Chapter 11. Enhancing the prospects of disadvantaged workers in the labour market

Employment and job vacancies are high in many OECD countries. However, some people tend to find it more difficult than others to be hired. This chapter focuses on those population groups (low-skilled young people, persons with care responsibilities, migrants, persons with disabilities and older workers) facing disadvantages in the labour market and on policies that could help improve their situation. The right policies are often different from one group to another, but several common lessons can be drawn. First, the participation of disadvantaged workers in the labour market can be enhanced by making policy support more employment-oriented. Second, early intervention is usually better than costly interventions at a late stage. Third, policies to reduce discrimination in hiring and retaining of workers are important. And fourth, a coherent set of policies, not only a single policy, is needed to deliver broad progress.

    

Introduction

Fostering social cohesion and inclusive growth requires a labour market that provides access and equal opportunities to all and leaves no-one behind. Yet, labour market inequalities have been widening, with persistent difficulties to participate fully in the labour market for some groups and large disparities in pay, working conditions and career prospects.

Governments use a wide range of labour market and other policies that influence the performance of labour markets. This chapter focuses on specific policies aimed at helping people with disadvantages in the labour market. While general policies also affect disadvantaged groups, additional support that targets them may, or in some cases may not, be warranted.

This chapter defines five groups of workers as disadvantaged in the labour market because, in most countries, they have comparatively low employment rates. Low employment rates often go hand-in-hand with social exclusion and low levels of well-being.

The five groups are:

  • low-skilled young people

  • people with care responsibilities

  • migrants

  • people with disabilities

  • older workers.

The employment rates of each of these five groups are lower than for prime-age men in almost every country of the OECD (Figure 11.1). On average, the employment gap (i.e. the difference between the employment rate of prime-age men and that of the group, as a per cent of the employment rate of prime-age men) is 9% for youth not in education and training,1 22% for mothers with young children, 23% for migrants, 45% for people with disabilities and 32% for workers aged 55-64.

Over the past ten years, employment gaps for disadvantaged workers have declined on average, but many people who could work remain jobless. The sheer size of the current employment gaps and their differences across countries suggest that further policy action has the potential to improve the labour market performance of these workers.

As the policy challenges are often specific to a group of disadvantaged workers, the chapter discusses the issues group by group: low-skilled young people (Section 11.1); persons with care responsibilities (Section 11.2); migrants (Section 11.3); persons with disabilities (Section 11.4); and older workers (Section 11.5). The conclusion draws common lessons for policy design to enhance the economic prospects of disadvantaged workers.

As will become clear in the chapter, policy considerations often overlap, especially when workers cumulate several disadvantages, as is the case for low-skilled young migrants or older persons with partial work capacity. Commonly, it is also different members of the same family who encounter disadvantages at the same time, for example when young parents have children with difficulties at school. People’s lives can rarely be classified neatly into simple categories, and a major challenge is to make policy responsive to the actual, often multiple, problems that people face. The focus must be on matching help to the needs of people, not matching people to the schemes that providers are offering.

Figure 11.1. Employment gaps for disadvantaged groups with respect to prime-age men
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Note: The employment gap is defined as the difference between the employment rate of prime-age men (aged 25-54 years) and that of the group, expressed as a percentage of the employment rate of prime-age men. “Mothers with young children” refers to working-age mothers with at least one child aged 0-14 years. “Non-natives” refers to all foreign-born people with no regards to nationality. Data on changes in the employment gap are not available for people with disabilities.

Source: OECD calculations based on OECD Employment database, OECD International Migration database and OECD Family database.

 StatLink http://dx.doi.org/10.1787/888933881496

11.1. Young people with low skills

The successful engagement of young people in the labour market is crucial for their own economic prospects and well-being as well as for overall economic growth and social cohesion. However, low-skilled youth often struggle in the labour market. On average, the unemployment risk of 25-34-year-olds with below upper-secondary education is more than twice that of people of the same age who completed tertiary education (Figure 11.2). A few countries, in particular Colombia and Mexico, show the reverse pattern, but this is because there low-skilled youth tend to live in very poor households and have to work to survive given limited, if not inexistent, social assistance. A disproportionate number of young people with low educational attainment lost their job during the Great Recession. Their employment rates remain below their level before the crisis in the majority of OECD countries, while employment rates of young people with tertiary education are higher today than a decade ago (OECD, 2017[1]).

Beyond educational attainment, it is also the type of skills acquired and the proficiency in these skills that influence the probability of finding a job and how much it pays (OECD, 2014[2]). Young people with weak foundation skills – in literacy and numeracy – are more likely to be neither in employment nor in education or training (NEET). Moreover, evidence suggests that youth unemployment can have serious negative effects on earnings and employment opportunities even 20 years later (Schmillen and Umkehrer, 2017[3]). Prolonged periods without a job may lead young people into crime and reduce their civic engagement as well as their trust in society and other citizens, with large long-term consequences for social inclusion (Carcillo et al., 2015[4]).

Figure 11.2. Low-skilled young people are more likely to be unemployed
Unemployment rate of 25-34-year-olds by educational attainment, 2016
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a. Data for upper-secondary attainment include completion of a sufficient volume and standard of programmes that would be classified as completion of intermediate upper-secondary programmes.

b. Year of reference differs from 2016.

Source: OECD (2017[1]), Education at a Glance 2017: OECD Indicators, http://dx.doi.org/10.1787/eag-2017-en.

 StatLink http://dx.doi.org/10.1787/888933881515

The stark contrast in labour market outcomes between skilled and unskilled youth may increase in the future in the context of further rising levels of educational attainment and a growing demand for skills, unless policy responds to the challenge (see Chapter 14). Many of the jobs destroyed during the crisis are gone for good. It is thus essential that all young people are equipped with good foundation skills that will enable them to create and seize economic opportunities and learn new skills.

Fighting early school leaving is essential

According to the OECD Programme for International Student Assessment (PISA), almost one-in-five students does not reach the basic level of skills that is considered to be needed to function in today’s societies. Students from low socio-economic backgrounds are twice as likely to be weak performers, indicating that social circumstances affect personal outcomes and are obstacles to achieving educational potential.

Failure to get an upper-secondary qualification is a major disadvantage in future life. To reduce the number of young people who leave school without an upper-secondary qualification, policies need to ensure that signs of disengagement are detected early and young people at risk of dropping out of school receive the support they need to complete their education.

Systematic monitoring of school performance helps identify at-risk youth

Strategies intervening at an early stage hold the best promise of keeping at-risk students in education. In most cases, dropping out of school is not a sudden, unexpected event, but the consequence of a longer process of gradual disengagement (Lyche, 2010[5]).

Schools can systematically monitor student attendance and performance and keep the key stakeholders – notably parents and social services – informed to ensure that troubled pupils are tracked and receive the attention they need. Requirements to report attendance to national education authorities, like in Norway (OECD, 2018[6]), can ensure that teachers, schools and municipalities take school absences seriously. One issue with the collection of information on regular attendance can be that schools may not have an incentive to report drop-outs promptly, in particular if their funding depends on student enrolment. Specific attention has to be devoted to the higher risk of school drop-out in disadvantaged schools by, for instance, attracting and retaining high-quality teachers, as has happened in Finland and Korea, or by strengthening school leadership, as through the Student Success Teacher programme in Ontario, Canada (OECD, 2012[7]).

At-risk students and their families may require comprehensive support

When absenteeism and poor school performance are caused, or aggravated, by factors beyond education (such as family problems, health concerns or drug abuse), these need to be addressed too.

If specialised support staff are in place in schools, they can quickly identify and address the challenges that a troubled young person may face. Trained psychologists or social workers can be an important first point of contact for students, parents and teachers when problems arise. Where schools lack the resources for such specialised staff, designated teachers with the appropriate training can help. Support networks outside schools (such as social, health or public employment services or non-governmental organisations) play an important role to address more severe and long-lasting problems that schools are incapable of dealing with on their own – see, for example, the headspace centres in Australia (OECD, 2015[8]) or the Educational Territories of Priority Intervention programme in Portugal (OECD, 2016[9]).

Vocational education and training can help smooth school-to-work transitions

Vocational education and training (VET) plays a dual role: it enables young people to develop a mix of general and job-specific skills and directly responds to the skill needs of the labour market. In a number of OECD countries, however, VET policies are often overshadowed by a stronger focus on academic education. Students and the general public tend to view VET as comparatively low status. Improvements to the quality of VET will be crucial to combat its negative image and achieve better outcomes for people transitioning from school to work.

Apprenticeships are an ideal way of providing relevant practical training

Apprenticeship programmes, where students combine classroom learning with practical training with an employer, typically for a period of several years, are often regarded as a good way of supporting young people who do not want to continue with formal education. Empirical research suggests that apprenticeships yield positive returns in terms of wages and job stability (Carcillo et al., 2015[4]). Learning in the workplace also allows young people to develop both “hard” skills on modern equipment and “soft” skills (such as teamwork, communication or negotiation skills) through real-world experience. Countries with a long tradition of apprenticeships are Austria, Germany and Switzerland.

In many OECD countries, the main challenge is not with the provision of quality training, but with the insufficient number of apprenticeship places offered by firms. The involvement of social partners in drawing up curricula is important to ensure that training meets the employers’ needs. However, the financial burden in terms of wage and non-wage costs deters some companies from taking on apprentices. Accordingly, a number of countries have introduced financial incentives to make it more attractive for employers to create apprenticeship places. Australia and the United Kingdom, for example, directly subsidise employers taking apprentices; Canada and France grant tax credits. A number of countries have introduced a special sub-minimum wage for apprentices (OECD, 2016[9]).

Pre-apprenticeship programmes and career guidance play important roles

At-risk youth may lack the motivation and skills to find a position for an apprenticeship or, if they find one, to succeed in the programme; non-completion rates are high among apprentices in many countries (OECD, 2014[10]). At the same time, there is evidence that the least educated youth are also those who benefit the most from apprenticeship programmes (Céreq, 2011[11]). Some countries, including Austria and Germany, have created pre-apprenticeship programmes for disadvantaged youth who cannot find an employer. These programmes can prepare young people for VET programmes, by improving their skills, building motivation, familiarising them with work routine and giving them short spells of work experience.

Quality career guidance can boost education and training completion rates by improving the match between young people and their chosen path (OECD, 2016[9]). It can strengthen social mobility by informing young people of career paths that their family and social networks may not suggest and encourage them to choose careers that are more likely to see strong labour demand. Good practices in Finland illustrate that career guidance is of particular importance for young people considering VET programmes, including apprenticeships, as these affect career prospects more directly than general secondary education programmes (OECD, forthcoming[12]).

Activating unemployed and inactive youth

Public employment services play a key role in supporting unemployed and inactive young workers who have few skills and difficulty finding a job. For youth who have become marginalised, more specific outreach policies in collaboration with other youth services are important (OECD, 2010[13]). The appropriate intervention depends on the individual’s employment barriers. Extensive profiling helps ensure that young people receive the type and intensity of support they need and that resources are spent effectively.

Activation programmes mix a range of interventions

In many countries, “education first” is the approach for early school-leavers who otherwise have little chance of finding quality employment. Social or public employment services work with the educational authorities to re-integrate them in mainstream schooling. Some countries, including Australia and Denmark, even tie eligibility for income support to a return to education (OECD, 2016[9]).

Comprehensive, full-time, second-chance educational programmes can be a suitable alternative for early school-leavers who are unable or unwilling to return to a standard school. Second-chance programmes, like the US Job Corps programme, combine catch-up courses in foundation skills, vocational classes, counselling and career guidance and often lead to an upper-secondary qualification. They have been shown to reduce benefit dependency and criminal activity and raise earnings in the long term (Schochet, Burghardt and McConnell, 2006[14]; Cohen and Piquero, 2015[15]). But such programmes should be well-targeted as they tend to be costly, requiring well-trained and highly motivated staff capable of providing intensive support and supervision.

Work experience programmes or short training courses with a strong practical component may be attractive policy options for the most disadvantaged youth. They can help regain self-esteem, build a work routine and prepare for later participation in education or training programmes. Even when such programmes do not improve employment prospects in the regular labour market (Kluve et al., 2016[16]; Card, Kluve and Weber, 2017[17]), they can be used to address social or health issues of disadvantaged youth.

Hiring subsidies for businesses have proven to be effective to improve young jobseekers’ employment prospects. However, such subsidies should only target low-skilled, long-term unemployed jobseekers to reduce “deadweight”, i.e. the risk that employers pocket the subsidy to recruit jobseekers whom they would have hired in any case (Cahuc, Carcillo and Zylberberg, 2014[18]).

Low-cost, low-intensity interventions, such as job-search assistance, counselling and short training courses (in resume writing and interview techniques), can be sufficient for youth with low barriers to labour market entry. They may also be useful for testing a young person’s readiness for participating in more intensive activities.

Support for at-risk youth is often difficult to co-ordinate

Comprehensive support for young people with multiple barriers often requires different actors to work together, based on good policy co-ordination and cross-communication (OECD, 2015[19]). Common databases with client information accessible to government services at all levels can help, but they are frequently unavailable, due to privacy concerns or for political reasons.

Interesting policy initiatives to better co-ordinate support policies for young people exist in several OECD countries. Australia set up regional “partnership brokers” to strengthen local connections between schools, businesses, community groups and families (OECD, 2016[20]), Finland created one-stop shops (Ohjaamos) for different youth services (OECD, forthcoming[12]), and Norway integrated a range of different social and employment services under the umbrella of the Labour and Welfare Administration (OECD, 2018[6]).

11.2. People with care responsibilities

Care responsibilities can have a profound effect on the labour market situation of many workers. Although people with care responsibilities include both men and women, they tend more frequently to be women. Differences in the employment patterns of men and women emerge when they start a family or, typically later in life, care for partners or elderly parents. For example, compared with childless women, mothers tend to work fewer hours, earn less than men and more frequently stop working altogether. Overall, the labour market careers of women are disproportionately hampered by care responsibilities (OECD, 2012[21]; OECD, 2017[22]; OECD, 2018[23]).

Across the OECD, the gender gap in the employment rate of childless men and women is relatively small at 5 percentage points, but this gap grows to 23 percentage points when comparing men and women who have at least one child below age 14 (OECD, 2017[22]). In some instances, the reduction in paid work by mothers reflects choice and a preference for spending time with their children. Traditional attitudes towards women’s work and family roles continue to play a role: on average across the OECD, almost two-thirds of all women think that mothers with young children should work, but mostly on a part-time basis (OECD, 2016[24]).

In many cases, however, people with care responsibilities do not choose to sacrifice paid work, but are constrained to do so. Finding affordable quality childcare or out-of-school- hours care may be a challenge, especially for low-income mothers with young children; access to paid leave benefits to care for children or dependants may not be available; and workplace measures are sometimes insufficiently flexible. Addressing barriers to combine work and care responsibilities will facilitate the pursuit of individual labour market aspirations and foster a more efficient use of the talent available in labour markets and society (OECD, 2007[25]).

Ensuring access to early childhood education and care

Since childcare commitments tend to affect the labour market behaviour of mothers more than that of fathers, early childhood education and care (ECEC) services are especially important for women’s labour market opportunities. Investments in high-quality ECEC services also serve wider policy objectives, as participation in high-quality ECEC fosters cognitive and social development, particularly for children from disadvantaged backgrounds (OECD, 2013[26]; Havnes and Mogstad, 2015[27]; García et al., 2017[28]).

Subsidising ECEC is necessary to ensure that all parents have access to affordable care. All OECD governments help fund ECEC, spending 0.7% of GDP on average and more than 1% of GDP in the Nordic countries and France. These differences in the financial support for ECEC, together with differences in parental leave and attitudes towards non-parental care for young children, contribute to cross-country differences in the participation in ECEC services (Figure 11.3).

One in three children below age 3 participates in formal ECEC on average across OECD countries. Participation is highest in Denmark and Iceland and lowest in several Central and Eastern European countries, where lengthy parental leave entitlements often encourage parents to stay at home until their children enter pre-primary education. It is generally much higher among children aged 3-5; in most OECD countries more than 80% participate. Pre-primary education is frequently offered to all children as a statutory right from the age of 3, or participation is compulsory for one or two years before primary school. ECEC services for 3-5-year-olds are often heavily subsidised or even free.

Childcare costs are high for parents, reaching an average of 13% of the disposable income of a typical dual-earner couple with two children (OECD, 2017[22]). These high costs weaken incentives to work for second earners and single parents (Box 11.1), especially those with low potential earnings. Hence, children in low-income families make comparatively little use of ECEC services, even though the evidence suggests that they stand to gain the most in cognitive terms (OECD, 2016[29]). Lowering effective tax rates on working – by reducing childcare costs for low-income families or tax burdens on second earners or single parents – would encourage low-earning mothers with young children to work and increase the use of ECEC services.

Childcare issues continue when children enter pre-primary or primary school. Opening hours of schools are frequently not compatible with a full-time working week and school holidays are usually longer than annual leave entitlements for employees. Thus, working families with school-age children often need to find additional care solutions. Out-of-school-hours (OSH) services are well-developed in some countries: in Denmark, France, Hungary, Slovenia and Sweden, more than half of children aged 6-11 use OSH services during a typical week. National guidelines can provide local authorities with ideas on the type of activities to be offered, the qualifications needed for staff and carers and the structure of fees.

Figure 11.3. Participation in early childhood education and care services
Participation rates for 0-2-year-olds and 3-5-year-olds, 2014 or latest available year
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Note: Subject to some variation across countries, early childhood education and care (ECEC) services for 0-2-year-olds include centre-based services (e.g. nurseries or day-care centres and pre-schools, both public and private), organised family day-care and care services provided by (paid) professional childminders. ECEC services for 3-5-year-olds include pre-primary education and primary education.

Source: OECD Family Database, http://www.oecd.org/els/family/database.htm.

 StatLink http://dx.doi.org/10.1787/888933881534

Towards a better sharing of unpaid work among parents

Women tend to do more unpaid work, including care work, than men. A disproportionate responsibility for unpaid work limits women’s opportunities to enter and progress in the labour market. A comparison of countries suggests that more women participate in paid work when their male partners take on more housework. For example, gender gaps in unpaid work are smaller than one hour per day in Norway and Sweden, two countries that also have high full-time employment rates for women (OECD, 2018[30]).

Couples tend to be fairly egalitarian in their division of (unpaid) household labour before children are born, but with children women take on more unpaid work than men (OECD, 2017[31]). Fathers’ leave, when taken around childbirth, can help correct this imbalance: fathers who take such leave are more likely to have an active role in childcare both early on and after they return to work (Huerta et al., 2013[32]). Fathers’ leave is also good for women’s labour market outcomes, since it helps reduce gender discrimination in the workplace and make it less likely that only women take care-related leave or part-time jobs (Rønsen and Kitterød, 2015[33]).

Attitudes also likely play a role. Nordic men, for instance, appear more gender-egalitarian in their opinion and behaviour than other men. More individuals believe that parental leave should be split equally between men and women in the Nordic countries than in all other OECD countries except France and Germany (OECD, 2017[31]). Fathers with a child of pre-school age want their partners to work about 35 hours per week in Finland and Sweden, while this is just 20-25 hours per week in “part-time work countries”, including Germany, the Netherlands and the United Kingdom.

To encourage take-up of parental leave among men, a number of OECD countries have introduced individual parental entitlements to paid leave periods (Adema, Clarke and Frey, 2015[34]). Most common are “mummy and daddy quotas” in which specific portions of an overall parental leave period are reserved exclusively for each parent. Other options include “bonus periods”, where a couple may qualify for some extra weeks of paid leave if both parents use a certain amount of shareable leave, and the provision of paid parental leave as an individual entitlement for each parent right from birth.

Box 11.1. Helping single parents match work and care commitments

The work-life balance issues for single parents – often mothers – are challenging as they have no partner with whom to share daily care responsibilities for children. At the same time, employment participation of single parents is often crucial to limit poverty risks for them and their children. It is thus important to address care and employment barriers for single parents simultaneously, in particular in light of their increasing numbers (OECD, 2011[35]).

In the Nordic countries, the overall policy stance is to provide the necessary support and facilitate labour market participation for all parents, regardless of their partnership status. Public policy provides a continuum of support to all parents with young children, especially during the pre-teen years (OECD, 2018[30]): paid parental leave is followed by the provision of affordable ECEC and OSH services during primary school. Persons without a job are expected to use the available employment services and actively engage in job search, and the tax-and-benefit system provides parents with broadly the same financial incentives to work as others.

In some other OECD countries, tax-and-benefit policies provide income support to single parents without expecting them to seek employment until their youngest child goes to secondary school and sometimes even later (OECD, 2007[25]). This was the policy stance in, for example, Australia, Ireland, New Zealand and the United Kingdom, until reforms over the past ten years introduced an expectation for parents on income support to look for work and strengthen their self-sufficiency.

Since the reform in the United Kingdom, single parents are expected to seek employment when they have a child aged 3 or over. The employment rate of single parents has increased from 57% in 2007 to 68% in 2017 (Rabindrakumar, 2018[36]), and poverty rates among single-parent families have fallen from 30% in 2007 to 22% in 2015. However, many single parents in work are trapped in low-paying jobs close to the poverty line, a situation that is often compounded by high childcare costs and little control over working hours to help reconcile work and care responsibilities. Furthermore, some single parents on income support moved to health-related benefits or were “disconnected” from work or benefit support, especially if they did not have a strong history of labour market attachment or a demonstrated skill set (Avram, Brewer and Salvatori, 2018[37]). To avoid such “disconnect” and associated poverty risks, it is crucial for policy to provide ample childcare support and effective training and skills policies and make integration in quality employment a reality for many single parents (OECD, 2011[38]; Ahn, 2015[39]).

Caring for elderly relatives

Care commitments for children are not the only source of work-family tensions. A rising number of older people require long-term care and – although formal care systems exist – many of those providing such care are informal carers, mainly family and friends (OECD, 2017[40]). Some of those caring for elderly relatives are likely to already have their own family care commitments as well as jobs, which is why they are sometimes referred to as the “sandwich generation”.

Many older people who need elderly care services prefer to stay in their own homes as long as possible, retain their independence and remain part of their local community. While home care can lead to better outcomes for the elderly, it also means that informal carers, such as partners or adult children, take on an important role. It is hence important to enable workers to take time off for caregiving. Employees in most OECD countries are often entitled to flexible working hours or family-caregiver leave, although such arrangements are often short or apply only in case of very serious illness. Ensuring that workers can use them for a wide spectrum of caregiving situations and at short notice is important, as the needs they are designed to meet are often unpredictable.

Greater control over working hours

Flexible working arrangements cover a variety of practices that can improve efficiency of production processes and help workers make their work schedules fit better with care commitments. Measures include reduced working hours, flexible start and finishing times as well as more advanced options, such as the opportunity to work “compressed” weeks or telework from home. Flexible working arrangements can act as a complement to other parental support, for example by allowing parents to match working hours with childcare opening hours, but are particularly important when other support is underdeveloped.

On average across European countries, only 30-35% of employed parents report to have at least some control over their working time, with this proportion being highest in Denmark, Finland, the Netherlands, Norway and Sweden. Regular part-time work is the most common form of flexible working (OECD, 2016[41]).

Several OECD countries guarantee working parents access to at least some form of flexible working. Parents of young children have the option to work part-time, either through a statutory right to request reduced hours when children are young (in Austria, Finland, Slovenia and Sweden) or the possibility to take statutory parental leave part-time (in Denmark, Iceland, Korea and Poland). The Netherlands and the United Kingdom have introduced legislation that gives all workers (subject to firm size or contract history) a comprehensive statutory right to request changes to hours as well as other forms of flexible working, including the location of work. Nevertheless, the prevalence of part-time work in both countries also contributes to the persistence of gender pay gaps and limiting female career opportunities (OECD, 2012[21]).

11.3. Migrants

One-in-eight persons in the OECD was born abroad. Skills and labour market prospects vary widely among immigrants. Some are highly qualified, while others face difficulties in finding employment that pays a decent salary, which may be due to language barriers, no recognition of education degrees, discrimination and a lack of basic skills or relevant work experience. Getting policy right is important for helping these immigrants integrate in the labour market of their host country.

Given the diversity of the immigrant population, a range of policies matter. For those migrants who come with relatively high skills, the objective should be to make the most of their skills. For those migrants who are especially vulnerable, for example because they come for humanitarian reasons, the policy challenges are much broader and particularly acute. The first part of the section focuses on making the most of the skills of migrants and the second on addressing the needs of vulnerable migrants.

Making the most of the skills of migrants

Building host-country language skills is critical for successful integration

Evidence clearly suggests that some proficiency in the host-country language is an essential prerequisite for the social and labour market integration of migrants (OECD, 2018[42]). Poor knowledge of the host-country language can be self-perpetuating, since both networks and employment are important routes through which language skills can be built. Language proficiency is also a key ingredient for the acquisition of new skills relevant in the host-country labour market and the transferability of existing skills.

One tool which has proven effective in enhancing the efficiency of language acquisition is the combination of language instruction with vocational training. This helps build work-related language skills while gathering work experience in the host country. Australia pioneered on-the-job language training and co-funding of employer-based training, offering courses that entitle migrants to up to 200 hours of vocation-specific language tuition and 80 hours of work placements (OECD, 2016[43]).

Recognition of qualifications can help migrants better use their skills

Education acquired outside the OECD tends to be strongly discounted in the host-country labour market, often resulting in people being over-qualified for the work they do. This problem can, in part, be ascribed to the different quality of education systems in the origin and host countries and employer uncertainty regarding the value of the qualifications obtained abroad.

Integration policy can play an important role by providing an infrastructure that formally recognises and validates the value of foreign qualifications (OECD, 2017[44]). However, to be successful the outcomes of such procedures need to be accepted among employers. Sweden is one of the countries that have recently made progress in improving recognition processes. Programmes map and validate the skills of participants in their mother tongue, while at the same time offering language tuition alongside these activities (OECD, 2016[43]).

Beyond the recognition of formal qualifications, recognition of prior learning – which documents non-formal competences – may be particularly important for migrants who have acquired their job-related skills in a different context. Recognition of prior learning can also provide a quick and cost-effective way to identify individual needs for further training and prevent the duplication of training content. Finland’s competence-based qualification system, for example, recognises vocational competencies, regardless of whether the person acquired them through work experience, studies or other activities. Employers understand the qualifications, as they can be obtained in the formal education system (OECD, 2018[45]).

Local labour market contact enables migrants to demonstrate their skills

Newly-arrived migrants often have little or no local labour market experience. This puts them at a disadvantage when it comes to demonstrating their suitability for a position. As a result, temporary apprenticeship or training programmes, that provide an opportunity to demonstrate skills, can be an important stepping stone into employment. This opportunity is likely to be especially valuable to migrants for whom information asymmetries due to unfamiliar qualifications tend to be larger.

For instance, Swedish employers hiring newly-arrived refugees can benefit from several subsidised employment schemes which have the objective of providing migrants with local labour market experience. Among these, “Step-in Jobs” is targeted particularly at newly-arrived humanitarian migrants. The programme, which provides a subsidy covering 80% of wage costs, is intended to ease transition into regular employment through building skills and experience. Requirements of the programme are that participants undertake language training alongside their work and that the employment contains an element of mentorship (OECD, 2016[43]).

Discrimination needs to be overcome to improve migrants’ labour market access

Discrimination may also undermine the ability of the foreign-born to find work and put their skills to use. It occurs when employers prefer to hire candidates of a particular origin. Empirical studies which try to isolate the effect of discrimination on hiring from other factors suggest that, in many countries, migrants must send twice as many applications to be invited for a job interview than native-born people with an equivalent curriculum vitae (OECD, 2013[46]).

Most OECD countries have taken measures to combat discrimination. However, tackling discrimination through the courts can be a challenge, as past experience has proven. Anti-discrimination policy itself appears to raise awareness but not to reduce discrimination. Hence, besides anti-discrimination policy, several countries – including Belgium, France and the Netherlands – have introduced policies to incentivise diversity and harness corporate social responsibility. In addition, innovative recruitment methods, that for example simulate work situations, have been useful in addressing discrimination that stems from employer uncertainty regarding the productivity of migrant workers (OECD and UNHCR, 2018[47]).

Policy can help compensate for migrants’ lack of local knowledge and networks

Widespread recruitment through informal means is another way through which foreign-born can be put at a disadvantage. Migrants, particularly those who have newly arrived, tend to have fewer contacts that are relevant to the labour market and less knowledge of how the labour market functions. Many vacancies, although not necessarily closed to migrants, may be filled in such a way that migrants have little opportunity to apply, irrespective of how well they are equipped for the job. The role of the public employment services, which match jobseekers with employers, is therefore particularly important for migrants. In addition, many OECD countries offer job-search training as part of early integration efforts and have adopted career mentoring schemes to provide migrants with access to networks (OECD, 2014[48]).

Addressing the needs of vulnerable migrants

Integration policies to help vulnerable migrants acquire basic skills

Integration represents a long-term investment, for the host country and the immigrants themselves. Depending on the educational institutions in the origin country, migrants bring with them quite diverse education backgrounds.

Across the OECD, around one-quarter of migrants are low-educated, a similar proportion as among the native-born. This aggregate, however, masks differences across countries. Australia, Canada, Ireland and the United Kingdom are characterised by large intakes of high-educated labour migrants, while in some other European countries the low-educated are over-represented among immigrants.

The integration process for those who arrive after school age but lack basic skills can be long. In recognition of this, several OECD countries provide adult education combined with long-term language training. Norway, in particular, focuses heavily on low-skilled humanitarian migrants in its integration efforts, requiring them, in exchange for income support, to take adult education classes to endow them with the basic skills needed to function in Norway. In addition, all humanitarian migrants above compulsory schooling age who require primary or lower-secondary education are entitled to dedicated, long-term adult education (OECD, 2016[49]).

Migrants arriving for humanitarian reasons often require additional support

Refugees, in particular, tend to face considerable barriers to integration. The reasons are manifold: those arriving for international protection migrate not because they want to but because they have to; they had little or no time to prepare for migration (for example to collect proof of qualifications or learn the language); their health may have worsened during a long journey; and they often had no contact with the host country before arrival.

The unique set of integration challenges for refugees is often reflected in low employment rates. In contrast to labour migrants who already have an employer upon arrival, refugees arrive without a job. In contrast to international students, refugees have no educational institution to provide them with a programme of daily activities and link them to their host country. In contrast to migrants who arrive to reunite with their family, refugees often have no family links to their host country and more limited networks through which they can orient themselves and access information. Hence, the employment support needs of refugees are distinct, not only in the type of these needs, but also in their intensity.

Most Scandinavian countries provide newly-arrived refugees with structured multi-year programmes that combine language and labour market training and civic integration courses. Programmes typically last two to three years, although their duration may be adjusted in line with the education levels of individual refugees. In Denmark, for example, illiterate refugees who do not possess basic skills may receive additional language training, which goes beyond the scope of the official three-year induction programme and lasts for up to five years (OECD, 2016[49]).

Family migrants and migrants with childcare responsibilities

Family migrants, many of whom arrive in their host country with no direct ties to the labour market, often experience particular difficulties integrating in the labour market and society. Many left their careers and homes to follow their spouse; others may migrate for humanitarian reasons or to reunite with family members who themselves are refugees (OECD, 2017[50]). Alongside their efforts to integrate, many family migrants must also juggle childcare responsibilities, which can compromise their involvement in early integration activities. As time passes, these migrants risk becoming increasingly distant from the labour market.

Family migrants are seldom in the spotlight of integration and activation measures. They rarely claim social assistance, in part due to the common requirement that they have a family member in the host country who is able to guarantee their living expenses. Yet, not integrating family migrants represents a lost resource and risks long-run consequences for the integration success of their children.

Integration programmes need to be compatible with childcare or employment, allowing migrant parents to learn the host-country language, participate in integration activities and work at the same time. In Germany, for instance, all integration courses aim to provide a childcare option if no other childcare is available. Integration courses also have a special track for mothers and migrant women that focuses on education and childcare (OECD, 2017[51]).

At the same time, migrants with care responsibilities should not be sent on an exclusively childcare-centred integration track that maintains their distance to the labour force. Active labour market programmes must be accessible to those with childcare duties, and early childhood education and care options should become more widely available and better known among migrant parents. Research has shown that labour market participation among foreign-born mothers has a pronounced impact on the outcomes of their children. For the native-born children of migrants, the effect of having had a working mother at age 14 on the probability of being employed when an adult is, at 9 percentage points, more than twice the effect for the children of native-born (OECD, 2017[52]).

Young migrants and children of poorly educated migrants

Young migrants face a number of challenges when they arrive in their host country. Besides orienting themselves in a new country, they must learn the language and integrate into school in time to catch up with their native-born peers. Research indicates that, while it takes children approximately two years to acquire communicative language skills, they can take up to seven years to develop the academic language used in school environments (OECD, 2015[53]). This is a challenge for all young migrants but even more so for those from countries with quite different education systems. Many, particularly those who arrive towards the end of compulsory schooling, struggle to qualify for further education, which often translates into lifelong difficulties to gain durable employment. Recognising this, in New Zealand where school is compulsory until age 16 and education is free until age 19, refugees are allowed to stay in high school until they are 20 or 21.

These challenges can be particularly acute for unaccompanied minors who, in addition, face a strong motivation to begin work and remit money to their family who, in many cases, has invested all its savings into funding the journey of the child. While a strong motivation to work is, in principle, a good premise for further integration, it can also risk preventing these minors from engaging in the longer-term integration investments that are necessary to build a resilient career (OECD, forthcoming[54]).

Alongside young migrants, the native children of migrants are also at greater risk of poor labour market outcomes. In many countries, particularly in Europe, children of migrants enter the labour market in greater numbers. Young people with two foreign-born parents now account for over 9% of all youth aged between 15 and 34 and 11% of those below the age of 15 (OECD, 2017[52]). The integration of these children, particularly those of low-educated parents, is a growing concern, given that the intergenerational transmission of disadvantages appears to be stronger among migrants than native-born. Increasing access to early childhood education with a specific focus on children with language obstacles not only allows parents to participate in the labour market but also provides high returns for the children. Many OECD countries have specific policies in place to help children of immigrants with language obstacles, often based on systematic language screening in pre-school and follow-up remedial training (OECD, forthcoming[55]).

11.4. People with disabilities

Disability is widespread: in the OECD, around 14% of the working-age population report to have a disability or chronic health condition hampering their daily life; one-third of them have a severe disability (OECD, 2003[56]; OECD, 2010[57]). Disability or chronic ill-health often develops over the lifetime, sometimes gradually, sometimes suddenly due to an accident or illness. The prevalence of disability therefore increases with age, which is a growing problem given the rapid ageing of populations in most OECD countries.

The large majority of persons with disabilities have significant work capacities and many of them have full work capacity. It is therefore concerning that the employment rate for persons with disabilities is only around half that of persons without disabilities and that their unemployment rate is twice as high. The employment disadvantage of persons with disabilities is smallest in Iceland, Sweden and Switzerland and largest in Hungary, the Slovak Republic and the United States (see Figure 11.1).

Low employment rates translate into low incomes for many persons with disabilities, despite the availability of disability benefits in most countries. One in seven persons with a disability lives in a household with an equivalised income of below 50% of the median, a common definition of poverty. This compares with an income-poverty rate of below 10% for persons without disabilities. The difference in poverty rates between persons with and without disabilities tends to be larger in countries where the employment gap is higher and income-support benefits for those not working are low.

At the same time, OECD countries struggle with the costs of their sickness and disability benefit programmes. On average, 6% of the working-age population receive a disability benefit, a similar number as 20 years ago (Figure 11.4). The fiscal cost of paying disability benefits to so many people is considerable. Average public spending on disability benefits is 2% of GDP, and in some countries it is as high as 4% of GDP. It often exceeds spending on unemployment benefits.

Figure 11.4. Disability benefit caseloads are rather high in many OECD countries
Disability-benefit recipients as a share of the working-age population (%)
picture

Source: Update of (OECD, 2010[57]), Disability and Work: Breaking the Barriers: A Synthesis of Findings across OECD Countries, https://doi.org/10.1787/9789264088856-en.

 StatLink http://dx.doi.org/10.1787/888933881553

A growing “medicalisation” of disability policy

In many countries, disability benefits have become the benefit of last resort for people unable to stay in, or enter, the labour market. A number of policy developments have played a role:

  • Reforms in several countries have restricted access to, and the maximum duration of, unemployment and social assistance benefit schemes, partly through stronger enforcement of labour market activation of jobseekers. This contributed to the decline in unemployment, and in particular long-term unemployment, in many OECD countries prior to the global financial crisis.

  • Older workers – who often had been encouraged to retire several years before the legal retirement age – can no longer draw on some options previously available to leave the labour market prematurely, due to the retrenchment and phasing-out of early-retirement options and special unemployment retirement pathways.

  • As a result, in many countries disability benefit systems, which overall have seen little change compared to reforms in other areas, have become the only benefit that can be received permanently and without any conditionality.

These developments have led to a “medicalisation” of labour market issues associated with disability. However, most persons with disabilities want to work and can work in ways compatible with their health condition. Supporting those people to gain and retain work is a “win-win” policy: it helps them avoid exclusion and have higher incomes while reducing benefit dependency. Due to the strong link between disability and age, policies addressing the employment of persons with disabilities will also affect, and be affected by, policies addressing the employment of older workers, the subject of the next section.

Towards an employment-oriented disability policy: What remains to be done?

A key question is whether disability should be treated as a health issue, to be addressed with special rules and programmes, or rather an employment issue, to be tackled with mainstream policies. Singling out disability as a special problem has distanced it from employment policy and lowered the employment expectation of both persons with disabilities and those helping them into work. All actors, including employers and public authorities, need to better recognise their mutual rights and responsibilities. A person with disability who seeks a job is in the first place a jobseeker, although possibly facing additional barriers to employment. This gives the employment focus in disability policy first-order importance.

Strengthening responsibilities and incentives

It is mainly the behaviour of five actors that affects the functioning of disability policy: the individuals with disabilities themselves, employers, public authorities, employment service providers and health professionals.

Persons with chronic health conditions or disabilities should be given a clear message that work in line with their capacity is expected and a prerequisite to receiving complementary benefits, if needed. Compulsory participation in rehabilitation programmes and job-search requirements in line with work capacity are both therefore important. Several countries have moved in this direction; examples are the introduction of the rehabilitation-before-benefit principle in German-speaking countries, work-focused interviews in the United Kingdom and unemployment benefits with adjusted job-search requirements for those with partial disabilities in Australia (OECD, 2010[57]).

Employers are important in several ways. They can help prevent disability, retain workers with disabilities and hire jobseekers with disabilities (see Chapter 9). To foster disability prevention and job retention, a better matching of responsibilities and incentives is required to strengthen employer action in preventing longer-term sickness absence (through co-payments for sickness benefits and rigorously enforced occupational health and safety regulations) and helping sick workers back into a job in the company (through a clear rehabilitation and return-to-work process). To foster job creation, wage subsidies and other incentives to hire workers with disabilities can be useful. The Netherlands is the country which has gone furthest on several of these aspects, thereby contributing to declining rates of sickness absence and disability benefit claims (OECD, 2014[58]). Sick leaves are very costly for Dutch employers who also have to make significant efforts to help people return to work and face a significant sanction if they fail to do so.

Public authorities have a key role in guiding people with disabilities through the system. They need to have effective tools and clear incentives to assess people’s work capacity, direct them to the right service and, where appropriate, deliver services that help people into employment. Only few countries have so far tackled incentives of public authorities. One example is Denmark which has experimented with financial incentives for local job centres to stimulate labour market integration (OECD, 2013[59]).

Employment service providers need stronger incentives to bring people into sustainable employment. Traditionally, they are paid for every client they serve, irrespective of the actual outcome achieved. Paying for sustainable outcomes instead of managing caseloads could have a significant impact. Australia and the United Kingdom have developed their provider market in this direction, with increasing attention to longer-term employment outcomes and the degree of disadvantage of customers: the longer a customer stays in employment and the higher is the level of disadvantage, the higher is the payment which the provider will receive – see OECD (2014[60]; 2015[8]).

Health professionals are key actors as providers of sickness certificates and other capacity assessments, and as gatekeepers to the benefit system. Doctors influence their patients’ future pathways and should be given the time, resources and incentives to provide information that promotes employment and a return to work, without undermining their patients’ long-term health. Doctors often need better training and direction in understanding the value of work when evaluating their patients’ health. Sickness absence guidelines in the Netherlands and Sweden are good examples of how the behaviour of doctors can be changed (OECD, 2013[61]; OECD, 2014[58]).

Moving from disability to employability

Disability benefit programmes have long been cash transfer schemes with little attention to the effect that they may have on employment, under the assumption that beneficiaries cannot be expected to work. This assumption is contradicted by the fact that most beneficiaries have at least some work capacity. In many countries, the case for a more unified scheme for all those who are able to work, including those with disabilities and partial work capacities, is strong. Turning disability benefits into an employment instrument requires an increased focus on a number of critical aspects (OECD, 2010[57]):

  • A first step in the operation of a disability programme must be an assessment of persons’ remaining work capacity and their barriers to work, not their disability. Time and effort of all actors must be used more effectively than in the past when a lot of time was invested in demonstrating the inability to work. Denmark, for example, has a comprehensive assessment process in which health issues play a relatively minor role (OECD, 2013[59]). The United Kingdom has moved in this direction as well, including by changing the name of the benefit programme to signal the shift in focus (OECD, 2014[60]).

  • A second aspect is to award disability payments on a transitory basis, as is common for sickness and unemployment benefits, and to reassess entitlements and work capacity regularly. Disability payments are increasingly provided for a temporary period, at least initially, but they often become permanent because reassessments of entitlements are not very rigorous. Countries also tend to “grandfather” beneficiaries in case of system reform. The Netherlands and the United Kingdom are exemptions worth mentioning as they tend to reassess all entitlements when work capacity assessment methods and criteria are changed.

  • A third aspect is support to facilitate the transition back to work. The return to work may be gradual, in line with a person’s improving work capacity. Austria and Finland are two countries that have recently introduced the option of a gradual return to work for people receiving health-related benefits.

  • A fourth aspect is that disability schemes must be designed so that working, or working more hours, always pays. Also here, more and more countries, including Ireland and the Netherlands, are lowering the high effective marginal tax rates that many of those moving from benefits back into work face.

Providing the right services at the right time

More people with disabilities could work if they were given the right supports at the right time. Countries invest more in rehabilitation and employment measures than they used to. Nevertheless, on average, OECD countries spend only 5% of their total disability-related spending on labour market programmes for persons with disabilities, while the remainder is used for out-of-work benefits. For comparison, the share going to labour market activation is as high as one-third for unemployment-related spending. Moreover, services must be provided in a timely, tailored and integrated way.

Providing services in a timely way means providing services as early as possible because re-employment chances decline quickly with the duration of time people have been away from the labour market or between the completion of education and entry into the labour market. Early action is essential in general and for persons with disabilities in particular. Data for a number of countries show that after six months of absence only few people return to the labour market successfully (OECD, 2015[62]). Switzerland is probably the country with the largest shift to early identification and action, which has considerably reduced the number of disability benefit claims (OECD, 2014[63]).

Providing services in a tailored way means adapting services to the actual needs of people through systematic profiling and engagement, with active case management for those who are more in need and quick referral to adequate services and supports. The shift to such type of individually-tailored services in some OECD countries makes, at the same time, a strong case for the unification of systems and services.

Providing services in an integrated way means identifying complementary (such as health, skills or social) barriers that a jobseeker may face. All these barriers should be addressed concurrently as doing so sequentially – such as first addressing any health issues before providing any employment support – just delays the process and reduces  re-employment chances. Integrating services requires much-improved cross-agency co-ordination and co-operation, especially between the benefit authority and employment service, including through information exchange and clarity about responsibilities and funding issues. Countries like Belgium, Denmark and Sweden have gone furthest in this regard (Arends et al., 2014[64]; OECD, 2015[62]).

11.5. Older workers

Increasing employment rates among older workers requires measures that improve both incentives to continue working and employment opportunities at old age. Older workers are a diverse group. Many do well in the labour market and enjoy working, while others are trapped in poor-quality jobs or even struggle to find and hold on to jobs. Pension policies, together with other social policies concerning health and the labour market, need to reflect this diversity so as to prevent societies from ageing unequally, as is recognised in the OECD Recommendation of the Council on Ageing and Employment Policies (OECD, 2015[65]) and the OECD Action Plan for Preventing Ageing Unequally (OECD, 2017[66]).

Inequalities in skills and health affect older cohorts disproportionately because the risks of skill obsolescence and reduced work capacity due to health problems tend to rise with age. Promoting the employability of workers throughout their working lives – with a view of maintaining employment opportunities at an older age – is a key requirement for longer, rewarding careers. In a context of ageing populations, mobilising more fully the potential labour force and sustaining high productivity at old age are essential. This in turn requires a healthy workforce with relevant skills.

Changing work and retirement patterns

Over the past decade, many OECD and emerging market economies have undergone substantial pension reforms, often under the pressure of population ageing and financial sustainability concerns. The most visible change has been made in raising pension ages. On average in the OECD, the pension age will increase from 64.3 in 2016 to 65.8 by 2060 for male workers entering the labour force at age 20, and from 63.4 to 65.5 for female workers. In recent reforms, “age 67” has become the new “65” and several countries are going even further. In Denmark, for example, the pension age is due to increase gradually from 65 to 67 years over 2019-22 and subsequently will be linked to changes in life expectancy.

Setting a legal norm does not mean that all people actually work up to these higher ages. Many workers leave the labour market well before reaching the pension age. However, effective retirement ages have been increasing in most countries over the past decade. On average in the OECD, men left the workforce two years later in 2016 than in 2006, and women nearly one and a half years later (Figure 11.5). But several countries still have considerable scope to close the gap between pension ages and effective retirement ages and to further increase the pension age. For instance, at current policy settings full-career workers entering the labour market at age 20 today will still be able to retire with a full pension before 65 in France, Greece, Luxembourg and Slovenia.

While pension reforms face strong resistance in many countries, calls for more flexible retirement rules are re-surfacing in the public debate (OECD, 2017[67]). People differ in their preferences on how and when to move from work to retirement. Some want to stop working earlier because of health issues, to pursue other interests or to care for elderly relatives or grandchildren. Others are able and motivated to work longer, perhaps for the income or the social interactions that work brings, or simply because they like their job. A recent survey suggests that for two-thirds of EU citizens combining a part-time job and a partial pension is more appealing than retiring fully.

Real choice in making the retirement decision means that postponing retirement should be sufficiently rewarding to compensate for lost pension years, while retiring a few years before the normal retirement age should not be overly penalised. Importantly, people need clear information on the benefits that they can expect to receive under each scenario to make informed choices and, in particular, to ensure that the size of their pension is adequate. For instance, Chile, the Czech Republic, Estonia, Italy, Mexico, Norway, Portugal, the Slovak Republic and Sweden offer flexible retirement options that: i) allow combining work and pensions after the retirement age, with no limit on earnings; ii) reward postponing retirement; and iii) do not overly penalise retiring early. Overall, the financial incentive structure in these countries encourages people to remain in work longer, thereby reducing the risk of poverty for retirees.

Enhancing job quality to make the most of a diverse workforce

Job quality influences people’s sense of engagement and well-being at work and beyond. Compelling evidence indicates that poor work environments can have a profound impact on an individual’s physical and mental health. Job quality affects the retirement decisions of older workers, since jobs that are more enjoyable and support good health are likely to translate into longer working lives (Cazes, Hijzen and Saint-Martin, 2015[68]).

The determinants of working conditions and work organisation are primarily an issue for businesses, but policies and institutions can provide employers with incentives and tools to improve them. Many of these policies, such as safety-at-work regulations or well-designed sickness schemes, are similar to the ones that have the objective of disability prevention discussed in the previous section.

Figure 11.5. Contrasting the effective retirement age with the legal pension age
picture

Source: OECD (2017[67]), Pensions at a Glance 2017: OECD and G20 Indicators, http://dx.doi.org/10.1787/pension_glance-2017-en.

 StatLink http://dx.doi.org/10.1787/888933881572

Good practices by employers in managing a diverse workforce with workers of different ages should be encouraged through initiatives that provide guidance on, for example, how to promote sharing of knowledge across age groups, how to adjust work responsibilities and working-time arrangements to better balance professional and family responsibilities and how to create a good work environment, in general and especially for older workers. Examples of such initiatives can be found in Denmark and Germany, where programmes are in place that combine practical guidelines and financial incentives for employers to promote well-being at work, in particular for older workers (OECD, forthcoming[69]).

Flexible working time arrangements help particularly older women who would otherwise be more likely to retire early to care for their grandchildren, parents or other relatives. The employment barriers of older women are often inherited from problems conciliating work and family responsibilities at a younger age. Recent research by Saint-Martin, Inanc and Prinz (forthcoming[70]) finds that workplace flexibility generally benefits both individuals  – by reducing stress at home and work, thus reducing absenteeism  – and employers  – by lowering costly worker turnover and increasing productivity, although changing workplace practices may give rise to short-term costs.

Investing in effective skill development strategies over the life course

Workers who maintain and upgrade their competencies by undertaking training during their working life fare better in the labour market when older. Yet, workforce groups at greater risk in the labour market, such as low-skilled workers, generally receive less training and this in turn tends to compound their disadvantages. In other words, they risk getting trapped in a situation in which they rarely benefit from training, and their skills remain weak or deteriorate over time, making it harder for them to participate in learning activities and possess marketable skills as they age. This problem is often exacerbated by workers, sometimes from the early age of 45, having little access to training. Governments and employer and employee associations should take concerted action to reverse this pattern (OECD, 2017[40]).

Adult learning has two main functions: equipping workers with job-related skills that match employers’ needs and raise workers’ productivity, employability and earnings; and helping people acquire adequate foundation skills (for example in numeracy or literacy) which are essential to support lifelong learning, even if they may have less immediate returns. The appropriate skill mix evolves over the work life, with job-related skills becoming relatively more important over time. Programmes designed on the basis of an apprenticeship concept – combining short classroom sessions with a firm-based approach – and informal, self-determined training focusing on practical and relevant work problems tend to be particularly effective for older workers. Countries have only recently started to promote the access of adults to apprenticeship schemes. One example is New Zealand Apprenticeships, a programme introduced in 2014, under which all apprentices enjoy the same level of government support, regardless of age (OECD, 2017[40]).

Many mid-career and older workers, whose initial qualifications may appear outdated, have acquired new skills and competencies through various work experiences, but no certificates to prove it. This makes formal validation systems for skills and competencies, which render them transparent to employers and establish an appropriate basis for further learning, particularly important for older workers. In case of job loss, the recognition of prior learning and validation of acquired experience can play crucial roles to help workers find a quality job that matches their actual competences and skills. The experiences of Portugal and the United Kingdom show how the recognition, validation and certification of acquired skills can help improve the employability of mid-career and older workers, especially when combined with additional training measures (OECD, forthcoming[69]).

Removing barriers to retain and hire older workers

Some older people are less productive, due to their age and health, and require in-work benefits or social protection. The higher likelihood of reduced work capacity or declining productivity among the elderly may make some employers hesitant to retain or hire older workers. Public policy can help overcome this in four main ways: affirmative action (including through information campaigns and guidelines); coercive action (in the form of anti-age discrimination laws); specific support for older workers with low productivity and few employment prospects; and measures to facilitate job mobility (OECD, 2017[40]).

Affirmative and coercive actions tend to be mutually reinforcing. Anti-age discrimination legislation gives a strong message that discrimination should not be tolerated, but it may only be effective when accompanied with public awareness campaigns and guidelines that help employers implement good employment practices with respect to age diversity and make older workers themselves aware of their rights. Information campaigns should also have as an objective to change some of the priors that potential employers may have of older workers (such as lack of motivation or inability to adapt to new technologies).

Anti-age discrimination laws will be powerful if enforcement is not necessarily dependent on the initiative of individuals deprived of their rights. Victims often face strong barriers to bring a case before court, with legal action being costly and complex and the outcome uncertain. Hence, enforcement by specific agencies, mandated to investigate companies and take – even in the absence of individual complaints – legal action against employers operating discriminatory practices, can play an important role. One example is the US Equal Employment Opportunity Commission, which is granted extensive powers (OECD, 2008[71]). Since its establishment in the 1960s, the commission has been at the forefront of the fight against discrimination. In particular, it has the authority to investigate charges of discrimination against employers, to settle the charge where discrimination is found, and to file a lawsuit to protect the rights of individuals and the interests of the public if the settlement procedure has not reached a successful conclusion.

Additional support is also necessary to help employers retain or hire disadvantaged older workers, i.e. those with low productivity and few employment prospects. This is essential to prevent early withdrawal from the labour market and reduce poverty risks at old age. Several countries introduced wage-subsidy and in-work benefit schemes to strike a better balance between older workers’ productivity and the cost of employing them. These schemes are designed, over a certain period of time, to incentivise firms to employ older workers.

Nevertheless, packages of placement, training and counselling measures targeted at disadvantaged older workers may be more effective than wage subsidies alone. For instance, Germany’s “Perspective 50 Plus” employment pacts for older workers in the regions, which ran from 2005 to 2015, placed great emphasis on intensive counselling for the older unemployed. Another example is Canada’s Targeted Initiative for Older Workers programme which supports older jobseekers, typically between ages 55 and 64, who live in small, vulnerable communities, helping them regain a place in the labour market and improve their employability.

Policy-makers also need to strike the right balance between protecting older workers’ jobs and increasing their mobility. Greater mobility requires hiring more jobseekers over a certain age and increasing older workers’ willingness and ability to change jobs. Special employment protection rules for older workers can be counterproductive; they may reduce hiring chances and firms may seek to avoid penalties through early retirement arrangements. Ultimately, the best form of employment protection for older workers is to improve their employability and increase the range of job opportunities open to them.

Conclusion

This chapter reviewed policy options to enhance the prospects for five groups of workers who tend to face disadvantages in the labour market: low-skilled young people, people with care responsibilities, migrants, persons with disabilities and older workers. Each group faces unique challenges; nevertheless several common lessons can be drawn.

Designing policy in an employment-oriented way

One of the main reasons why employment rates for disadvantaged workers are low is that policy is insufficiently employment-oriented. For example, persons with partial work capacity should receive stronger incentives to stay in or return to work. Retirement rules should make it more rewarding for older individuals to stay in the labour market. Early contacts with the labour market, in particular for low-skilled youth and newly-arrived migrants, can be essential to avoid a lifetime out of decent work. In some countries, this requires a change in the mindsets of policy-makers and individuals, away from social protection towards an employment-oriented social policy.

Preventing exclusion through early intervention

Early intervention is crucial to avoid a lifetime out of work or in poor-quality jobs. The way governments deal with supporting the upbringing of young children may be the most vivid example in this respect. Mothers who, following birth, stay out of work for too long tend to become detached from the labour market, which substantially reduces their labour market prospects. Early education and care and low effective tax rates on second earners are two ways to support young mothers, and they are at the same time likely to benefit the cognitive development of young children. As the chapter discusses, similar considerations arise for each group of disadvantaged workers.

Intervening against discrimination

Women, migrants, persons with disabilities and older workers tend to be affected by discriminatory practices. They are often paid lower wages than others with similar competences and less likely to be offered a job or promotion. Such practices are sometimes in breach of anti-discrimination legislation, but policy initiatives need to go beyond relying on law enforcement processes which can be cumbersome and entail uncertain outcomes for the individuals concerned. Combining enforcement of regulation with suitable financial incentives and information campaigns that encourage employers to hire, promote and retain these workers holds the best promise of reducing discrimination.

Packaging measures

For all five groups of disadvantaged workers, no one policy exists that can eradicate their disadvantages. To make reforms for enhancing the inclusion of disadvantaged workers in the labour market a success, policies need to be combined into coherent packages. It is the combination of stronger work incentives, continued skills development during work life and health-friendly human resource policies that may allow older workers to retire later. Similarly, to help young mothers return to work swiftly, affordable childcare, not overly excessive tax rates on second earners’ incomes, greater flexibility of working hours and a stronger engagement of fathers at home may all be required. Another example are low-skilled unemployed or inactive youth requiring comprehensive support in the form of training courses, job-search assistance, employer subsidies and career guidance. Making different agencies work together to meet the specific needs of each person is one of the most difficult challenges to be overcome if people from disadvantaged groups are to be able to fulfil their labour market potential.

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Note

← 1. Employment gaps are even larger for low-skilled youth.

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