Parties, Unions, and Activation Strategies: The Context-Dependent Politics of Active Labor Market Policy Spending

This article explores the diverging roles of leftwing parties and trade unions in determining active labor market program (ALMP) spending. We argue that unions today increasingly take into account the distinct re-employability worries of their members. Rather than as a labor market outsider program, unions now consider ALMPs, especially those sub-programs most directly useful to their members, as their second-best or first-best feasible priority. Specifically, in countries where high job protection levels (the first-best goal) have not been achieved, more powerful unions will promote ALMP spending as an alternative way to offer their members some measure of labor market security. We test these arguments on a sample of 20 OECD countries between 1986 and 2005. Using a new measure of leftness, we find that leftwing party power has no effect on ALMP spending generally and a negative effect on job creation programs. By contrast, larger and more strike-prone unions are associated with higher ALMP spending overall, and specifically on those programs most benefiting their members: employment assistance and labor market training. Moreover, union strategies are context-dependent. More powerful unions push for more activation spending especially in labor markets where jobs are not yet well protected.