Active Versus Passive Labor Policies

In the past 40 years, active labor market policies have emerged as an important employment policy tool, particularly in the industrial countries. This policy package includes a wide range of activities intended to increase the quality of labor supply through retraining, increase labor demand through direct job creation, or improve the matching of workers and jobs through job search assistance. The objective of these measures is primarily economic, that is, to increase the probability that the unemployed will find jobs or that the underemployed will increase their productivity and earnings. More recently, the case for active labor market policies has also emphasized the potential social benefits in the form of inclusion and participation that come from productive employment. So-called passive programs, such as unemployment insurance or social transfers, mitigate the financial needs of the unemployed, but are not designed to improve their employability in any fundamental sense, whereas active programs are intended to directly increase the access of unemployed workers to the job market.