Transition from Unemployment to Work and the Role of Active Labour Market Policies during the Lisbon Strategy Period and the Economic Crisis

1 Introduction This paper analyses how European countries have fared in terms of labour market outcomes during the Lisbon Strategy period, and, particularly, in the first phase of the economic crisis. Is it possible to observe within Europe as a whole common trends shaped by the European Employment Strategy (EES) and fostered through policy learning? Or do countries remain confined within their logic of path-dependent developments? What role has the economic crisis played? Does it constitute a break or do the countries that performed well during the EES also remain on track during the economic crisis? A particular focus is placed on transitions from unemployment to work and how they can be bridged through active labour market policies (ALMPs). The importance of focusing on transitions between different labour market states and private arrangements (e.g. full-time and part-time employment, unemployment, housework and caring), and particularly on the institutions and policy instruments (e.g. ALMPs, unemployment benefits, working-time arrangements, employment protection legislation, parental leave) that can foster these transitions, has been pointed out and theorised in Schmid and Gazier (2002) and Schmid (2008). As part of the Lisbon Strategy, the European Employment Strategy (EES) defined an ambitious overall employment target of 70% for the EU as a whole, to be reached by 2010, and targets of 60% for women and 50% for older workers (55-64 years). Despite the slogan "more and better jobs and greater social cohesion", the focus was largely on quantitative targets and much less on qualitative ones. (1)No specific targets on unemployment were formulated. As competences in the field of employment lie with the member states, an open method of coordination (OMC) (2) was set up to monitor and benchmark developments in terms of employment in the EU member states (cf. Zeitlin et al. 2005 and, for a more critical account, Kroger 2009). Despite the fact that some policy learning can be observed, the fact that the OMC lacks provision for sanctions strictly limits the possibilities of the EES. The new or follow-up Europe 2020 strategy was conceived in the light of the severe (labour market) impacts of the economic crisis. Despite greater emphasis on education and sustainable growth, the key areas of action (knowledge and innovation, a more sustainable economy, high employment and social inclusion) are similar to those of the Lisbon Strategy, as are the methods. The new overarching employment rate target is 75% for women and men aged 20 to 64 years and the need, if this target is to be reached, for greater participation of specific labour market groups (youth, older workers, low skilled workers and legal migrants) is pointed out in the conclusions of the European Council (26 March 2010). Guideline 7 of the Europe 2020 strategy calls upon the member states to increase labour market participation and reduce structural unemployment. To this end, member states are asked to "introduce a combination of flexible and reliable employment contracts, active labour market policies, effective lifelong learning, policies to promote labour mobility, and adequate social security systems to secure professional transitions accompanied by clear rights and responsibilities for the unemployed to actively seek work" (European Commission 6.5.2010). Thus, while both transitions and the use of active labour market policies are on the European employment agenda, the specific content remains vague. The paper proceeds as follows. Section 1 uses the European labour force survey data in order to benchmark the developments in employment and unemployment in European countries during the Lisbon period and the first phase of the economic crisis. It also compares countries in regard to transition from unemployment to employment in the pre-crisis period (latest available data). A specific focus is put on Denmark, Germany and the United Kingdom, countries with different welfare state configurations with regard to the importance of ALMPs (high importance in Denmark, medium importance in Germany, low importance in the UK) and different experiences in terms of labour market developments during the Lisbon period (the UK and Denmark doing better in terms of unemployment) and the economic crisis (Germany doing better in terms of unemployment). …