The Great Recession of 2008-2009: Causes ... - Index of - IZA

labour market policy measures that do not require complex institutional structures and social
dialogue. Nonetheless, some governments are turning to more innovative policies that have
not been widely used before such as providing subsidized training for threatened workers.
The effectiveness of labour market policies during the global financial crisis 2008-2009
In general, evaluation studies conclude that active labour market policies are a potentially
important weapon in the fight against unemployment and poverty, but produce mixed results
(Auer et al. 2008). Earlier evaluations of active labour market policies in Europe and the
United States focused mostly on the short-run employment effects of programmes. 42 Some
key messages from this literature are that job-search assistance is relatively effective in the
short-run and job subsidies generally increase employment chances but may entail significant
direct and indirect (deadweight) costs, and hence should be targeted. More recent studies
reveal stronger positive effects of active labour market policies if a longer-run perspective is
taken. For example, training measures, which are the most widely-used active labour market
policy in the context of the crisis, are beneficial for participants over the longer-term with
respect to employment and earnings outcomes (Kluve 2006; Lechner & Wunsch 2009).
In addition to these general findings, it is also possible to gain an insight into the coverage of
crisis-related programmes using information provided by governments (particularly the
public employment services). As illustrated by the examples in Table 8, this information
indicates that in high-income countries, work-sharing schemes have been utilised for a large
number of workers as a response to the crisis. For example, over 1.4 million German workers
were being subsidized through the Kurzarbeit scheme, which helped employers hold on to
workers rather than laying them off. Even if it is too early to ‘evaluate’ these schemes, it is
likely that these measures have helped to prevent further increase in unemployment.
However, while these measures work over the short-term, they have to be phased out at one
point because resources and job reallocation have to take place and because these measures
are costly. In some middle-income countries, public works programmes are supporting
incomes among a large number of poor households during the downturn.
42 See Auer et al. (2008), Bechterman et al. (2004), Card et al. (2009), Kluve (2006), Lechner and Wunsch
(2009), and Martin (2000) for further discussion on these issues.
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