Beyond “Work First”: How Private-Sector Employment Programmes Tackle Unemployment Cycles

This blog is based on an article in Social Policy and Society by Roy Peijen and Ton Wilthagen. Click here to access the article.

Since the early 2000s, the Netherlands has maintained a work-first-oriented policy to support the unemployed back to work. These policies prioritise labour market attachment with the thought that any job is better than none. No matter how precarious jobs might be, if job tasks match workers’ skills, and whether employers provide career growth opportunities, such as promotion and further training. We argue that the work-first support ignores the discrepant labour market barriers of ethnic minorities, such as statistical discrimination, unrecognised credentials, traumatic past, and availability of social resources in their network.

Before 2010, some training programmes on application skills in multiple foreign languages were available. However, the focus on integrating ethnic groups shifted from labour market integration towards social integration, i.e., compulsory citizen tests. Thoughts on emancipation drove this policy change, treating all social groups equally. After abolishing this support, the Dutch work-first support has become even more generic, focusing on rapid re-entry to work by monitoring one’s job-search efforts. One may wonder, whether this equal treatment leads to equal outcomes.

Work first assumes that unemployed people build up knowledge and skills (‘human capital’) once they start working again. In doing so, the idea is that the loss of skills associated with unemployment is considered to be minimal. However, we argue that this reasoning does not apply to people who are some distance from the labour market. Take for instance non-western people who may have relevant skills but whose credentials are unrecognised in the western world or have a shortage in social resources. They may face a vicious cycle of precarious work interspersed with periods of unemployment. The factors mentioned earlier are probably the initial reasons for their unemployment and lack of labour market mobility, which are anything but solved with work-first support. 

Moreover, the Dutch labour market has become heavily segmented with a strong emphasis on skills. Only the upper segment, workers with the desired skills, are provided career opportunities. Consequently, going from the lower to the upper segment for workers without the desired skills is almost impossible. In the Netherlands, we see the most established ethnic groups, Moroccans, Turks, Surinamese, Dutch Antilleans, and those from non-western and western origins, having the highest unemployment share compared with Dutch natives. In addition, they also work more often for lower wages based on flexible work arrangements, limiting their chances for career development. 

Our Social Policy and Society article evaluated an alternative large-scale private sector-initiated employment programme, the ‘Philips Employment Scheme’ [Philips Werkgelegenheidsplan (WGP) in Dutch] and compared its outcomes to that of the public work-first support up to ten years after completion of either intervention. The WGP offers participants one to two years of work experience and provides on-the-job, formal and informal training up to the secondary vocational level. We found long-term treatment effects on post-programme employment for programme participants belonging to non-western (10%) and western (11%) minority groups compared to a work first-entitled control group, except for the most established ethnic groups in the Netherlands (2%). Furthermore, we see long-term effects on competitive employment for non-western (6%) and western (6%) minority groups but again not for the most established ethnic groups.

Since 1983, the WGP has supported different vulnerable groups of unemployed people back into the labour market. Ever since they have worked closely with the Public Employment Services and municipalities in selecting participants from the pool of registered unemployed. At that time, unemployment sharply increased in the Netherlands amongst early school-leavers and undereducated migrant workers. The Dutch government came together with social partners with policy reforms that consisted of, among other things, economy-wide wage restraints and a reduction of the standard weekly working hours to create more jobs, known as the Wassenaar Agreement in 1982. Philips foresaw significant challenges because the regional pool of unemployed was challenging to place into their skilled positions. They came up with an alternative to offer work experience and training to temporarily hire individuals for a one-to-two-year period and provide them with (in)formal training, making them more employable for Philips and other businesses in the region but without the obligation for Philips to hire them. 

Supposedly, the employment programme’s participants gained relevant work experience at a multinational firm that resembles a regular job without postponing labour market integration, the same as the goal of work first, but with essential skill-building components. Philips’ name on CVs might place participants in a more favourable position due to higher performance and training standards than people without this experience. In contrast to work-first support, human capital-oriented programmes delay labour market integration to at least manage the problem that stands in the way of having sustainable careers. This approach might be more time-consuming but yield more favourable long-term returns than short-term strategies like work-first support.

The lesson for international policy is that exposure to work experience and formal learning at reputable companies for ethnic minorities excluded from the labour market is more appealing to employers than that of jobs found by work first’s enforcing strategy. The daily routine at work may positively affect participants’ intrinsic motivation for job search compared with the pushing and distrustful work-first approach. The investment in relevant skills and the recognition of skills in a multinational firm may open closed doors for those with western and non-western heritage. Creating a more level playing field for a heterogeneous group such as ethnic minorities calls for more workplace-based investments in skills, perhaps at different starting levels in educational attainment, further training, and social participation.

One last cri de coeur to employers is that they better focus on people’s skills and potential to learn the desired skills and less on educational attainments and previous positions held. This focus on credentials leads to mistaken beliefs about labour market unproductivity. Putting more emphasis on the overlap in knowledge and skills—that means between previous working tasks and those needed in the position advertised—may lead to more opportunities for both workers and employers. More skill-based approaches, like the WGP, may mitigate the negative consequences of businesses in industries confronted with skill shortages while simultaneously contributing to a greater societal problem. In particular, we call upon larger companies, and SME collectives that know what skills the regional labour asks for may be a possibility of a more sustainable solution to their very own problem of the growing number of hard-to-fill skill-shortage vacancies.

About the authors

Roy Peijen is Quantitative Researcher at the Netherlands Organisation for Applied Scientific Research (TNO).

Ton Wilthagen is Professor at Tilburg University.


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