5 th Meeting of the COMCEC Poverty Alleviation Working Group February 26th, 2015, Ankara, Turkey Activation Policies for the Poor: Lessons from OECD Countries Alexandre Kolev OECD Development Centre

2 What is Activation? No agreed definition of the concept but increasingly used by the OECD to refer to a combination of policy tools that provide support and incentives for: Job search and job finding Productive participation in society Self-sufficiency and independence from public support Activation measures often include policies that target recipients of public support and encourage them to find work (‘welfare to work’) But also include measures that strengthen the employability and earnings capacities of low-income families (like CCTs) Entail a mix of rights and responsibilities: while the possibility of benefit sanction is an important design element, the objective shall not be to curtail benefit provision but improve LM attachment and earnings prospects

3 Activation Measure in G20 countries Activation has a long tradition in the OECD area Early activation measures focused on the unemployed (ALMPs) and were implemented in a context of relatively strong overall LM performance More recent ALMPs implemented in the context of the job crisis and rising unemployment Activation measures recently extended to other working-age welfare recipients (disability and sole-parent benefits) Activation principles have been applied more broadly to a range of different population groups in emerging and developing countries CCTs in Latin America

4 Impact of Activation: What is the Evidence Base? Growing evidence on the impact of CCTs Usually positive effects on education and health behaviour There is also some evidence on the macroeconomic impact of ALMPs, again with a focus on employment/unemployment Results show that ALMP spending and activation can help cut unemployment even in period of economic downturn Large literature on the microeconomic impact of ALMPs. Most of these evaluations studies have looked at short-term employment effects

Impact of ALMPs – by Types InterventionSummary of impactComments Employment servicesGenerally positive, with low costs, in developed and transition countries Best when economy good Little evidence for developing countries Training for unemployedPositive impacts on employment (but not earnings) in developed countries Positive on both in transition countries Links to workplace helps Women benefit more than men Benefits appear to increase over time Training for mass layoffsUsually no positive impacts (though some exceptions) Little evidence for transition and developing countries Training for youthLittle impacts in developed countries Positive impacts in Latin America Earlier interventions more effective Success requires comprehensive and costly packages of services

Impact of ALMPs – by Types InterventionSummary of impactComments Wage/employment subsidies Overall negative effects in developed and transition countries Recent welfare-to-work programs in North America have positive impacts Little evidence for developing countries Results more effective when combined with training High deadweight and substitution effects Public worksOverall negative effects in developed and transition countries on long-term employment Can be effective as short-term safety net Little evidence for developing countries Important risks of displacement Self-employment assistance Few evaluations of employment impacts Very low take-up Can have positive effects for older, well educated Technical services help

7 Impact of Activation: What is the Evidence Base? Some new lessons from OECD activation policy reviews Results show that effective activation strategies can help get UI recipients off benefit and into work - even when labour demand is depressed - and work best for those benefit recipients who are close to the LM (typically the UI benefit recipients) The role of caseworkers and physical meetings seems to matter for successful action – limits of e-services Initial results show activation can work for lone parents with young children so long as recipients can get support for child care, while mixed results for long- term sickness/disability benefits Extending welfare to work programmes for recipients of UA, disability/long-term sickness and lone parents benefits, and for older workers is more challenging A matter of concern is that many benefits recipients are activated to take low- wage jobs which may not lift them out of poverty -> this is why OECD countries have increasingly introduced make-work pay policies – accentuate financial work incentives while maintaining adequate support for low paid workers through in-work benefits or tax credits

8 Selected References OECD (2013) G20 Task Force on Employment: Activation Strategies for Stronger and More Inclusive Labour Markets in G20 countries: Keu policy Challenges and Good Practices OECD Employment Outlooks Martin, J. (2014): Activation and ALMPs in OECD Countries: Stylized Facts and Evidence on their Effectiveness. IZA Policy Paper N°84

9 Thank You!