Employer Engagement in Active Labour Market Policies (ALMPs) within Segmented Labour Markets

Active labour market policies (ALMPs) seek to reintegrate the unemployed and other disadvantaged groups into the labour market. Such policies are particularly important during periods of economic instability, such as the Great Recession, where labour markets alone cannot cope with long-term unemployment (Martin and Swank, 2014). Existing academic literatures and government policies appear to be supply-side orientated whereas the demand side of the labour market remains under-researched (Ingold and Stuart, 2015). Employers however are a cornerstone element of ALMPs, as ALMPs rely on them to be involved, from placing vacancies with the public employment services and providing work placements to recruiting the short- and long- term unemployed (Ingold and Valizade, 2015). Employer engagement in ALMPs becomes crucial in an age of uncertainty where incremental financial pressures and the penetration of market forces into the delivery of ALMPs to end-users encroach on their efficiency.

This paper theorises employer engagement in ALMPs through the lens of the labour market segmentation perspective, particularly in light of the distinction between internal and external labour markets (Doeringer and Piore, 1970; Berger and Piore, 1980; Jessoula et al., 2010; Fervers and Schwander, 2015). The present study draws on original mixed-methods research composed of a large-scale survey of organizations in the United Kingdom (UK) and Denmark (as pioneers of ALMPs in the early 1990s) followed by in-depth case studies of employers in both countries. We argue that inherently discriminatory internal labour markets represent a major impediment to employers’ engagement in ALMPs, as the latter may distort the rigid components of internal labour markets upon which organizations rely extensively: skill specificity, on-the-job training and custom. Whereas in Denmark such a barrier is counterbalanced by direct financial interventions (for example wage subsidies), in the UK greater emphasis is placed on apprenticeships, which are traditionally perceived as part of internal labour markets (Doeringer and Piore, 1970). Our study shows that widely acknowledged success of Danish ALMPs is somewhat overstated, for employers tend to use ALMPs as yet another instrument for screening the labour market. Danish employers seldom recruit from ALMPs for the positions that pertain to internal labour markets, but unlike the UK, ALMPs in Denmark have permeated into organizational recruitment and selection activities. Furthermore, despite the fact that in the UK employers were positively disposed towards apprenticeships for young people, their recruitment and selection policies discriminated against other disadvantaged groups in the labour market.       

Theoretical and practical implications of our findings are discussed. We contend that ALMPs need to be aligned better with the core elements of internal labour markets in order to help the unemployed back into sustainable employment. In neither country however are ALMPs designed on the premise of a discriminative character of internal labour markets.