Coronavirus (COVID-19): measures to mitigate the labour market impacts - report

3. Existing measures supporting the Scottish labour market and key gaps

The sub-group received evidence on the impact of different labour market interventions, drawing specifically on the input from two experts.^[5] Box 1 provides a brief overview of which active labour market policies tend to be more effective, with a more comprehensive summary in Annex C.

Box 1: What are effective labour market policies?

Active Labour Market Policies (ALMPs) are used across the world to support those unemployed into work. A 2019 meta-analysis of multiple studies highlights that the most effective measures - both in terms of earning and employment impact - are wage subsidies (Yeyati, et.al., 2019). Vocational training and support to micro-entrepreneurs and self-employed are the next most effective measures.

A long-term view is key for these polices as human capital policies generally show benefits approximately 2-3 years after program completion (Card, et al., 2015).

However, the main challenges will be scaling up the right activity to meet the large volumes of people requiring support and ensuring there is enough labour market demand within the Scottish economy.

Figure 2 illustrates the broad range of measures in place to meet the range of challenges facing the Scottish labour market. Aspects of this support were under review prior to the outbreak of the pandemic, with the Cumberford-Little^[6] and the Muscatelli^[7] reports on the college and universities sector respectively containing a range of recommendations which are under consideration by Scottish ministers.

The sub-group considered the wide range of measures currently in place and focused on the potential gaps in support and where specific types of support need to be enhanced given the scale of the labour market challenge. As part of this work evidence was considered on the effectiveness of current measures and this is summarised in Annex D.

Gaps Identified

From this assessment and based on the evidence on the effectiveness of different active labour market policies, the sub-group identified a range of gaps in support which have been grouped in the following categories:

• Ongoing fiscal support for private sector employers;
• Greater protection for Scotland's young workforce;
• Incentives for employers to retain workers;
• Innovations to maximise apprentice and other trainee schemes;
• Scale up the support offered through PACE for those facing redundancy;
• Greater training support to enable people to transition into new sectors;
• More short courses designed in partnership with industry to enable people to quickly retrain;
• Maximise the availability of further and higher education places, including short courses, prioritising where there is a pathway to employment; and
• Greater support for the long-term unemployed and the groups most affected by the crisis.