The above analysis has presented detailed evidence concerning the policies implemented to mitigate the adverse effects on the labour market of the economic crisis, and assessed the effectiveness and equitability of the measures taken. It shows that, although a variety of measures have been implemented by the Member States, some measures, such as STWA, have been more prominent than others, such as public sector employment creation. Moreover, due to their specific nature, measures such as STWA have been more effective in the initial phase of the downturn while others, such as the use of temporary subsidies (particularly those targeted at encouraging hiring) appear to be more appropriate in the recovery phase since they help to speed up job creation when production rebounds.
If STWA avoid redundancies, they can save firing and (re)hiring costs for firms, prevent the loss of firm-specific human capital, and enhance workers’ employability and security by providing them with a (temporary) guarantee of income security, even if the reduced number of hours worked leads to a relative pay cut. On the other hand, these arrangements also pose the risks that enterprises become overstaffed, necessary restructuring is delayed, workers lose the incentive to upgrade their skills, deadweight losses accumulate, and funds get diverted from productive purposes such as training. In order to limit such risks, the analysis suggests that arrangements should apply only to companies with strong business fundamentals, that the duration and eligibility criteria should be subject to regular review, and employees should be given appropriate training to enhance their employability.
Temporary wage subsidies have a rather limited impact on aggregate employment levels but, if targeted at workers at the margin of the labour market, these measures may strengthen social cohesion. Similarly, reductions in social contributions targeted at disadvantaged workers may increase employment amongst this group. In all cases, however, the socio-economic gains of these measures have to be weighted against the fiscal burden they incur.
The creation of temporary jobs in the public sector has been less developed but has been targeted at specific vulnerable groups. The effectiveness of such measures is generally seen to be limited owing to high risks of adverse impacts on labour supply in the private sector, but they could be strengthened by providing the employees with adequate training opportunities and with incentives to search for work in the private sector.
Measures to upgrade skills and improve job matching have also been implemented. The public employment services have intensified the provision of information, placement and active support services, especially for young unemployed people. Member States where unemployment is expected to continue to rise are being encouraged to increase the capacities of their PES in order to match the provision of high-quality job-matching services with actions to promote intensification of job seeking.
As the prospects for economic recovery strengthen, most Member States have signalled that they will withdraw the crisis-related labour market measures by the end of 2010 or early 2011. In this situation, the evidence suggests that the gradual phasing out of the labour market recovery measures should be accompanied by a strengthening of activation, training and other flexicurity policies in order to facilitate job reallocation.
As the economic downturn has also highlighted some structural labour market problems, this suggests that the focus of employment policies could be positively re-orientated in order to reduce structural unemployment, improve skill formation, strengthen social inclusion and reduce poverty.