Does labour market training and subsidised employment reduce unemployment? An evaluation of the employment effects of labour market training and subsidised employment in Finland 1990-95 DRAFT

In Finnish labour market policy, labour market training and subsidised employment are seen as the key methods. The aim of the paper is to evaluate effectiveness of labour market training (LMT) and subsidised employment (SE) in Finland 1990 and 1992. The focus is placed on the individual employment impact at the micro-level: LMT and SE impacts on subsequent employment (number of employment months during the subsequent 3-year-period) for participants (an experimental group) are compared with likely outcomes without training or subsidised employment (control group) during a three-year-period (1991-93, n=65 409 and 1993-95, n=166 678). The data used combines individual-level information from various registers, maintained by the Statistics Finland. For the project, a panel data set has been produced, covering the years 1987-95. The data includes information on employment, unemployment, education, and family conditions. According to the regression analysis, participation in labour market training increased and participation in subsidised employment on the contrary reduced the duration of employment during the subsequent threeyear-period after controlling background factors. Within the subsidised employment, however, there was a large variation: start-up grants were more effective in increasing employment compared to subsidised employment schemes in the municipal and state sector. In addition, the effectiveness of labour market policy varied over time reflecting changes in the business cycle and unemployment rate.