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Active Labour Market Programmes and Poverty Dynamics in Ireland

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  • Halpin, Brendan
  • Hill, John
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    Abstract

    Active Labour Market Policies (ALMPs), which provide training and subsidised employment to the unemployed, are an important part of Ireland’s welfare state. While a good deal of existing research is concerned with the effect of these policies on employment chances and on wage rates, none addresses the connection between poverty and ALMPs. Do these policies have an effect on poverty? That is, first, to what extent do these policies serve the low-income population, as a consequence of and in addition to their focus on those in precarious labour market situations? Second, to what extent do these policies function to lift people out of poverty in the medium term? To address these issues we use longitudinal data from the Living in Ireland Survey (1994–2001) and examine how the respondents’ situation in one year predicts participation in employment and training schemes in the next year, and then how participation in these schemes affects poverty status in the following year. Participants on both sorts of schemes are much poorer than the population average, and those on employment schemes (but not training schemes) are even poorer than one would expect given their observed characteristics. Employment schemes and training schemes serve different purposes and different populations. A conventional logistic regression analysis seems to suggest that employment schemes (but not training schemes) positively increase the risk of poverty in the following year. This finding is not considered reliable, but rather it reflects the selection processes whereby those on employment schemes are in particularly vulnerable situations, in respects that are not picked up in the data set. A more rigorous analysis, using propensity score matching, reveals that employment schemes are neutral on poverty risk. Training schemes have a weak but insignificant protective effect. Considering the risk of poverty approximately one year after participation begins, employment schemes (and to a lesser extent, training schemes) do not provide a mechanism for immediately exiting poverty. We add the caveat that it may be desirable to consider outcomes two or more years into the future, were data available, and that other outcome measures of quality of life should also be taken into account. Ultimately, with regard to both labour market and poverty outcomes, we find no evidence that participants of training schemes or employment schemes have either raised their employment chances or reduced their risk of poverty in the year following their participation.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10335.

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    Date of creation: Aug 2008
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    Handle: RePEc:pra:mprapa:10335

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    Keywords: active labour market programmes; ALMP; propensity score matching; employment policy;

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    1. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, Econometric Society, vol. 66(5), pages 1017-1098, September.
    2. Callan, Tim & Keeney, Mary J. & Nolan, Brian & Maitre, Bertrand, 2004. "Why is Relative Income Poverty so High in Ireland?," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number PRS53.
    3. Jeffrey Smith, 2000. "A Critical Survey of Empirical Methods for Evaluating Active Labor Market Policies," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 20006, University of Western Ontario, Department of Economics.
    4. Layte, Richard & Maitre, Bernard & Nolan, Brian & Watson, Dorothy & Williams, James & Casey, Barra, 2001. "Monitoring Poverty Trends and Exploring Poverty Dynamics in Ireland," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number PRS41.
    5. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, Elsevier, vol. 125(1-2), pages 305-353.
    6. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(1), pages 74-90, January.
    7. Breen, R. & Halpin, B., 1989. "Subsidising Jobs: An Evaluation of the Employment Incentive Scheme," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number GRS144.
    8. Richard Layte & Brian Nolan & Christopher T. Whelan, 2001. "Reassessing Income and Deprivation Approaches to the Measurement of Poverty in the Republic of Ireland," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 32(3), pages 239–261.
    9. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
    10. Denis Conniffe & Vanessa Gash & Philip J. O'Connell, 2000. "Evaluating State Programmes - “Natural Experiments” and Propensity Scores," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 31(4), pages 283-308.
    11. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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