How effective is help for displaced workers?

In our increasingly globalized and digitized world, more and more jobs are at risk of suddenly disappearing. Unfortunately, when the unlucky workers who are displaced eventually find new employment, they tend to split into two groups. Some do manage to find better jobs, but very often the displaced workers end up in jobs that don't pay as well as the jobs they left.

This process contributes to America's growing inequality problem. So, there's strong interest in providing active labor market programs (ALMPs) in hopes they'll improve the job prospects for the unemployed. Among these programs are classroom and on-the-job retraining, help with job searches, employment subsidies in the private and public sectors, and penalties for failing to search for employment.

Do these programs work?

A recent paper by David Card, Jochen Kluve and Andrea Weber, "What Works? A Meta Analysis of Recent Active Labor Market Program Evaluations," looks at this question by using statistical techniques to compile results from 207 recent empirical examinations of ALMPs in countries across the world.

The results are broken down according to the type of program and the type of participant, and the researchers evaluated the programs for both short and long time horizons. The four main results summarized in the paper are:

  • On average ALMPs have relatively small effects in the short run (less than a year after the program ends), but they have larger positive effects in the medium run (1-2 years post-program) and longer run (2+ years).
  • The time profile of impacts in the post-program period varies with the type of ALMP. Job search assistance and sanction programs that emphasize "work first" have relatively large short-term impacts, on average. Training and private sector employment programs have smaller short-term impacts but larger effects in the medium and longer runs. Public sector employment subsidies tend to have negligible or even negative impacts at all horizons.
  • The average impacts of job-training programs vary across groups, with larger effects for females and participants drawn from the pool of long-term unemployed, and smaller effects for older workers and youths. There's suggestive evidence that certain types of programs work better for specific subgroups of participants. Job-search assistance and sanction programs appear to be relatively more successful for disadvantaged participants, whereas training and private sector employment subsidies tend to work better for the long-term unemployed.
  • ALMPs are more likely to show positive impacts in a recession.

Interestingly and importantly, the results are also separated according to whether the program used "randomized controlled trials," the gold standard in empirical research, and when the results were very similar for both groups.

There are growing and realistic fears about job security among workers of all types. After all, very few jobs are truly safe from technology and globalization, and we must do our best to help workers when those fears are realized.

Labor market programs will, of course, provide important help to workers and their families, but the nation as a whole also needs well-trained workers who can attract industries that provide the best jobs. ALMPs have generated quite a bit of skepticism, but this research tells us that well-targeted, well-designed programs can be quite useful for some workers.