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When is a policy that helps people be in work not an ALMP?

Advisor, Productivity Commission
9 October 2019

Answer: When it’s a childcare subsidy available to other low-income households.

Active Labour Market Policies, or ALMPs for short, are a broad range of interventions designed to help people into employment or stay employed. They can include subsidies for firms to hire unemployed workers, training programmes to upskill unemployed people, and job placement services.

There are many ways to categorise the different types of ALMPs. Here’s my categorisation based on the main objective of the policy.

Different types of ALMPs

Most international studies only count policies as ALMPs if they are specifically targeted at people who are unemployed or at risk of unemployment, but that distinction leads to some quite odd classifications.

For example, a relocation subsidy to help an unemployed person take up a job in another city is an ALMP in international studies. But a childcare subsidy that helps unemployed low-income parents to take up work would not be an ALMP, if the support is available to other low-income parents.

In New Zealand, MSD is the main agency funding ALMPs. MSD funded programmes are almost exclusively for people not in employment and on a benefit1 or for people who have recently left the benefit system.2

Based on MSD’s 2019 report on employment assistance, MSD’s total spending on employment interventions that fit common definitions of ALMPs was just over $300 million in 2016-17.

                                     Spending on ALMPs funded by MSD in 2016-17

Spending on ALMPsSource: My analysis of data from the MSD report

My analysis excludes the roughly $200 million that MSD spent on the Childcare Subsidy even though, according to MSD, it is a weekly payment that aims to assist people with dependent children to undertake and remain in employment, education or training. I haven’t included the subsidy in MSD’s spending on ALMPs because it is available to other low-income households.

If the Childcare Subsidy was a time-limited payment available to help cover childcare costs for unemployed workers (with dependent children) conditional on starting work, this would count as an ALMP. For example, MSD also has a programme called Flexible Childcare Assistance, which is a childcare subsidy for sole parents to help them cover the costs of childcare during non-standard hours so they can take up more work. The assistance runs for 26 weeks. This would likely count as an ALMP.

What’s counted as an ALMP and what’s not is one of the reasons we should be cautious about international comparisons of spending on ALMPs. I’ll be delving more into international comparisons of ALMP spending in my next post.

Notes
1. Unsurprisingly referred to as a “passive” as opposed to an “active” labour market policy.
2. An exception is the Earthquake Support Subsidy which is a subsidy for earthquake affected firms to retain staff.

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