Education-ALMP complementarity in promoting employment: article in Social Policy & Administration by Ilze Plavgo

The article “Education and active labour market policy complementarities in promoting employment: Reinforcement, substitution and compensation” by Ilze Plavgo was published in Social Policy & Administration on 10 January 2023.

This article follows up on the call to study policy complementarities, focusing on the education-ALMP interplay. The contribution of this article is both theoretical and empirical. Theoretically, it provides an analytical base for assessing education-ALMP complementarities, building on the skill formation literature at a micro level, social investment scholarship at a policy level, and the varieties of capitalism perspective at a state level. Two alternative hypothesized mechanisms of policy complementarity are put forth. First, reinforcement whereby higher investments in one policy boost the effectiveness of the other. Second, substitution-compensation whereby higher investments in one policy diminish the effectiveness of the other. These theoretical propositions are then tested empirically, drawing on micro-level panel data from 285 longitudinal EU-SILC surveys from 29 European countries collected between 2003 and 2015 and combined with aggregate data. Analyses assess how individual and national educational attainment interact with national ALMP efforts in promoting employment, for the total workforce and by age group to account for potential heterogeneity across at-risk groups.

Results highlight the complementarity of education in the functioning of ALMPs and show that the education-ALMP interplay follows different dynamics when individual or national education are considered. Higher individual educational attainment is associated with lower marginal returns from national ALMP efforts, with higher ALMP effectiveness among the lower-educated. By contrast, higher national educational attainment is associated with increased ALMP effectiveness, with ALMPs tending to be far less effective at low levels of highly educated workforce. Different interaction patterns are observed for youth, indicating increased difficulty in activating this risk group.