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

Abstract

This article explores the diverging roles of left-wing parties and trade unions in determining active labour market programme (ALMP) spending. We argue that unions today increasingly take into account the distinct re-employability worries of their members. Rather than as a labour market outsider programme, unions now consider ALMPs, especially those sub-programmes 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 labour market security. We test these arguments on a sample of twenty OECD countries between 1986 and 2005. Using a new measure of leftness, we find that left-wing party power has no effect on ALMP spending generally and a negative effect on job creation spending. By contrast, larger and more strike-prone unions are associated with higher ALMP spending overall, and specifically on those programmes most benefiting their members: employment assistance and labour market training. Moreover, union strategies are context dependent. More powerful unions push for more activation spending, especially in labour markets where jobs are not yet well protected.