1. Executive summary

Background and purpose

Much has been said about improving labour market attachment among vulnerable groups, yet progress remains limited, especially among young people. The Nordic countries generally outperform the EU27 in labour market inclusion for vulnerable groups. However, significant challenges persist. Vulnerable groups continue to experience lower labour market participation rates, and substantial employment gaps remain despite political focus, various reforms, and locally anchored initiatives. This constitutes a challenge for both society and individuals.

Although a considerable body of literature and reports exists, the evidence on what works, and for whom, remains limited, especially for the most vulnerable groups in the Nordic labour markets. This knowledge gap arises, in part, from the heterogeneity within vulnerable groups and the complex employment barriers they face, making scalable solutions difficult to design and implement.

Many experts point to the complexity and heterogeneity within this population as making it difficult to design effective interventions. As a result, individualised and holistic approaches have become the default answer. While these approaches have merit, they often serve as a comfort zone, hindering the development of scalable and sustainable programmes for vulnerable individuals.

This project aligns with the Nordic Council of Ministers’ strategic efforts to improve labour market participation among vulnerable groups (Nordic Council of Ministers, 2022). In this report, we aim to bridge the knowledge gap by presenting concrete, evidence-based policy recommendations to improve labour market inclusion among vulnerable groups.

Prerequisites for effective employment instruments

Designing effective employment instruments for vulnerable groups is both challenging and complex. However, by analysing microdata, interviewing experts and caseworkers in the Nordic countries, and summarising literature, we have found five prerequisites of effective employment instruments for vulnerable groups. Effective instruments:

Are holistic and comprehensive
They are typically holistic and comprehensive in nature, addressing not just employment barriers but also social and health-related barriers. For example, literature documents positive employment effects of individual placement and support (IPS) within the framework of Supported Employment. A central part of this type of intervention is integration of mental health services and employment services in order to provide individuals with competitive employment while being treated for the mental health issue.

Involve the individual and build on good relationships
They often actively engage the individual and are built on trust and a good relationship between the vulnerable individual and the caseworker. Our findings highlight the critical role of time in fostering meaningful engagement with the system. This can be achieved by, among other things, reducing the case load for caseworkers in order for the caseworker to establish presence, offer support, and provide encouragement.

Include some form of labour market training
They often include some form of labour market training to bridge the gap between the needs of the labour market and skills acquired through education and formal or informal work. This training also aims to provide vulnerable individuals with confidence in their abilities. Such training can take many forms, including internships, wage-subsidised jobs, or regular paid hours. A key factor appears to be ensuring that the training occurs under conditions as close to ordinary workplace terms as possible.

Are built on a solid skills and social match
They build on a solid skills and social match between the individual and the employer. Our research demonstrates that a strong match between employer and employee is crucial for the success of labour market training. Certain instruments are effective because they involve a structured sequence of job training internships that help participants develop skills. By exploring different workplaces and sectors, participants gain opportunities to find a suitable job match both professionally and socially.

Require close contact between caseworker and employer
Direct interaction between caseworkers and employers has been shown to significantly enhance the effectiveness of employment initiatives. Evidence suggests that this form of engagement facilitates faster transitions into employment for job seekers, as it allows caseworkers to acquire informal yet valuable knowledge that improves the quality of job matching.

These prerequisites form the foundation for the policy recommendations we present below.

12 Recommendations to increase labour market participation

Building on the prerequisites and prior work in this project – including literature reviews, interviews with caseworkers and experts, and extensive deep dives – we have developed 12 recommendations targeting state actors, local actors, and caseworkers. These policy recommendations outline a clear path forward to increase inclusion of vulnerable groups in the Nordic countries: embracing a system that prioritises addressing key barriers, designing flexible programmes grounded in trust and empowerment, and fostering stronger partnerships with employers. The journey towards a more inclusive labour market is not one of quick fixes but of sustained, strategic, and practical efforts, and we hope that these recommendations can pave the way for a labour market that provides opportunities for all and leaves no one behind. Such an approach would not only directly benefit individuals and society but also generate indirect effects, including fostering a more cohesive and resilient society.

For each recommendation, we present concrete signature projects that have been successful in incorporating elements from the recommendation. The recommendations are presented below.

Policy track 1: A more flexible and barrier-centric system

1.1 A system that provides greater flexibility in the selection and design of programmes and rewards long-term results

Today, caseworkers are limited in their ability to select and design effective interventions for vulnerable groups within the Nordic employment system. These systems are too heavily controlled by centrally determined requirements regarding the scope and nature of employment efforts. Therefore, we recommend that state actors in the Nordic countries place greater emphasis on providing caseworkers with flexibility in selecting and designing interventions for vulnerable individuals, allowing for individualised efforts that address each person’s unique needs and challenges.

1.2 Experiment with promising initiatives – systematise approaches, follow-up, and evaluations

Lack of quantified evidence regarding the employment effects of certain employment instruments and ambiguous results regarding others is a common Nordic challenge. To address this, we recommend that state actors establish a structured system to encourage pilot projects and test of promising initiatives – even in cases where results are not yet fully documented. This approach should aim to translate pilot projects into scalable, impactful interventions through a systematic, evidence-based, and methodical approach.

1.3 Systematic knowledge sharing and development of tools for assessing long-term economic consequences

Greater flexibility and fewer process requirements (see recommendation 1.1) increase the demands on local actors and caseworkers to identify which employment instrument is effective and for whom. To address this, we recommend that state actors launch initiatives to improve local access to knowledge about effective interventions for vulnerable groups. This includes, among other things, disseminating the latest research and best practices through cross-Nordic online knowledge portals.

1.4 Initiate a proactive strategy for the use of data models, AI, and new technology

General uncertainty and technical and legal complexity surrounding data models, artificial intelligence (AI), and new technologies prevent the Nordic countries – and especially local actors – from reaping the full benefits of these types of technologies. Therefore, state actors should establish a proactive strategy to promote the adoption and effective use of data models, AI, and new technologies.

Policy track 2: Create flexible programmes for complex challenges

2.1 Design combined programmes with a focus on the individual’s full set of barriers

Vulnerable individuals often face multiple employment barriers, and some of the initiatives in place today are not effective, because they inadequately address the individual’s actual barriers or because they address them in the wrong sequence. Therefore, interventions risk becoming ineffective. To address this, we recommend that state and local actors place greater emphasis on designing holistic intervention programmes that take into account the full range of barriers faced by vulnerable individuals.

2.2 Continue efforts with employment-focused initiatives for vulnerable individuals – as close to a real job situation as possible

The path to employment often goes through employment-focused initiatives, but there may be a tendency today to not fully reap the benefits of these initiatives, as there is insufficient focus on why such measures are effective, i.e., that genuine working conditions in a real workplace with real wages is what works. Therefore, we recommend that local actors continue to prioritise employment-orientated initiatives but focus more than they do today on placing individuals in working conditions that resemble actual employment in a real workplace with real wages.

2.3 Prioritise vocational education with qualification certificates

Vulnerable individuals often lack formal qualifications and may struggle within the ordinary education system. Also, to some degree, they are offered fragmented courses as part of employment initiatives without receiving formal certificates for the competencies they acquire. Therefore, we recommend increasing the use of flexible vocational education that combines skills training with workplace practice, ensuring that participants receive formal, transferable qualifications to enhance long-term employability.

Policy track 3: Create results through good relations, confidence, and motivation

3.1 Improve the interaction between vulnerable individuals and the system – focus on co-creation, peer-to-peer feedback, and autonomy

The motivation and willpower of vulnerable individuals are diminished if they feel a lack of control over their own situation and have a lack of understanding of how the system works. Therefore, we recommend that state and local actors work to improve the interaction between individuals and the system to foster greater motivation and ownership of their own development. By creating more meaningful connections and fostering genuine engagement, individuals are more likely to take an active role in their way to the labour market.

3.2 Strengthen relationship-building efforts – empower caseworkers to build continuous and trustful relationships with vulnerable individuals

The caseworker’s ability to build a strong relationship with the individuals is currently hindered by large caseloads and a lack of continuity in following the individual’s progress due to, e.g., frequent caseworker changes. Therefore, we recommend enhancing the capacity of caseworkers to build and establish strong, ongoing, and trust-based relationships with vulnerable individuals by providing them with extended authority and resources.

3.3 Empower caseworkers to exempt vulnerable individuals from requirements and sanctions, and increase economic incentives for progression towards employment

Striking the right balance between economic incentives, requirements, and sanctions, and providing vulnerable individuals the time and space to integrate into the labour market is a significant challenge. Therefore, we recommend empowering caseworkers to exempt vulnerable individuals from requirements and benefit sanctions for a defined period. Simultaneously, we propose strengthening economic incentives for vulnerable individuals who are assessed as ready to work, encouraging progress towards employment.

Policy track 4: Getting companies on board

4.1 Promote an inclusive labour market through systematic information, employer outreach, and best-practice cases

Many companies today are willing to take on some form of social responsibility by employing vulnerable individuals. However, a lack of information about opportunities and potentials can make employers hesitant to hire vulnerable individuals. To address this, we recommend that state and local actors systematically work to enhance employers’ awareness of the opportunities and potential benefits of contributing to a more inclusive labour market.

4.2 Strengthen the match between vulnerable individuals and employers, and simplify employers’ collaboration with local actors

A lack of clarity, complex regulations, and too many points of contact with local public actors complicate and limit employers’ willingness to collaborate with local actors. Additionally, insufficient focus on creating strong social and professional matches between vulnerable individuals and employers can lead to poor outcomes, discouraging future collaboration. Therefore, we recommend that state and local actors prioritise improving professional and social matches while simplifying employer collaboration.

Reader’s guide

The report is organised as follows: Chapter 2 synthesises the findings of the project, including an overview of labour market statistics in the Nordic countries, a framework outlining employment barriers and their prevalence among vulnerable groups, and an overview of available employment instruments in the Nordic countries. Chapter 3 presents 12 evidence-based policy recommendations derived from the project’s findings. These recommendations, based on extensive literature reviews and interviews with caseworkers and experts, are structured into four themes and accompanied by concrete Nordic examples of signature projects that successfully integrate key elements of these policies. Chapter 4 provides a detailed list of the literature used throughout the report. Chapter 5 explores three specific focus areas: young NEETs (young people not in employment, education, or training), immigrant women, and the disability employment gap. This chapter examines the barriers preventing these groups from participating in the labour market and offers insights into how these challenges can be addressed.