This perspective on activation policies in the labour market is one in a series of opinion pieces on labour market inclusion. This piece has been written by Federico Ciani and Arianna Vivoli from Action Research for Co-Development (ARCO). Federico Ciani is a researcher in Development Economics (PhD) and the Coordinator of the Inclusive Development Research Unit. Currently, he serves as the Principal Investigator of the Horizon Project SWINS and is a member of the Horizon Europe projects PATHS2INCLUDE and MERGE. Additionally, he serves as the scientific advisor for the PASHFARM project. Arianna Vivoli is a Development Economist with a focus on quantitative analysis of labour economics. She holds a PhD in Development Economics from the University of Florence and Trento. She has been a researcher at ARCO since February 2022, in the Inclusive Development unit.
Over the past decades, policymakers have explored various approaches to answering a fundamental question: How do we get more people to work? Between the 1950s and 1970s, employment promotion efforts primarily focused on the supply side. Governments played a central role in job creation, particularly in disadvantaged areas, through public investment and incentives for private sector engagement.
From the 1980s onwards, a shift toward neoliberal economic paradigms redirected attention to individual employability. Education, skills development, and labor market flexibility became the cornerstones of employment policy. This transition marked the rise of active labour market policies (ALMP). ALMP are social policy measures that stimulate labour market participation through human capital investments and job search assistance (Benda et al., 2020), and that emphasize the role of individuals in actively seeking and securing employment rather than relying on direct job creation by the state.
ALMPs bring naturally positive changes, but at the same time raise several critical points, two of which are discussed in this opinion piece. First, the effectiveness of ALMP and employment policies in general hinges on their localization. A one-size-fits-all approach is unlikely to succeed, as labor market dynamics vary significantly across regions. Recognizing this, European cohesion policies have evolved since the early 2000s, incorporating multilevel governance frameworks that engage local, national, and EU actors. This shift was accompanied by a growing body of literature in regional studies, emphasizing the importance of place-based strategies tailored to local socio-economic conditions (Barca, 2009, OECD, 2009 and McCann and Rodriguez-Pose, 2011).
Second, activation policies do not necessarily equate to increased employment. Encouraging more people to enter the labor market heightens competition, which can have ambiguous consequences, particularly for vulnerable groups. Overall, a regional perspective on labor markets shows that in poorer regions, factors exist that limit employment opportunities regardless of individual characteristics. This indicates that investments in individuals must be integrated with local industrial and development policies. Conversely, in areas with more dynamic labor market conditions, lower entry barriers and heightened competition can expose individuals, especially people in vulnerable situations, to greater risks that need to be mitigated.
This is precisely what emerges from the working paper “Assessing the Determinants of Labour Market Inclusion for Vulnerable European Citizens: An Eco-Systemic and Multi-Level Approach”, produced within the Horizon Europe Project PATHS2INCLUDE. Through a multilevel analysis conducted across all European Union states plus Norway between 2010 and 2022, authors find that:
- Both human capital stock and human capital flows are associated with a higher individual probability of being active (as in Di Cataldo and Rodriguez-Pose, 2021). However, once other variables are accounted for, including individual education level, living in a context where the labor force is, on average, more educated is associated with a higher individual probability of being unemployed, likely due to stronger competition.
- Similarly, individuals with chronic health problems and with relevant care duties are significantly less likely to be both active and employed[1], highlighting substantial barriers to labor market engagement and job retention. What is particularly interesting is the varying impact of illness conditions on these outcomes depending on the regional level of wealth: individuals with long-term illnesses living in richer regions are more likely to be active but less likely to be employed. This suggests that wealthier regions may create better conditions for individuals experiencing specific vulnerabilities to engage in the labor market, potentially due to a more dynamic labor demand. However, where job market entry barriers are lower, a larger proportion of vulnerable individuals are employed in less protected sectors, exposing them to greater job-related risks such as unemployment.
In other words, these findings reinforce the idea that while activation fosters labor market engagement, it does not guarantee job creation or employment stability. Instead, it may exacerbate inequalities if structural labor market deficiencies, such as skill mismatches, discrimination, or a lack of sufficient job opportunities, are not adequately addressed. In the same way, different individual characteristics might be differently correlated with activation with respect to employment.
As policymakers continue to refine labor market strategies, a key takeaway is that activation alone is insufficient. Effective employment policies must strike a balance between fostering individual employability and addressing structural labor market challenges through targeted, localized interventions. Only by acknowledging both the opportunities and limitations of activation policies can we craft more inclusive and sustainable labor market solutions.
References
Barca, F. (2008). An agenda for a reformed cohesion policy: A place-based approach to meeting European Union challenges and expectations (No. EERI_RP_2008_06). Economics and Econometrics Research Institute (EERI).
Benda, L., Koster, F., & Van der Veen, R. (2020). Activation is not a panacea: Active labour market policy, long-term unemployment and institutional complementarity. Journal of Social Policy, 49(3), 483-506. https://doi.org/10.1017/S0047279419000515
McCann, P., & Rodríguez-Pose, A. (2011). Why and when development policy should be place-based. In OECD Regional Outlook 2011. OECD.
[1] In the labor market, active refers to individuals who are either employed or actively seeking work (i.e., part of the labor force). Employed, on the other hand, specifically refers to individuals who have a job and are engaged in paid work. In short, all employed individuals are active, but not all active individuals are employed (as job seekers are also considered active).