ALTHOUGH Britain and America can feel smug about their unemployment rates of 5.6% and 5.3%, other countries are still fire-fighting. The Spanish and Italian governments are grappling with rates of 22.4% and 12.7% respectively, and in June the euro-zone average was 11.1%. But what works when people are not working? A new NBER Working paper* offers a guide for governments desperate to reduce the ranks of the unemployed. “Active labour market programmes” are schemes meant to help people to find work. They grew out of the American public works programmes of the 1930s, where the government spent billions of dollars busying its citizens with building schools, hospitals and bridges. Today programmes also take the form of training, subsidised private work, or help with finding a job. This sort became widespread in America and Britain in the 1990s, as so-called “welfare-to-work” schemes were expanded. But alongside these programmes, some worry that overly generous welfare benefits make people lazy. They say that threats to cut people's benefits if they do not join such programmes could also boost employment, by prodding people off the sofa and into work.

The authors compare results from hundreds of different studies to find out what works best to boost employment prospects, who it works for, and when. They do what is known as a “meta-analysis,” where they combine statistics from lots of papers to get broader (and more powerful) results. Why look at one policy when you could look at 207?

They split work programmes into two groups. The first group emphasises “work first”, and includes benefit sanctions and helping people with their job searches. The second group includes programmes to invest in training, either off or on the job.

Their results show that in the short-term, the more immediate policies—such as kicking people off benefits—get more impressive results. But the effects quickly fade. In contrast, cuddlier programmes that offer training are disappointing in the short-term, but blossom over time. This fits with other research, which has found that the returns to experience in low-skilled jobs is very low, so there is little benefit from pushing people into the first shelf-stacking job they find. On the other hand, the study implies that building their skills yields long-term rewards.

The authors then compare effects on different groups and find that women and the long-term unemployed are most responsive to the investment programmes, but that young people are slightly less responsive than average. This is slightly worrying for governments in Italy and Spain, where more than two of every five people aged under 25 are unemployed. But they can take some comfort from the paper’s final result. When the authors compared programmes implemented in booms and busts, they found training programmes worked better during recessions when unemployment was high.

Overall, the paper offers some useful lessons. Cutting benefits to “discourage laziness” might save money. But the results suggest that if policymakers really want to tackle unemployment, then they will need to invest in well-targeted training, and risk up-front costs for long-run gains.

* “What works? A Meta Analysis of Recent Active Labor Market Program Evaluations”, by David Card, Jocken Kluve and Andrea Weber. NBER Working Paper No. 21431.