In the beginning of the 2000s despite many macroeconomic improvements Estonia paid little attention to developing the labour market. Estonia’s spending on labour market policy was one of the lowest in Europe. The aim of the current study is to evaluate the effectiveness of ALMP (Active Labour Market Policy), to give an overview of other countries’ experiences with its implementation, and to introduce different methods to evaluate the effectiveness of ALMP.
Effectiveness of methods
Other countries’ experience shows that large-scale ALMP programmes are ineffective and well-aimed programmes work the best. Although ALMP can only help a small percentage of the unemployed, it is still an important measure of labour market policy. The most effective and cheapest is to offer help searching for a job and, to some extent, labour market training. Inefficient methods include start-up grants for the unemployed to start their own business, subsidies to employers, community work. The effectiveness of programmes can only be increased by combining different methods of ALMP.
Compared to many European countries, Estonia spends very little on ALMP and the structure is quite one-sided, because a big part of that is spent on labour market training and financing the employment policy. Although by joining the European Union, those costs would increase more than twice, they would still remain low and as a result, the effectiveness of using the measures would probably suffer.
Considering the target population
The changes in employment between economic sectors took place in Estonia in a period three times shorter than in the EU, so the social guarantee and retraining system did not function the way it should have. So the employment rate in Estonia is lower and therefore it is important to apply diverse ALMP programmes which suit the needs of different target groups as well as possible. Among different risk groups, the most difficult is to help the unemployed youth, because they are often young people with incomplete education who are not interested in studying, and short-term training cannot help them.
The results of the analysis show that active labour market policy in Estonia is generally effective. E.g. those who take part in training are 7% more likely to work one year after the end of the training and in two years it is twice as likely. Start-up grants for those starting their own business increase the probability of working in two years by a quarter. On the other hand, those trends may be connected to the general economic development in the viewed period, but two people out of three still found that participating in courses increased their job prospects.