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As we know that the most important factor for an individual or human being to survive in the world is that he/she must have some source of income to fulfill all the basic needs of life and achieve all that he/she wants in their lives. So for this purpose their must be some labor market policies, which by implementing would definitely fulfill the human needs as well as be beneficial for the productivity and growth of a country.

Labor market policies are actually government programs that help the unemployed find work which ultimately, reduces unemployment and creates a productive country. Labor market policies can be differentiated into three main categories


  1. Public employment services

Public employment services can be by creating job seeking centers, which can provide information about the existing job vacancies. Public employment service can also be by giving training to enhance interview skills and how to create effective curriculum vitae.

  1. Training schemes

Help the unemployed improve their vocational skills and increase their employability by giving training classes to the unemployed.

  1. Employment subsidies

Directly create jobs for the unemployed. Usually short term measures, to allow the unemployed to build up work experience and prevent skill atrophy.

  1. Youth measures

It includes only special programs for youth in transition from school to work and is broken down in two parts: (i) measures for unemployed and disadvantaged youth; and (ii) support of apprenticeship and related forms of general youth training.

  1. Measures for the disabled

It includes only special programs for the disabled, limited to two types of policies: (i) vocational rehabilitation; and (ii) work for the disabled.

  1. Unemployment compensation

It comprises all forms of cash benefits to compensate for unemployment, except early retirement. In addition to unemployment insurance and assistance, it includes publicly funded redundancy payments and other compensation for jobless workers due to firm’s permanent or seasonal shutdown.

  1. Early retirement for labor market reasons

It includes special schemes in which retirement pensions are paid to individuals without work or otherwise because of labor market policies. Only subsidized early pensions rather than funded schemes within regular pension plans (e.g., by actuarially calculations of the amounts paid) are taken into consideration.

Do these policies really prove to be beneficial for the country or not?

Now the question arises that do these policies really prove to be beneficial for the country or not. Are these policies creating a standard or not?

Marcello Estevão1 in 2003 stated in his IMF Working Paper, Do Active Labor Market Policies Increase Employment which was prepared for European Department that

“In the era of 1970’s and 1980’s there was a steady increase in the unemployment level because of the labor supplied did not have the required skills, over-generous out-of-work benefits etc. the most appropriate solution to the rising problems was the introduction of governmental labor policies to be implemented.”

It is also stated that,

“By the implementation of the labor policies there was seen a decrease in the unemployment rate in the business sector of 15 industrial countries. These policies were more or less the same policies as mentioned earlier. And these policies caused wage moderation. This wage moderation might have been one of the causes for the association of active labor market policies with better employment rates.”

In the paper was also stated that the labor market policies although played an important role in the lowering on the unemployment rate but is was subject to high budgetary cost. This budgetary cost could be retrieved by placing benefit recipients into jobs.

The paper also gave a list of reforms that could take place in a society to improve labor utilization. These reforms could be like reductions in tax wedges, in benefits replacement rates, in public sector employment, and, more generally, in insiders’ wage bargaining power.

John A. Bishop, Andrew Grodner, Haiyong Liu all from the department of economics of the East Carolina University, on February 9, 2006, state in their paper Chinese Economic Reform and Labor Market Efficiency state that,

 “The Chinese economy experienced very rapid growth between 1988 and 1995.

The environment in which Chinese workers convert their human capital into earnings changed dramatically as a result of market-oriented economic reform. Simultaneously with labor market reforms were educational reforms that increased compulsory schooling to 10 years. We hypothesize that the change from a centrally-planned economy to a more market oriented labor market substantially increased labor market efficiency.”

These theories presented thus answer the question that do these policies really prove to be beneficial for the country or not? And we can say that yes, definitely these policies can be very beneficial for an economy to grow.

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