1. Executive summary

Background

Methodology

1. conduct a systematic literature review to collect cutting-edge research on the effectiveness of various employment instruments.
2. gather grey literature on the subject by searching databases and interviewing experts from employment ministries in the Nordic countries.
3. compile Nordic and international literature reviews on topics where research is scarce.
4. interview caseworkers in the Nordic countries to get the practitioner’s view on the effectiveness of various employment instruments on various groups. In total, we have interviewed 44 caseworkers from PES across the Nordic countries.

Framework of employment instruments

Key findings

Choice of employment instrument is a complex issue

Sustainable employment requires a wide range of instruments

Despite intensive focus and academic research, significant knowledge gaps remain

• Effects of guidance and counselling programmes appear rather mixed, as can be seen in Table 1, which shows that, across target groups, we have identified two articles demonstrating positive effects and two showing no effect. In general, guidance programmes targeting, for example, young people appear to not achieve positive effects, and literature suggests that individuals farther away from the labour market generally benefit less from these instruments. Despite the mixed results, these programmes have the advantages of being relatively low-cost and experiencing fewer lock-in effects. Caseworkers we interviewed confirm that these programmes are not highly effective for vulnerable groups who face more employment barriers than can be addressed in guidance meetings.
• Overall, labour market training is considered one of the most effective instruments across multiple target groups. Academic literature suggests that young individuals with health problems benefit from labour market training. However, the results among immigrants are more mixed, partly because labour market training can crowd out language training. Interviews with Nordic caseworkers suggest that labour market training is rarely efficient on its own but may be effective when used as part of a larger, well-devised plan.
• The literature shows that ordinary education generally has positive employment effects, though significant lock-in effects must be considered. Further, the literature indicates that ordinary education is more effective among some groups than others. For example, individuals with physical health issues experience stronger effects than individuals with mental health issues. Similarly, caseworkers report that ordinary education can benefit vulnerable groups. On the other hand, several respondents point out that such education requires that the persons targeted are motivated and capable of following the courses.

• Research on preventive efforts such as profiling is scarce in the Nordic countries, as can be seen from Table 1, but it is gaining traction in some of the countries. Profiling involves models that assess the support needs of unemployed individuals. The potential of profiling is growing due to advancements in machine learning and AI. However, the literature highlights important considerations to be made before introducing such tools, including the involvement of caseworkers and the unemployed.
• The evidence on rehabilitative efforts is relatively comprehensive, and such efforts generally appear effective. Table 1 demonstrates that we have identified 10 articles in total related to rehabilitative efforts, and the literature indicates that multidisciplinary efforts and gradual return to work have positive effects among sick-listed workers, whereas traditional ALMPs show limited effectiveness among this group. These findings are supported by Nordic caseworkers, who acknowledge the effectiveness of gradual return to work and other rehabilitative activities. However, they also emphasise the complexity of each individual’s situation, noting that addressing complexity requires time.

• The literature on the effectiveness of compensatory efforts, such as work accommodation, is scarce, as shown in Table 1. These instruments primarily target individuals with health issues and aim to adjust a job or work environment to enable them to perform their duties despite their disabilities. While some evidence suggests positive effects from assistive support and devices, this evidence is weak due to reliance on observational study designs. Caseworkers generally agree that such accommodations can be crucial for individuals to gain or maintain employment. 

• The literature supports the effectiveness of monitoring and sanctioning as tools to encourage jobseekers to actively engage in finding work and participating in training programmes. However, studies have predominantly focused on their effects among individuals close to the labour market (i.e., those with unemployment insurance), with less research available for individuals farther away from the labour market. Nordic caseworkers generally agree that sanctions can be necessary in some cases, but they are often sceptical about their autonomous effectiveness in promoting employment.
• The literature shows that benefit schemes can impact employment, with higher benefit levels tending to decrease the employment rate, and vice versa. However, several factors can moderate this effect, such as the complexity of employment barriers among the affected individuals as well as demand on the local labour markets. Furthermore, reducing benefit levels can lead to unintended consequences, such as an increase in property crime and poorer educational outcomes among the children of those affected. This raises questions about the overall socio-economic benefits of such measures.
• Evidence has shown that wage subsidies yield positive effects, particularly among individuals with health issues. A key mechanism behind these results is that subsidies facilitate employment in real workplaces under normal conditions, with genuine expectations from employers and colleagues. Caseworkers agree on the effectiveness of wage subsidies in helping vulnerable groups gain a foothold in the labour market. However, they emphasise that wage subsidies often represent the final step in a series of necessary measures to secure employment for vulnerable groups.

• The evidence on the effects of support, mentoring, and the relationship to the caseworker is limited, especially among vulnerable groups. These efforts encompass various forms of mentoring and support aimed at helping individuals overcome challenges in their daily lives, as well as they emphasise the importance of the individual’s relationship with their caseworker. These efforts typically do not demonstrate any positive employment effects in the short run. However, the literature suggests that one cannot expect such programmes to have any employment effects in the short term. Rather, in the long term, mentor support will contribute to make unemployed persons able to participate in activation or take up employment or education. The importance of a good personal relationship between the citizen and the professional aiming to provide guidance and help is a recurring theme in the caseworker interviews.
• Programmes where cross-sectoral coordination and ongoing support are central typically refer to efforts such as Supported Employment (SE), including Individual Placement and Support (IPS). These programmes provide individualised assistance, job placement, and ongoing support to help the unemployed achieve sustainable employment. IPS is originally targeted at individuals with severe mental illness and typically produces positive effects for this group. However, when extended to other groups, results become more mixed, underscoring the need to customise programmes according to specific target groups and contexts. While caseworkers generally lack direct experience with these efforts, they mainly express positive views concerning their usefulness.

• Many of the employment instruments discussed earlier rely on effective collaboration between the PES and companies. However, evidence on the effectiveness of initiatives to improve the inclusive labour market remains scarce, as can be seen in Table 1. There are indications that informational campaigns can influence norms and attitudes, making employers more willing to hire individuals with health issues. Further, various initiatives aimed at enhancing the inclusive labour market have been implemented, such as job carving, which involves rearranging work tasks within a company to create customised employment opportunities for vulnerable individuals. Caseworkers emphasise the critical importance of collaborating closely with employers to successfully place individuals facing various employment barriers in suitable jobs.