Rethinking the Welfare State: The prospects for ... - e-Library

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Labour market training
Introduction
With growing and shifting patterns of international trade, increasingly large and
destabilizing international capital flows, the potentially adverse impact of rapid
technological change on lower-skilled workers, and an OECD standardized
unemployment rate that more than doubled from just over 3 percent in 1973 to 7.3
percent in 1997, 1 governments world-wide are increasingly preoccupied with the
devastating social and private costs of unemployment. 2 The classically prescribed
macroeconomic remedy—Keynesian demand-side economic stimulus—has attracted
diminishing support because of government deficit and debt levels and doubts as to its
efficacy—qualms that were exacerbated by the “stagflation” experienced by many
economies in the 1970s and early 1980s. 3 Because of the lagging support for this default
policy, various alternatives have been promoted. One such alternative strategy consists of
a supply-side policy that emphasizes the importance of systemic deregulation and
liberalization of labour markets—thereby reducing the costs of, and simultaneously
increasing the demand for, labour. However, this strategy, if unaccompanied by targeted
transitional assistance to displaced workers, attracts concerns that it will increase income
inequalities, threaten job security and more generally reintroduce the problems that
supply-side labour market regulations were initially designed to address. 4 Another option
is the adoption of microeconomic-oriented active labour market policies (ALMPs) that
focus on job search facilitation, job training and remedial education. Many governments
have endorsed ALMPs as their preferred policy in addressing unemployment. Given the
mixed evidence of the effectiveness and successes of such strategies to date, 5 increased
consumer choice and the infusion of competitive pressures facilitated by voucher
instruments may be the stimuli that ALMPs require to respond effectively to the
challenges of unemployment.
This chapter begins by briefly adumbrating the goals of, and rationales for, labour
market training programs. Next, we outline the modes and problems of current
government intervention in the labour market, as well as some promising experiments in
voucher program intervention. Finally, we outline ways to design a voucher regime that
may address the problems that currently plague labour market training, while at the same
time presenting a more attractive efficiency-equity trade-off than currently dominates
government policy in most Western jurisdictions.