Luxembourg’s unemployment rate - which was extremely low in the 1970s and 1980s, and in the 1990s increased considerably but still remained low compared with other countries - has since 2004 been close to 5%. This report first compares Luxembourg’s experience with that of "reference countries", which also provide a high level of social protection. as measured by the level of unemployment insurance and minimum income benefits. The country’s small size and the importance of cross-border commuting in the country has certain advantages for the Public Employment Service (PES) and generates some additional constraints, but the policy options remain generally similar to those tried by the other reference countries. Several of these countries (Norway, Sweden, and Switzerland) also had very low unemployment into the 1980s. In general, the countries which first introduced generous unemployment benefits only in the 1970s suffered high levels of unemployment about 20 years later, and from this point of view the PES in Luxembourg has managed to keep unemployment relatively low longer than almost anywhere else. The steady increase in the level of registered unemployment relative to unemployment in the sense of the labour force survey from 1975 to 2000 indicates progressive change: the rigorous management and the stigmatisation of unemployment which motivated unemployed people not to register in the early years has been progressively replaced by a situation where some people who register are not available for all types of work. The introduction of a minimum income benefit in 1986 and various extensions of entitlement to passive benefits in 2002 and 2003 have also increased the number of PES clients who are difficult to place...