The Role of Public Employment Services in Promoting an Inclusive Nordic Common Labour Market

This report explores how reforms of Public Employment Services (PES) and active labour market policy (ALMPs) systems in the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) contribute to the common Nordic labour market. The report examines recent, ongoing and planned PES reforms and trends in PES modernisation among Nordic countries, the increased deployment of digital and Artificial Intelligence (AI) solutions and co‑operation practices between Nordic PES. The report presents a number of recommendations on how Nordic PES can further strengthen and enhance their work with the aim to promote an inclusive common Nordic labour market.

Four of the five Nordic countries reviewed in this report are undergoing a reform in their system to provide ALMPs. Denmark is designing and Finland has just started to implement major revisions to the organisation of ALMP provision and Sweden has recently re‑organised its ALMP delivery system and is currently evaluating and fine‑tuning it. Each of these three reforms is changing the high-level institutional set-up of ALMP provision, including organisational set-up, legislative set-up, governance and funding models. Iceland is about to reform its ALMP and other support systems for people with disabilities, aiming to implement the reform in September 2025. The only OECD Nordic country not going through a reform process is Norway which had an overhaul of its ALMP system in 2006, merging employment services, benefits and many other related functions into a single agency.

Promoting the common Nordic labour market is not part of the ongoing and planned reforms in the ALMP systems or revisions to ALMP packages. Nevertheless, there will still be some impact on the common labour market, as the reforms are likely to have an impact on the labour market situation and attractiveness more generally in individual countries.

The ALMP reforms in the Nordic countries have been inspired by good practices in other Nordic countries and mutual learning from each other has continued throughout the reform processes. Furthermore, the reform designs have been guided by evidence. Denmark went through a thorough evidence‑collection phase to guide the reform design, and Finland and Sweden piloted the new models to fine‑tune the reform design.

All Nordic PES now operate hybrid or blended models of service delivery and have undertaken significant digital advancements in recent years, building on other EU and OECD countries experiences and lessons learnt. All Nordic PES also now have at least one AI solution in place, compared to one‑in-two PES in OECD countries. While AI presents many opportunities for Nordic and OECD PES more widely, these technologies also bring with them a number of risks that require proactive mitigation.

Co‑operation between Nordic PES takes place at the local (border regions), Nordic and international levels. In border regions, this co‑operation takes place in dedicated cross-border information services located in key border regions and primarily takes the form of the co‑ordinated provision of information and recruitment support to workers or employers considering working or hiring from across a Nordic border. At the Nordic level, co‑operation occurs via several committees, including the Nordic Labour Market Committee and the Nordic Committee of Senior Officials of Labour, and through initiatives such as staff exchanges and study visits. Nordic PES also engage in European-level initiatives like EURES, that have spin-off effects for Nordic co‑operation. Despite these efforts, enhanced co‑operation on technical topics (such as digitalisation or AI) or on joint strategies or actions to address common challenges, like labour shortages or the green transition, would be beneficial.

To greater support a more inclusive common Nordic labour market, the Nordic PES can take action to:

• Implement continuous improvement processes throughout PES activities as a default way to strengthen and modernise ALMP provision, and keep up with the changing labour market needs, technological change and changes in PES environment and ecosystem more generally.

• Apply comprehensive approaches to on-going and planned ALMP reforms to balance prerequisites for bottom-up innovation and ensuring good unfragmented services across the country. Key frameworks to implement these approaches will need to include agreed co‑operation and co‑ordination models, strong accountability frameworks supported by benchmarking and identification of best practices, clear strategies to ensure sufficient capacity across service providers, and efficient data exchange within the ecosystem.

• Move from politically motivated reforms to evidence‑driven reforms by collecting evidence before launching reforms, piloting changes to fine‑tune reform design, designing monitoring and ex-post evaluation frameworks already during the design phase of reforms, and ensuring sufficient funding for evaluation.

• Continue to offer and promote a hybrid operating model combining both digital and in‑person services, providing flexibility for clients and ensuring that in-person support remains available for those who need it most (including vulnerable groups and those with limited digital skills).

• Develop dedicated AI strategies (potentially as part of wider digitalisation strategies) to set out the objectives and principles for AI use within the PES, establishing accountability for AI systems and promoting transparency and explainability.

• Establish systematic and comprehensive approaches to monitor and evaluate digital solutions, including formal evidence generation on their impacts (such as counterfactual impact evaluations).

Furthermore, some actions to better support the inclusive common Nordic labour market need to be taken jointly by the Nordic countries:

• Consider formalising the co‑operation between the Nordic PES in the future to strengthen exchanges on topics particularly relevant to the Nordic labour markets and good practices that are more likely transferable, while continuing exchanges on good practices of ALMP provision with countries beyond the Nordic region to enrich the evidence available for continuous improvement processes and reforms.

• Enhance Nordic co‑operation on an expert level, including on topics such as digitalisation, AI and legal topics, and on common challenges (e.g. skills shortages and the twin green and digital transitions).

• Strengthen joint initiatives by PES, including in the border regions, to relieve skill shortages, such as dedicated talent attraction campaigns, co‑ordination of Memorandums of Understanding with origin countries, and developing joint Skill Mobility Partnerships (SMPs) in line with long-term goals for securing skills and improving co‑operation with third countries.

• Explore legislative options to facilitate third country nationals to commute across Nordic borders.