Active labour market policies cover a wide range of tools, including interventions as diverse as support for job seekers, “active measures” such as cuts in social security contributions on low wages, supported contracts in the private and public sectors, and training programmes targeted at the unemployed. More broadly, employment policies also include cuts in social security contributions targeted at jobs at risk or at more fragile enterprises, such as small businesses1 . During the crisis, OECD countries focused on supporting the unemployed to cope with the influx of jobseekers, but the use of active measures has varied widely. Indeed, very little theoretical or empirical work has sought to inform policy by identifying the respective merits of the various types of intervention over the cycle. Most of the available evaluations do not pay specific attention to the time of the intervention, but most often seek to identify their long-term effects. The purpose of this note is to analyse the adjustment of employment policies in the different phases of the cycle in the light of recent research. This research leads to three important recommendations. First, the increased social cost of unemployment during recessions may justify counter-cyclical policies that facilitate job creation and limit job destruction, which should therefore be more intensive during the low cycle. Secondly, in periods of economic downturn, it is desirable to promote training programmes for job seekers. Indeed, as it is more difficult for them to find a job during these periods, the lock-in effect inherent in training has fewer drawbacks. Finally, it is desirable to favour schemes that reduce the cost of labour at the lower end of the wage scale in periods of recession, especially when the minimum wage is binding, as is the case in France. The first part of this paper briefly presents the main cyclical characteristics of active labour market expenditure in OECD countries. A second part presents economic analyses of the adjustments over the cycle in the volume of spending on active labour market policies. A third part is devoted to the analysis of the choice of the employment policy toolkit.

Pierre Cahuc & Stéphane Carcillo