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Lessons from the Swedish Crisis in the ’90s

Lessons from the Swedish Crisis in the ’90s. Anders Forslund IFAU, Uppsala and the Department of Economics, Uppsala University. Background. Sweden hit hard by rapidly increasing unemployment rates in early ’90s May be facing similar situation in the near future

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Lessons from the Swedish Crisis in the ’90s

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  1. Lessons from the Swedish Crisis in the ’90s Anders Forslund IFAU, Uppsala and the Department of Economics, Uppsala University

  2. Background • Sweden hit hard by rapidly increasing unemployment rates in early ’90s • May be facing similar situation in the near future • Despite extensive active labour market policies (ALMPs) in the ’90s, unemployment remained high for a number of years • We can learn • Who were hit the most by the crisis • What can and cannot ALMPs accomplish, and how can some pitfalls be avoided

  3. Who were hit by the crisis in the early ’90s? • We have computed a measure of how persons with different characteristics were hit by becoming unemployed during the crisis in the 90s: • For those who registered as unemployed job seekers at the public employment service (PES) 1992-95, we have computed the fraction of days in open unemployment or in labour market programmes from when they first registered through 2006

  4. Who were hit by the crisis in the early ’90s? (cont.) • On average, those becoming unemployed in the early ’90s (around 900 000) spent 22 % of the days (roughly 3 years) until 2006 in the PES registers • The risk of having a large fraction of register days was increased by the following characteristics: • Old age • Low education level • Born outside the Nordic countries • No perfect match with ”being targeted” by ALMPs; e.g. not clear why such a strong focus on youth

  5. Lessons of ALMPs in the ’90s • Evaluations of ALMPs in the ’90s indicate that programmes only rarely increased transition rates to employment. May reflect excessive focus on programmes and a neglect of job search assistance and incentives. May also reflect that programme participation could be used to renew UI benefit eligibility • Which programmes worked? Generally, the more similar to an ordinary job, the better, but also the more crowding out. Targeting necessary

  6. Lessons of ALMPs in the ’90s (cont.) • Training programmes worked in the ’80s and the early 2000s, but not in the ’90s. Why? • Large volumes • Hard to identify what to train for • Could be used to renew eligibility for UI benefits

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