees of income
replacement, especially in economic crisis with high levels of poverty and income
insecurity. These concerns are even more pronounced due to the restriction of the
public character of social policy in view of the required balance between social
spending and economic effectiveness and the transfer of competences in the provision
of social services in the private sector. Yet, important debates remain concerning the
role and effect of active labour market policies in reducing unemployment and raising
labour market participation through spending on public employment services,
training, employment incentives and direct job creation. Moreover, emphasis is given
to the investment in education and training as part of a broad social investment
strategy to fight against unemployment, and notably youth unemployment, as well as
to bridge the widening skills and education divide. On the other hand, the positive
outcomes of active labour market policies cannot easily been achieved in a time of a
serious decline of jobs and employment opportunities.
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The paper will explore the role of active labour market policies in Greece during the
economic crisis based on secondary research of previously published studies and
evaluations on this issue, which will be examined through content analysis and
interpreted with the comparative approach of data before and after economic crisis. In
the first section, the paper will present the recent theoretical discussion on active
labour market policies and their linkages with labour market and welfare policies, on
social policy and welfare state responses to social risks under fiscal pressures, as well
as on new forms of dualism expressed in social policy and welfare state reforms.
Then, the paper will describe in the second section the main characteristics of the
Greek labour market, the active labour market policies implemented before or during
the economic crisis and their results, as derived from existing evaluation studies and
reports. In the third section, the paper will consider OECD countries’ experiences on
active labour market policies to check and validate the evaluation results of active
labour market policies in Greece and to identify the necessary conditions that could
ensure their effectiveness. Finally, the paper will summarize and discuss the main
findings on the potential challenges of active labour market policies in Greece during
economic crisis. Overall, the paper aims to contribute to the deeper understanding that
the effectiveness of active labour market policies largely depends on the direction of
labour market and welfare state policies towards the selective or holistic coverage.
2. Theoretical Assumptions on Active Labour Market Policies
Active labour market policies started to occupy an important role since the 90s, when
the emphasis was placed on the individual responsibility, the more competitive
structure of salaries, the adaptation and the strengthening of citizen with the necessary
skills through vocational education and lifelong learning (Espin-Andersen, 2002: 46-
47). This discussion is related to the new European welfare model towards social
investment, which differs from the classical models of welfare system developed by
Gøsta Esping-Andersen (1990) and Maurizio Ferrera (1996) as it seeks to respond to
adaptability, flexibility, security and employability. The focus of this approach, which
is put more on “capacitating” interventions than on interventions that compensate,
explains fully why the emphasis is given to active labour market policies that enhance
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human capital instead of passive labour policies providing income support for the
economically inactive (Begg et al. 2015: 24-25). However, even if active labour
market policies appear as an attractive alternative compared to passive policies of
income support, there are serious doubts that can be effective as they cannot substitute
the fundamental guarantees of income replacement. Moreover, an effective strategy of
social investments presupposes the diminution of poverty and income insecurity and,
if promoted in real and sustainable terms, can support preventive policies (Espin-
Andersen, 2002: 48, 73). This issue becomes more complicated in view of recent
concerns whether European welfare states will continue to perform their redistributive
functions within the pressures on public finances and social spending. Currently, the
opinions diverge. On the one side, it is supported that welfare state offers a
comprehensive response to social risks and, with the necessary transformations, it can
continue to be responsive “as part of the fabric of society and not as an overblown and
costly liability” (Begg et al., 2015: 34). On the opposite side, it is stated that the
strong social dimension of the European market economy cannot be maintained and,
therefore, EU member states will finally converge towards a liberal welfare model
(Begg et al., 2015: 34).
The findings of the study in eighteen advanced welfare states, including Greece, show
that the social policy responses to the recent economic crisis have varied considerably
depending rather on the fiscal capacity of the state than on political and institutional
factors (Shahidi, 2015: 659). On the contrary, existing theories of welfare state change
give priority to political and institutional explanations for the direction of welfare
state during economic crisis - as for instance: the prevalence of existing compensatory
mechanisms (the neo-functionalist social compensation hypothesis), the partisan
complexion of governments in power leading to different political preferences (the
partisan politics hypothesis), the strength of existing welfare measures and the
partisan complexion of governments in weaker countries (the constrained
partisanship hypothesis), the role of institutions in shaping the contours of welfare
state change (the path dependent hypothesis) and the existence of severe fiscal
consequences of the economic crisis that can undermine the principles of the welfare
state (the fiscal crisis hypothesis) - which cannot in any case explain governments’
difficulty to respond to the demand for greater social protection generated by this
crisis (Shahidi, 2015: 660-663, 674-676). On the other hand, the restricted coverage
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of increased social needs by the welfare state legalized the transfer of competences in
the provision of social services to semi-private voluntary or private organisations,
which put the emphasis on the redeployment of public-private relations to respond to
the required balance between social spending and economic effectiveness, thereby
undermining the public character of social policy that is interrelated to social identity
of citizen (Petmesidou & Papatheodorou, 2008: 11-16).
As far as the Southern European welfare system concerned, according to
Papadopoulos & Roumpakis (2013: 204-206) we need to see its links with the
political economy, the production and the employment regime to understand its
characteristics as it is distinct from the other types of social-democratic, corporatist
and liberal welfare systems. Precisely, the low development of Southern European
political economies, which were affected by the EU processes of politico-economic
integration, has resulted in “the institutionalization of segmented and residual social
programmes and welfare policies” (Petmesidou & Mossialos, 2006 as cited in
Papadopoulos & Roumpakis 2013: 206). In this segmented welfare system, the family
is the main provider of welfare and plays a key role in the reproduction of its
institutional arrangements, restricting thus the role of employers and the state.
However, the family central role in welfare and its capacity to mobilise economic
resources has been undermined in the late 1990s, which marks the transition from
securing favourable treatment through clientelistic political relations to fiscal
discipline and stricter policy on social spending that brought more pressure to the
“familiarization” of welfare costs (Papadopoulos & Roumpakis 2013: 207-210).
Therefore, the crisis of the familistic welfare system was existing before the economic
crisis and has been intensified by the crisis subsequent austerity measures leading to a
generalized insecurity in both segments of the Greek labour market, i.e. the insiders
and protected workers and the outsiders and less protected workers (Papadopoulos &
Roumpakis 2013: 210-213).
However, analysing the linkages among industrial relations, labour market policy and
welfare state reforms in view of crisis management, Palier and Thelen (2010: 120-
121) supports that the institutionalization of new forms of dualism is explicitly
underwritten by welfare state reforms. For instance, the reforms introduced in
Germany and in France as responses to the economic crisis of 1970s and 1980s,
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aiming at saving core manufacturing economy by reducing workforce and
intensifying the work, have institutionalised new types of non-standard jobs without
imposing a unified flexibilization for all, thus contributing to the emergence of
secondary labour market (Palier and Thelen, 2010: 122-127). A typical example of
reinforcing dualism is the increase in state-subsidized jobs in France since the early
1980s, which target unskilled young and long-term unemployed to help them
integrated in the society. As characteristically stated, targeted programs within active
labour market policies were the favourite policy instrument since the late 1980s
“allowing various governments to avoid direct confrontation with the representatives
of the more permanent segment of the labor force while allowing them to present
subsidization as the price to be paid for job creation in the low-skill service sector”
(Palier and Thelen, 2010: 130-131). From late 1980s to 2009 new social policies have
been developed in France, which target specific populations and use new instruments
aiming to combat social exclusion instead of guarantee income and status
maintenance, such as the unemployment degressive benefit paid for a limited amount
of time and the active income of solidarity for those entering subsidized low skill,
low-paid jobs (Palier and Thelen, 2010: 134-135). Therefore, welfare reforms in
Germany and in France have increased the “contributivity” of the benefits, but they
lost their redistributive character by reducing the coverage of social insurance, thus
reinforcing the gradual dualization of the labour market between workers in the core
labour market with occupational insurance/contributory benefits and labour market
outsider workers with lower standards and in-work/non-contributory benefits (Palier
and Thelen, 2010: 137-139).
In addition, it is supported that the labour force in most European countries is divided
into two different groups, defined in terms of job security, compensation and
likelihood of receiving on-the-job training. For instance, a large share of temporary
contracts coexists with open ended contracts with much stricter employment security,
while the young people employed mainly in temporary jobs are the more affected
during downturns. Wage pressure is another adverse effect of dual labour markets,
which turns to the detriment of temporary workers and in favour of permanent
employees. Finally, the amount of training received on the job is considerable less to
temporary workers than to permanent workers (Garibaldi & Taddei, 2013). Similarly,
the support of active policies from labour market actors is differentiated according
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their position in the two sectors of the labour market. Following Rueda’s work on the
insider–outsider theory of active labour market policies, the labour is divided between
insiders, i.e. workers in full-time permanent employment and outsiders, i.e.
unemployed and workers in temporary or part-time contracts, and their position
depends on their exposure to risk of unemployment or their political power.
Therefore, if the insiders have very low employment protection increasing the risk of
unemployment, they will support active labour market policies and, if the outsiders
become members of trade unions increasing their political power, they may support
active labour market policies more actively (Vlandas, 2013, Rueda, 2006).
In any case, it is confirmed that there is a deterioration of the quality of jobs during
recessions, which calls for specific policy measures targeting the most vulnerable in
period of crisis, while there is evidence that active labour market policy spending
improves the functioning of the labour market and the following increase in the
matching rate improves the total employment (EC-IILS Joint Discussion Paper Series,
2011a and 2011b, García Pérez & Osuna, 2014). What is important according to
Vlandas’ findings (2013) is to make a distinguish analysis on what is driving spending
on different types of active labour market policies rather than on aggregate spending
on active labour market policies. For instance, spending on public employment
services is associated with lower employment rates. Spending on job rotation and job
sharing is a way to prevent redundancies. Direct job creation involves the use of
public funds to directly create jobs in the public or non-commercial sector, while may
have a positive impact on wages. Employment incentives and rehabilitation
programmes may promote low-wage work and become ‘financial subsidies that firms
exploit for hiring cheap labour’. Training schemes have the aim of raising human
capital and increasing unemployed chances of attaining their preferred employment
position (Vlandas, 2013). Therefore, the distinct analysis between different active
labour market policies appears to have significant contribution in the discussion on
the appropriate solutions to mitigate the negative aspects of economic crisis.
However, as Vlandas remarks it is important to take into consideration not only the
linkages of active labour market policies with welfare regimes, but also with
production systems and national political economies.
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3. Active Labour Market Policies implemented in Greece during
economic crisis
3.1. Towards a more aggravated or a more fragmented Greek labour market?
The Greek economy suffered significant macroeconomic changes during the period
2008-2014, recording a cumulative loss in terms of GDP that exceeded 25% (Bank of
Greece, 2015: 56). Greece continues to face a severe economic recession, which has
aggravated the serious and chronic structural problems of the economy and the labour
market explaining also why the implications of the crisis were particularly adverse
(Cedefop, 2014: 10, 13, Bank of Greece, 2014b: 42, 55). The reforms introduced
under the First and Second Economic Adjustment Programmes, agreed in May 2010
and in March 2012 respectively, affected employment protection, wage setting
mechanisms and social security and led to deep wage, pension and healthcare cuts,
which had a devastating impact in the labour market (Karantinos, 2014, Bank of
Greece, 2014a, Cercas, 2014). In fact, the depression has been much deeper than
expected, which has induced a fall of employment to 53.3% and a dramatic rise in
unemployment affecting more than 27% of the labour force at mid-2013 that remains
at the high level of 25% even after the moderate decline since 2013, as well as job
losses of around 1 million from 2008 to early 2014 (European Commission, 2015b:
14, Karantinos, 2014, OECD, 2013). The income losses, the high unemployment and
the lack of a well-designed social safety net reflect the unprecedented deterioration of
labour market conditions across large parts of the population (OECD, 2014, Cercas,
2014), while despite the improvement of tax and benefit reforms targeting
progressively high incomes, the burden of adjustment has been uneven as the
emergency property tax, the cut in unemployment benefits and the changes in the
personal income and property taxation have affected people with lower incomes
(OECD, 2016: 10-14, Leventi, Matsaganis, 2016: 13-14).
The young people aged 15-24 are the more affected by the highest unemployment
rates, along with the young women and the individuals with low and medium levels of
educational attainment. Youth unemployment of this age group reached exceptionally
high levels at 52.4% in 2014 with obvious difference from unemployment rates of
other age groups in the workforce (European Commission, 2014c: 25, Ministry of
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Finance 2015: 11). Unemployment among young people aged 20-29 also remains
high, although it seems that active employment policies and legislative changes from
2012 to 2014, which allowed the recruitment of young people with lower wages and
more flexible forms of employment, have helped to reduce youth unemployment from
47.4% in 2013 to 44.2% (Bank of Greece, 2015: 70). The unemployment problem is
particularly acute for young people who are neither in employment nor in education
and training with rates having increased for 15-24 year olds to above 20% (European
Commission, 2014c: 25, 48). Therefore, the rates of structural unemployment are high
and have been aggravated by the crisis (Karantinos, 2014). There is also a serious
increase in the unemployment duration, with one in two unemployed workers having
been without a job for more than two years and one in five without a job for four
years or more (ILO, 2014). Albeit an increase of 11.65 percent has been recorded to
salaried employment between 2013 and 2014, one in every five employees are in part-
time employment or shift work, while undeclared work and uninsured employment
has been aggravated by the economic crisis (ILO 2014).
According the overview of labour market reforms enacted between January 2008 and
June 2013, Greece’s changes were mostly focused on reducing the generosity of
unemployment protection and the strictness of employment protection, while policy
reforms in relation to the Greek welfare system have been enacted by reducing
established levels of social protection. (Shahidi, 2015: 665-667, 674). Major labour
market reforms enacted in Greece over the period 2010-2013 were focused on
reducing labour costs and social security contributions, minimizing collective
agreements’ protection and augmenting wage flexibility, reducing and freezing
minimum wages, reforming the minimum wage framework, reducing maturity
allowances, broadening the types of temporary work, extending part-time shift work,
facilitating working time arrangements, reducing employer-paid contributions, as well
as relaxing the conditions for dismissal and the thresholds for collective dismissal
(European Commission, 2014b: 47-49, Ministry of Labour, Social Security and
Welfare, 2014). In a nutshell, austerity measures and structural reforms in the labour
market and welfare state are associated with the wage-setting and employment
regimes points towards labour market deregulation and minimalist protection, while
social security reforms, especially if combined with the long-term consequences of
depression-level unemployment, point to residual social protection (Karamessini,
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2015: 1-2, 47-48). Overall, the economic crisis caused a shock in Greece resulting in
serious remuneration and jobs cuts, restrictions in pensions rights and welfare
benefits, and sharp labour market reforms, which constitute a considerable effort
towards welfare retrenchment existing, though, before the convergence of the national
economy within the European Union (Zartaloudis, 2014: 430).
There are no doubts that impoverishment during the crisis and under austerity affected
large parts of the population, including not only low-income individuals and
households but also the various social strata of the ‘middle class’, as well as self-
employed and public or private sector employees hit by taxes increase and wage cuts
up to 30 and 40 per cent (Karamessini, 2015: 34-35). That’s why, it is supported that
the crisis subsequent austerity measures have led to a generalized insecurity in both
segments of the Greek labour market, i.e. the insiders and protected workers and the
outsiders and less protected workers (Papadopoulos & Roumpakis 2013: 210-213).
However, the above labour market reforms and the data on flexible forms of youth
employment, part-time and shift work, undeclared work and uninsured employment
show that there is an increased polarization between standard and non-standard (e.g.
temporary, part-time) forms of employment. Although the reforms had little effect on
the creation of temporary employment, they favoured the use of part-time and
intermittent employment and there has been a deterioration in the quality of
temporary and part-time employment (ILO, 2014). In addition, it seems from the
following sections of the paper that the selective programs of active labour market
policies intensifying during economic crisis contribute to the gradual dualization of
the labour market (Palier and Thelen, 2010: 137-139).
3.2. Active Labour Market Policies before economic crisis
Greece maintained for a decade its long-standing model of state intervention in
economic and social activities, which along with low taxes revenues, pay rises,
generous pensions, early retirement schemes and low efficiency of the public sector
led during the 1980s to high public debt, deficits and sluggish growth (Zartaloudis,
2014: 433-435). During the period before economic crisis from 2000 to 2007, the
main characteristic was the rapid rise in economic activity without any expansion and
diversification of the production base, thus, leading to a distorted growth model and
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chronical imbalances that have not been adequately addressed for many years (Bank
of Greece, 2014b: 12-13, 22, 42). Similarly, the Greek welfare state was suffering
from substantial weaknesses at the onset of the crisis (Karamessini, 2015: 6). In
addition, public deficits and indebtedness because of a significant expansion of
earnings-related schemes and clientelistic–particularistic arrangements, led to the
retrenchment and rationalisation of social policy in the 1990s with very few attempts
to tackle major issues such as the blurred line between social insurance and
assistance, the absence of a safety-net (Petmesidou and Guillén, 2015: 7-10).
In this context, the implementation of active labour policies relied almost exclusively
on European structural funds and, mostly the European Social Fund, for the financing
of public services, public works and vocational training, as well as for the
development of EU inspired social policy, such as activation through Public
Employment Services or gender equality policies (Zartaloudis, 2014: 432, OECD,
2016: 59). A large part of active labour policies is occupied by lifelong learning
policies, aiming at combating social exclusion through training programmes and/or
promotion to employment for the inclusion of the unemployed. However, they were
characterised until the mid-1990s by the lack of central planning and coordination, the
wastage of European resources and the extensive privatisation, which questioned the
aim and the mission of active labour market policies against unemployment and social
exclusion. (Prokou, 2011: 207, 219-222).
By their scope, active employment policies are selective policies as concentrated to
specific social groups, such as young people, women, long-term unemployed,
migrants and other vulnerable groups, to increase their employment opportunities and
to improve their income perspectives (Dimoulas – Michalopoulou, 2008: 27-30). For
instance, during the period 2000-2006, the aim of active labour market policies was
focused on the prevention of long term unemployment, the support and
encouragement of unemployed to employment, the protection of equal opportunities
for access to the labour market and especially for those threatened with social
exclusion., the improvement of the access and participation of women in the labour
market and the upgrading workers' qualifications and services of the public sector.
During that period, there were 642.103 people benefited for relevant programmes for
the promotion of employment, vocational education and training, subsidized
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employment for the creation of new jobs or the acquisition of practical experience and
the promotion of equal opprortunities through childcare or elderly care structures
(Diadikasia, 2014: 28-30).
Furthermore, during the previous programming period 2007-2013 a vast array of
active interventions has been implemented to support employment, from which more
than 1 million persons benefited at a cost of approximately €3.7 billion. These
interventions have been implemented in the framework of the National Reform
Programme for Human Resources, which provides (Ministry of Labour, Social
Security and Welfare, 2014):
(a) Subsidised employment through local programmes of employment support,
subsidised contributions to employers for hiring unemployed, hiring subsidies to
employers, training vouchers for unemployed, public works programmes,
subsidies for start-ups
(b) Training programmes for unemployed, vocational training, training vouchers
(c) Programmes of companies’ structural adaptations including training of workers
(d) Programmes of social integration through local programmes of job creation and
social integration for vulnerable and the National Network against Poverty
According to the evaluation of active policy interventions carried out in the middle of
the programming period, the aim of subsided programs for the creation of new jobs or
the creation of new companies was selective, reserving a preferential treatment for
women, young people and long-term unemployed through quotas in the positions or a
higher subsidy for certain categories of unemployed. At that period, these programs
seem to function more as a universal employment support programs than selective
ones. However, there are serious doubts whether active employment policies
contribute to the increase of the participation rate, as few participants were active as
unemployed and others were inactive. Also, the dead weight of programs aiming at
the creation of subsidized new jobs (50-56%) or of new companies (60%) is very
high, which demonstrates that these programs contribute mainly to the support of
employment than the promotion to employment of groups with difficulties to enter the
labour market or to the enhancement of an existing initiative of entrepreneurship.
Finally, the sustainability of new jobs is not evident as it is the case for new
enterprises (EEO Group, 2012: 11-.15).
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An additional characteristic deficiency of the period before crisis is the fragmentation
of the evaluation of active employment policies and the subsequent difficulties to
monitor their implementation. Besides, there are some general remarks on the
characteristics of active employment policies that conclude on the lowest spending on
labour market interventions in Greece between 2000-2006 (0,46% to 0,9%) compared
to EU-27 average (1.5% to 2.2%) and the subsequent low participation number of
beneficiaries. As for the internal structure of the expenditure on interventions in the
labor market, the domination of employers' subsidy policies is clear, while
expenditure on employment services throughout the period 2005-2009 was extremely
low reaching only 2% of total expenditure on labor market interventions (EEO Group,
2012: 16-22).
Furthermore, the findings of a qualitative research on the effect of Integrated
Interventions, implemented during 1994-1999 with the aim to combat unemployment
through a combination of professional orientation, vocational training, employment
subsidies and counselling, show that the unemployed participants constitute a specific
category of labour market’s supply, which is constructed and operates depending the
supply and demand of subsidised employment. In fact, the Integrated Interventions
didn’t succeed in implementing a mainstreaming policy for the less favoured groups
of unemployed facing difficulties in entering the labour market. On the contrary, these
interventions favored the unemployed who had already skills and, therefore,
comparative advantages in the labour market (Dimoulas – Michalopoulou, 2008: 43-
45, 152-153).
Overall, the problems identified in the design, implementation and management of
active employment policies along with the economic crisis made necessary to
redesign these policies. It’s worth mentioning that the specific targeting of policies to
vulnerable groups that are not in employment and the selection of programs towards
employment maintenance, creation of new jobs and vocational training shape the new
philosophy of active employment policies in the period of economic crisis (EEO
Group, 2012: 23-25).
3.3. Active Labour Market Policies during economic crisis
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Policy recommendations to cope with the social cost of the crisis indicate the urgent
need for more inclusive economic growth to reduce poverty and inequality and boost
employment in the short term, including a comprehensive social safety net, better
targeted social programs, effective benefit system and expansion of active labour
market policies along with guaranteed minimum income (OECD, 2016: 11, 28-29,
Jessoula et al., 2015: 23-29). In particular, the priority in late 2013 was to deal with
the very high unemployment rate through some key active labour market policies,
based on short-term and temporary public work programmes with 50,000 positions
mainly for the long-term unemployed, and subsidised internships of 45,000 young
jobseekers with private sector employers. Additional reforms in the welfare system
provide the revision of various existing benefits to increase the effectiveness of social
welfare spending and ensure the targeted support of vulnerable groups with the
strongest needs of income support, the tapering of unemployment insurance benefits,
as well as the development and integration of the guaranteed minimum income
scheme with other social benefits and services (European Commission, 2013b and
2014b: 50-51, OECD, 2016: 57-58). As far as labour market policy concerned, the
strengthening of activation programmes (training voucher programs for access to the
labour market, public benefit employment schemes) is foreseen to tackle high
unemployment with emphasis on their effects in promoting employment, along with
the improving of the labour inspection system and the condition access to
unemployment benefits on stricter obligations for participation in training and
employment service programmes (OECD, 2016: 59).
In this context, the upgrading and expansion of vocational education and
apprenticeships is crucial to improving the transition from education to employment
and to foster sustainable employment (European Commission, 2015b: 15). To this
end, Greek authorities has to pursue a detailed implementation plan for the
modernisation and expansion of vocational education and training, and the increase in
the provision of apprenticeships, including the establishment of a quality framework
and a monitoring mechanism to develop local partnerships, the encouraging of closer
employer engagement and private-sector funding in vocational education and training,
and the effective matching of vocational education and training with the needs of the
labour market (European Commission, 2014b: 48). The Memorandum of
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Understanding for a three-year ESM programme for Greece dated on 19 August 2015
provides specific requirements for the modernisation and expansion of vocational
education and training. Subsequently, the National Strategic Framework for
upgrading vocational education and training (VET), recently presented by the
Ministry of Education takes into consideration the perspectives of the Greek
economy, the labour market data and the medium term projections on skills needs and
concludes to the vision for upgrading vocational education and training, which is
structured in three pillars: (i) strengthening the social role of VET in order to reduce
social inequalities, (ii) enhancing the working role of VET and (iii) linking VET with
the overall development planning of the country (Ministry of Education, 2016).
In the last quarter of 2014, there have been urgent initiatives within active labour
market policies in order to implement targeted actions in favor of the most affected by
unemployment and the vulnerable groups, which include (Ministry of Labour, Social
Security and Welfare, 2014):
Integrated programmes for 8.000 unemployed graduates that provide continuing
vocational training in the fields of generic skills, job search skills, entrepreneurial
and ICT skills, practical training in private firms and counseling services.
Training voucher for 38.000 low skilled unemployed workers aged 29-64, which
provides theoretical training, practical training in enterprises, as well as
counselling and guidance services in construction, waste management and ICT.
Subsidies to employers in order to hire 5.000 unemployed workers for 12 months.
Public works programmes addressed to 50.000 long-term unemployed persons.
Specific programmes of Vocational Training for 16.000 young unemployed
aiming at the reinforcement of skills in specialisations of cutting edge sectors of
the Greek economy.
Regional mechanisms to support the development of Social Cooperative
Enterprises.
In addition, a National Action Plan to implement “Youth Guarantee” in Greece has
been elaborated to provide a coherent set of actions targeted to young unemployed
and not in Education, Employment and Training (NEETs), which include activation,
apprenticeship, traineeship or education, support of entrepreneurship and integrated
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interventions of job search assistance, training, counselling and job offer (Ministry of
Labour, Social Security and Welfare, 2014).
Concerning the evaluation of active labour market policies that have been
implemented in Greece, it’s worth mentioning that evaluation studies are regularly
commissioned by the Greek Management Authority for European Social Fund and the
Management Authorities of relevant ministries and conducted by external contractors,
such as independent experts or private consulting firms and research institutes.
However, these evaluations are mainly focused on the implementation or measuring
of success of adopted policies and do not provide clear insight to policy making on
the design of new policies and on what works and why. Moreover, an operational
system for the on-going internal evaluation of ALMPs schemes, as a core service
offered by the Greek Public Employment Service, is not yet in place (Chrysakis,
2012). Most of the active labour market policies implemented recently to tackle the
effects of the crisis are not evaluated yet, while past evaluations provide little insight
due to the different labour market conditions (Karantinos 2015).
During this period, three evaluations on programs of active labour market policies
have been conducted. The first evaluation concern the harmonisation of family and
professional life with possible results on the employment and maintenance of job
positions. The second evaluation was focused on local actions of social inclusion for
vulnerable groups, which strengths were related to the individualised approach and
support, the regular information, the development of social skills, the training and the
networking. Finally, the evaluation of the program of Voucher Entry to the Labour
Market has been conducted on the basis of quantitative research with a web survey
and a qualitative research through seven focus groups with all actors involved. The
program of Voucher Entry to the Labour Market implemented during 2014 for 35,000
unemployed young people aged up to 29 years has been evaluated and resulted in the
formulation of concrete recommendations to ensure better targeting and to avoid
eventual substitution of employers by the beneficiaries of the program. It is suggested
to award more points in the age group 25 to 29 which is at a disadvantage position in
the labour market due to longer duration of unemployment. Further restrictions are
needed to discourage companies to make continuous use of the voucher program to
cover their needs in labour force. Attention should also be paid to preventing possible
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replacement of employers by the program’s beneficiaries, while stricter conditions
should be adopted for the training providers. Finally, it would be useful to follow a
certification procedure for the skills acquired by the beneficiaries during the voucher
program (Karantinos et al., 2015: 278-279).
Despite the lack of regular and comprehensive evaluation studies on ALMPs, some
broad conclusions can be drawn by the existing literature for the period during the
economic crisis (Karantinos, Chrysakis, Balourdos, Mouriki, Soulis, Galata, Petraki
and Kostaki, 2013, Karantinos 2014):
The available indicators show that the amounts dedicated to active labour market
policies are particularly low, as labour market policy expenditure seems to rely
more on passive measures than on actives ones.
The most important weaknesses of active labour market policies in Greece
concern the little connection with the needs of the labour market and the lack of
evaluation.
Concrete policies should be implemented to address the structural labour market
problems and improve the matching of job seekers with new vacancies, so as to
avoid the conversion of unemployment from cyclical to structural, i.e. permanent.
Future developments in the Greek economy will also depend on structural policy
measures, namely by improving the quality and efficiency of education as well as
the development of skills in areas that can become new sources for growth.
Greater emphasis should be made on activating the unemployed, especially youth
and women. Job-search training should be the top priority in individual action
plans along with job counseling services.
Existing employment subsidies should be better targeted to the most
disadvantaged youth, such as early school leavers and individuals who have not
been in employment, education or training for a long-term.
The introduction of apprenticeships and the planned VET reform with strong links
of the educational and training system with the labour market are essential.
Stronger emphasis should be placed on the weak areas of active labour market
policies in Greece, such as mechanisms for early identification of skill needs,
quality assurance and management of schemes, guidance and counselling services.
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Main priorities in combating the effects of the crisis should be policy measures for
young people, subsidizing employment and self-employment, active inclusion of
people at risk of social exclusion, local public-spirited programmes, development
of social economy, continuing vocational training and strengthening of
rehabilitation services.
4. Active Labour Market Policies in OECD countries
Active labour market policies occupy an important role in the OECD and EU policies
that have been developed since the 1990s to improve employment and labour market
performance and encompass: “all social expenditure (other than education) which is
aimed at the improvement of the beneficiaries' prospect of finding gainful employment
or to otherwise increase their earnings capacity” (European Commission, 2015).
More specifically, active labour market policies include public employment services
(job placement, counselling and vocational guidance), labour market training for
unemployed and employed adults, youth measures referring to training and
employment programmes and apprenticeship, subsidised employment (hiring
subsidies to private-sector employers to hire unemployed, assistance to unemployed
persons to start their own business and direct job creation), as well as measures for
the disabled including vocational rehabilitation training to enhance employability and
work programmes which directly employ disabled people (Martin & Grubb, 2001
Eurofound, 2010). On the other side, passive labour market measures include
unemployment benefits to the unemployed and early retirement benefits (Martin &
Grubb, 2001 Eurofound, 2010).
A mix of passive and active labour market policies is generally used in order to
counter higher unemployment rates. Yet, expenditure on active labour market policies
is indeed more likely to reduce unemployment with a lower fiscal cost as savings may
be generated on passive policies. However, some Member States with high
unemployment spend relatively small shares of their GDP on labour market services
and active measures (notably Bulgaria, Slovakia, Lithuania, Latvia, Croatia and
Greece), although it may be worthwhile to shift some spending to activation measures
(European Commission, 2015). Across the EU, labour market policy measures
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account for 1.6% of GDP with a ratio of approximately 2:1 in expenditure between
passive and active measures. Despite the variety in the structure of ALMP spending
over Member States, training accounts for the biggest share of expenditure at nearly
40% and employment incentives account at 24% of expenditure. Supported
employment and rehabilitation, as well as direct job creation occupy a significant
share of funding at 16.1% and 13.4% of expenditure respectively (Eurofound, 2010).
Nonetheless, total expenditure on active labour market policies has been falling in the
EU-28 since 2010, despite the severity of the labour market challenge. On the other
hand, even when active labour market policies spending was increasing during the
crisis (2007–2010), the activation support was not commensurate with the labour
market needs generated by the crisis (ILO 2015: 28).
Thus, a major question is raised concerning the impact of active labour market
policies in reducing unemployment and raising labour market participation. The
analysis of the effects and the contribution of active labour market policies in labour
market performance is based on the existing literature related to the evaluation of the
different forms of active labour market policies and programmes. The evaluations that
have been performed measure either the impact of training and job assistance
programmes on individuals’ employment and earnings or the net effects of subsidised
employment programmes on aggregate employment and unemployment by estimating
“dead-weight”, “substitution” and “displacement” effects (Martin & Grubb, 2001).
Following the findings of this analysis, we can come to the following conclusions:
Employment services are the most cost effective intervention (Cazes, Verick &
Heuer, 2009) and has positive outcomes according to evaluations in some
countries, notably Canada, Sweden, the UK and the US (Martin & Grubb, 2001).
The mix of measures involving job matching, counselling and guidance and
private sector employment subsidies are more likely to have positive outcomes
(Eurofound, 2010). Therefore, counselling, job-finding incentives and job-search
assistance programmes are effective if they are combined with increased
monitoring of the job-search activity and enforcement of the work test (Martin &
Grubb, 2001).
Training programmes have a ‘modest likelihood’ of having a positive impact on
post-programme employment (Eurofound, 2010), but they can have positive
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impacts, particularly when conducted in the workplace (Cazes, Verick & Heuer,
2009). Findings show that training programmes tend to be among the most
expensive active measures, while only some training programmes work (Martin &
Grubb, 2001), such as vocational trainings that need to be based on a more
targeted and market-oriented function (Duell, 2012). The effectiveness of training
programmes can be maximised if they are small scale, built with mainly on-the-
job content and well targeted to the specific needs of unemployed and employers
(Martin & Grubb, 2001).
Youth programmes have 40% to 60% lower probability of generating positive
outcomes than those targeted at older age groups (Eurofound, 2010). Training
programmes, wage subsidy measures and direct public sector job creation
schemes are not effective for disadvantaged youths, even they have been
particularly popular in many European countries. Effective programmes for
disadvantaged youths should combine: (a) close link to the local labour market
and jobs, (b) mix of academic education, occupational skills and on-the-job
training and (c) a range of supporting services, tailored to their needs (Martin &
Grubb, 2001).
Employment subsidies do not have a favourable impact, as for instance public
works programmes can be effective as a safety-net but usually do not lead to
better employment opportunities and entrepreneurship incentives are appropriate
for a small segment of the population (Cazes, Verick & Heuer, 2009). Even if the
impact of these programmes is greater than training programmes or job creation
measures, their net employment gains are very small and they present large dead-
weight and substitution effects. On the other hand, the goals of these programmes
to keep individuals in contact with the world of work or to provide the long-term
unemployed with jobs may be important (Martin & Grubb, 2001). In any case,
subsidized employment need to be run on a smaller scale, combined with other
ALMP measures like training (Duell, 2012), targeted to particular groups of
unemployed and closely monitored (Martin & Grubb, 2001).
Direct public sector employment programmes are not effective in helping
unemployed people to get permanent jobs and they may actually worsen
employment prospects (Eurofound, 2010). These programmes should be
implemented exceptionally for a short duration and targeted to the most
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disadvantaged, while temporary employment programmes in the public sector can
be used particularly in a recession when vacancies are scarce (Martin & Grubb,
2001).
Interactions between active measures and unemployment benefit systems can
have significant effects on work incentives for the unemployed and on the wage-
setting behaviour of workers and employers. Furthermore, activation strategies
with additional perspectives to intensify job search can have impact on transitions
to employment for people receiving unemployment benefits (Martin & Grubb,
2001).
Additional findings from evaluations reveal some particular aspects that can influence
programme effects, such as:
The type of programme itself is the primary factor determining the success of
labour market outcomes, rather than contextual factors such as business-cycle
timing or institutional labour market features (Eurofound 2010).
Significant positive employment impacts are much more likely to be identified
two or three years after programme participation (Eurofound 2010).
Comprehensive assessments should assess outcomes against unit costs (Eurofound
2010), which can turn the estimated programme effects into negative (Martin &
Grubb, 2001).
Comprehensive assessments should not be limited to output measures related for
instance to the number of placements in employment, but calculate economic
efficiency measures based on short-term expenditure and outcomes (Collins,
2012).
Finally, the analysis of studies on policy decisions adopted by governments in 79
OECD and non-OECD countries, since the beginning of the economic crisis, shows
that training is the most commonly used active measure in high-income countries (27
countries), followed by work sharing (24 countries), increased resources for public
employment services including job search assistance measures (20 countries), and
subsidies (20 countries). The least-implemented intervention in this group of countries
is public works programmes (5 countries) due to its limited effectiveness. Moreover,
17 high-income countries have made changes to unemployment benefits schemes
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based on extensions of coverage and broader eligibility criteria (Cazes, Verick &
Heuer, 2009). Similarly, the most utilized policy response in the middle-income group
is training (with 25 countries) followed by job search assistance, entrepreneurship
incentives and public works programmes. Interestingly, 11 of these countries are
using a reduction in working hours to support employers in response to the downturn,
though not all these interventions are subsidized. There are far fewer low-income
countries implementing such policies in response to the crisis, focusing on
entrepreneurship incentives and training. Overall, the use of labour market policies in
response to the current crisis is declining, which reflects the financial and technical
constraints hindering the response of these governments (Cazes, Verick & Heuer,
2009). On the other hand, active labour market policies present some challenges
despite the significant decline of jobs and employment opportunities. For instance,
training has obvious attractions in a downturn, as it enhances social contact for the
unemployed, responds to existing skill gaps (Eurofound, 2010) and address the
growing divide between the educational ‘haves’ and the ‘have-nots’ for reasons of
social equality and for economic efficiency (Friends of Europe, 2015a). Moreover,
short-term complementary active labour market policies are needed to ensure that
individuals have the right skills to take up the jobs created, while focus should be
given on job search assistance and training as well as on as training programmes
accompanied by specific services of matching skills to sector needs, which are among
the most effective active labour market policies. Furthermore, the reinforcement of
active labour market policies, along with a targeted combination with passive policies
and adequate income support to all jobseekers, is needed to ensure the necessary
support to the most vulnerable (ILO, 2015). Besides, active labour market policies
should be associated with job creation, while a comprehensive policy to boost job
creation is absolutely needed to tackle the effects of the crisis (ILO, 2014).
5. Conclusion
From the above analysis, the need to protect the unemployed and the most
disadvantaged groups from the negative effects of the prolonged economic recession
in Greece became clear. This requires undoubtedly well-designed structural policy
solutions, more effective social support measures and safety net benefits. In this
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context, the role of active labour policies is appearing attractive as they can contribute
to the better functioning of the labour market, ensure that workers remain attached to
the labour market and provide unemployed with the right skills to take advantage of
emerging jobs. Also, the effect of active labour market policies in the mitigation of
the crisis’ social consequences can be significant for reasons of social equity.
However, the limited fiscal capacity of the country plays a decisive role in shaping
social policy solutions, while the existing structural weaknesses of the economy and
the labour market along with the fragmented character of the welfare state reduce the
potential for the effective implementation of active labour market policies. Due to
budgetary constraints, the state promotes mostly selective social policy measures that
are justified by the extensive and emergency nature of crisis’ social repercussions, but
they reduce the coverage of social protection. Thus, selective social policy options
introduce new forms of dualism in the labour market without solving the problems of
the vulnerable groups. This is getting more accentuated in view of the poor results of
active labour market policies in terms of employment and income ability.
Subsequently, an additional factor that restricts the effectiveness of active labour
market policies is related to their use for substituting the fundamental guarantees of
income replacement, due to the inability of the Greek economy to reduce high levels
of poverty and income insecurity. Even if the policy documents suggest for a
combination of labour market and welfare state solutions, there are doubts that these
objectives can be achieved taking into consideration the unfavorable conjuncture.
Moreover, these concerns are even more intense because of the restriction of the
public character of social policy in view of the required balance between social
spending and economic effectiveness and the transfer of competences in the provision
of social services in the private sector.
In addition to these difficulties, there are endogenous weaknesses in the
implementation of active labour market policies in Greece, which are related with the
lack of a long-term, coherent and well-coordinated design of policy interventions in
correspondence to the labour needs, the absence of a quality framework and
accreditation of skills, as well as the deficiency to ensure the effective use of
resources and the sustainability of initiatives. There also the side effects from the
implementation of active labour market policies. As we have seen in previous
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sections, a vast array of active interventions has been implemented so far to support
employment and social inclusion. Before economic crisis, active labour market
policies were selective as they were reserving a preferential treatment for women,
young people and unemployed, but they function more as universal employment
support programmes. During economic crisis and, mostly after 2012, the selective
targeting of the active employment policies was the main answer to the crisis. In the
the last quarter of 2014 more targeted and selective active measures have been
promoted in favor of the most affected by unemployment and the vulnerable groups
by advancing integrated actions of training and counselling services, public works
programme, apprenticeships and voucher-based internship scheme for the young
unemployed, as well as unemployment assistance for the long-term unemployed.
Furthermore, before economic crisis the main side effects of the active labour market
programs were mainly related to the high rates of “dead weight”, as well as to the low
achievement of objectives and the low sustainability of results. On the contrary, the
main side effects of active labour market programs during economic crisis are related
to the targeting of the programs and the substitution of employers by the beneficiaries
to cover their need in labour force.
Nevertheless, the economic crisis revealed the necessity of active labour market
policies not separately, but in combination with other welfare state’s interventions in
order to reduce the substitution of income and support their effectiveness. It seems
that actors in Greece are better equipped now with alternative active labour market
solutions to counter social crisis. What is needed is to fully exploit other countries’
experiences in active labour market policies in combination with social protection
measures and to increase expenditure in favor of active labour market policies to
combat unemployment and social exclusion. Despite the narrow margins of policy
options, there are several challenges for promoting active labour market policies,
particularly in a recession, provided that they will not substitute the fundamental
guarantees of income replacement and that will be associated with a comprehensive
policy of job creation, while preserving the public character and the role of the state
that should not be undermined under the pretext of budgetary constraints.
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