OCDE - Reforms of Active Labour Market Policies

@ Policy Reforms of Active Labour Market Policies to meet evolving labour market needs 12 May 2026 Key messages e Active Labour Market Policy (ALMP) design and implementation must keep up with changes in labour market needs to support economic growth and labour market resilience, addressing labour shortages and skills mismatches and mobilising untapped labour reserves. Public Employment Services (PES) are increasingly expected to modernise their services as labour markets evolve. At the same time, fiscal pressures call for greater efficiency and effectiveness of ALMPs and PES. e ALMPs and PES support have significantly changed over the past decades in many ways across OECD countries: wider target groups covering workers, people at risk of job loss and displacement and inactive people; strengthened career services and training provision aligned with skills forecasts; employer needs informing ALMP design and implementation; better co-ordinated policies and stakeholders to meet the individual needs of jobseekers; streamlined and digitalised processes and services; strengthened govemance and accountability frameworks; and more evidence-informed ALMP design and implementation. High-level institutional models of ALMP provision remain diverse due to lack of evidence for a single optimal model. For example, some countries have recently decentralised their ALMP provision, while others centralised. Some have opted for contracting more employment services out and others roll such approaches back. e Continuous improvement processes should be the default way to adjust ALMPs and PES. Systematic continuous improvement processes ensure modern ALMP provision without interruptions. Large-scale reforms should be reserved for structural misalignment with labour market needs and evidence to help systems leap forward in performance. o Substantial reforms of ALMP and PES systems are common in OECD. Almost two-thirds of OECD countries have reformed their ALMP system in the past 16 years. Finland, Iceland and Poland launched an ALMP reform in 2025, while Australia, Denmark and the United Kingdom are designing a reform for 2026 and the coming years. Relying on evidence to trigger, design and implement a reform is key for success. Other

Poland launched an ALMP reform in 2025, while Australia, Denmark and the United Kingdom are designing a reform for 2026 and the coming years. Relying on evidence to trigger, design and implement a reform is key for success. Other success factors include strong political commitment, wide stakeholder engagement and capacity, solid and agile change management, sufficient time allocated for planning and implementation, and potentially more substantial investments in the first years of the reform.

REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 20262| What'’s the issue?

OECD labour markets are undergoing structural transformation that challenges traditional ALMP provision models. Across OECD economies, labour markets are being reshaped by demographic ageing, technological change, globalisation and the green transition. These trends are increasing labour shortages and skills mismatches while simultaneously heightening risks of labour market exclusion. Many ALMP systems, originally often designed to activate unemployed jobseekers, are under pressure to support continuous job transitions, occupational mobility and workforce adaptation at scale. PES, the key organisations facilitating labour market matching and implementing ALMPs, face expanding mandates under tight fiscal constraints. PES are increasingly expected to serve a broader population, including workers at risk of job loss, displaced workers, inactive groups and people far from the labour market, while strengthening engagement with employers and anticipating skills needs. At the same time, fiscal pressures require greater efficiency, clearer accountability and demonstrable results. This combination of expanding expectations and constrained resources makes the design and performance of ALMP systems a key policy priority. Why is this important? The design of a country’s ALMP system influences the performance of ALMPs — the effectiveness and efficiency in connecting people with good jobs. Furthermore, the system design defines the agility and resilience of ALMP performance in the face of labour market shocks and trends, determining how quickly ALMPs and PES support can be adapted to changing labour market needs and how tailored these responses will be. For example, coping with the challenging labour market situation during the COVID-19

resilience of ALMP performance in the face of labour market shocks and trends, determining how quickly ALMPs and PES support can be adapted to changing labour market needs and how tailored these responses will be. For example, coping with the challenging labour market situation during the COVID-19 outbreak and reacting without delay proved easier for countries with agile ALMP setups (Lauringson and Liske, 2021;; OECD, 2021z). Effective ALMPs support economic resilience, productivity and growth. Well-designed and soundly implemented ALMPs can shorten unemployment durations, facilitate career progression and job-to-job transitions, bring inactive people to the labour market, and improve matching between workers’ skills and employers’ needs (OECD, 2025(3). In tight labour markets, ALMPs are increasingly used to mobilise underutilised labour reserves even beyond people registered with PES, contributing to productivity growth and economic resilience. ALMPs that do not meet the labour market needs, might fail to sufficiently support jobseekers, workers and employers and yield limited returns on investments into these policies. ALMP provision is undergoing significant modernisation OECD countries are continuously investing in modernising their ALMP systems to keep them effective and efficient. In general, many of the changes undertaken in ALMP systems are broadly similar across OECD countries: Widening ALMP target groups. In addition to registered unemployed, also employed jobseekers, people at risk of job loss or displacement and inactive population are increasingly supported by ALMPs and PES. Countries adopt more proactive approaches instead of reacting to labour market needs (Lauringson, Pantelaiou and Westlake, 20254)). PES have a wider remit above all regarding career services, reskilling and upskilling to support labour market restructuring, tightly aligning their services and measures with skills assessment and anticipation exercises. Relevant examples include the reforms in Estonia in 2017 and 2019, Lithuania in 2022 and Poland in 2025.

REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 2026|3

include the reforms in Estonia in 2017 and 2019, Lithuania in 2022 and Poland in 2025. REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 2026|3 ¢ Increasing engagement with employers. ALMPs are increasingly considering the needs of labour supply and demand simultaneously (Dromundo Mokrani, Lauringson and Xenogiani, 2024s)) such as in the reform in Greece in 2022 and in Australia in the coming years. ¢ Increasing co-ordination between active and passive labour market policies (unemployment benefits), merging the responsibilities of implementation into a single organisation. Countries are also revising activation criteria and mutual obligations for benefit recipients and other jobseekers to provide more meaningful support (OECD, 2025)). Examples include the reforms in Finland in 2022, Sweden in 2025, Denmark in 2026 and Australia in the coming years. e Aiming for more individualised and comprehensive support to jobseekers, particularly to people further from the labour market who have severe and often multiple barriers to employment e.g. due to health and disabilities, limited skills, qualification and job experience or care obligations. While ALMPs can also improve social integration (OECD, forthcomingyz), successful labour market and social integration requires tight co-ordination with education, social and health services (OECD, 2022)). For more comprehensive service provision, countries are improving co-operation and co-ordination models within ALMP systems and across policy areas. Examples of reforms that have focussed on this aspect, have been launched in Costa-Rica and Luxembourg in 2019, Lithuania and Spain in 2023, France and the Netherlands in 2024, and Iceland in 2025. Furthermore, better co-ordination of policies can require revising several policy areas simultaneously and ensuring their sufficient capacity. For example, the recent Jobs Again reform in Greece reformed substantially the ALMP system and PES, as well as strengthened investments into skills and training and streamlined social security (OECD, 20249)).

Furthermore, better co-ordination of policies can require revising several policy areas simultaneously and ensuring their sufficient capacity. For example, the recent Jobs Again reform in Greece reformed substantially the ALMP system and PES, as well as strengthened investments into skills and training and streamlined social security (OECD, 20249)). « Digitalising services and administrative processes for more effective, efficient and user-friendly services (Brioscu et al., 202410;; OECD, 202211)). All OECD countries are making changes along with digitalisation in society at large and as new technologies become available. This trend has been particularly strong since the COVID-19 pandemic (OECD, 202211)). An aim for fully renewed digital infrastructure is on-going in Costa-Rica, Iceland, Luxembourg and New Zealand, and constitutes a key part of a larger reform process launched in Greece in 2022 and France in 2024. Strengthening governance and accountability frameworks to increase the performance of PES and contracted-out service delivery (Vodopivec, 2023(12;; Lauringson and Liske, 2021(1). Examples include the reforms in Sweden in 2019, Greece in 2022 and France in 2024. e Moving towards evidence-driven ALMP provision and improved Labour Market Information systems, enabled by digitalisation, data exchanges across registers and increased analytical capacity (OECD, 20253)). These aspects have been instrumental in the reforms in Greece in 2022 and France in 2024. Despite the similar trends, support to jobseekers, workers at risk of job loss or displacement and employers remains very diverse across countries. The ALMP systems of OECD countries come from different starting points and have reached different levels of maturity. For example, some OECD countries only established their ALMP systems within the past 20-30 years and need time to fully develop these. Organisational set-ups of ALMP provision vary greatly across OECD countries Despite similar trends in ALMP provision in OECD countries, the organisational set-ups of ALMP provision remain very different across countries (Figure 1). As hard evidence on the performance of

Organisational set-ups of ALMP provision vary greatly across OECD countries Despite similar trends in ALMP provision in OECD countries, the organisational set-ups of ALMP provision remain very different across countries (Figure 1). As hard evidence on the performance of different organisational models is ambiguous or missing, countries adjust the organisational models for ALMP delivery driven based on political motivation, examples in other countries and aiming to find new solutions to issues identified in their current organisational models. For example, some OECD countries are centralising ALMP responsibilities (e.g. Finland in 2025), while others are decentralising them (e.g. ltaly over 2014-2024). However, the evidence on the REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 20264] performance of decentralised versus centralised models for ALMP provision is still ambiguous, as both models come with their pros and cons (Lauringson and Liiske, 2021(1; OECD, 202313)). On the one hand, decentralising responsibilities for ALMPs can bring services closer to local labour markets and employers. On the other hand, more centralised models can ensure consistency, a proper implementation of minimum service standards and stronger performance management. During the COVID-19 pandemic, more centralised systems were able to implement more homogenous approaches across the country, and more autonomous PES could introduce working methods and measures quicker to address the new challenges (OECD, 2021z). For higher performance, decentralised systems need to ensure support mechanisms for sub-national PES with lower capacity, while centralised systems should encourage bottom-up approaches and locally adjusted measures within the overall framework. Figure 1. Some of the reforms in ALMP system restructure the organisational set-up Recent and on-going reforms in the organisational set-up of ALMP provision in OECD and EU countries Seteup of public Ministry Nationallevel PES ~ Nationallevel PES~ Subnational ~ Sub-national

Figure 1. Some of the reforms in ALMP system restructure the organisational set-up Recent and on-going reforms in the organisational set-up of ALMP provision in OECD and EU countries Seteup of public Ministry Nationallevel PES ~ Nationallevel PES~ Subnational ~ Sub-national institutions coordinating govemed bya with riparite PESwitha PESwitiouta providers ministry management national agency national agency Role of Private Employment Services Mainly public providers ~ CYP, HUN, JPN, CZE, CHL, CRF', EST,DEU",HRV, CHE, DNK AN LUX ISR, SVK PRT, SVN Privte providers FIN: BOR,LTULVA, GRC,ISLROU, COLES/ relevant but no MEX TUR contracting out Employment services RL, MLT.NOR SWE, AUTF A BEL,POL,USA partaly o fully NLD contracted out Note: XXX —changes in the high-level organisational set-up. XXX — changes in co-operation/co-ordination/scaling outsourcing. The mainstream | first tier system mapped but alternative systems are present. Private Employment Service is a private company or an NGO providing employment services (category 1.1 of labour market policies according to the OECD/EC methodology, i.e. placement and related services) Source: Adjusted using OECD (2025;g)), “The Role of Public Employment Services in Promoting an Inclusive Nordic Common Labour Market”, https://doi.org/10.1787/54cec4d6-en Some countries have expanded the use of contracted-out employment services to increase flexibility, client choice or scalability (e.g. Sweden in 2019, Denmark in 2026), while others have scaled back market-based models after concems about cost, fragmentation or limited performance gains (Australia in 2022, Sweden in 2025). As the international evidence indicates that contracting-out can deliver results only when accompanied by robust accountability frameworks, outcome-oriented payment models and

market-based models after concems about cost, fragmentation or limited performance gains (Australia in 2022, Sweden in 2025). As the international evidence indicates that contracting-out can deliver results only when accompanied by robust accountability frameworks, outcome-oriented payment models and effective data exchange between public and private actors (Vodopivec, 202312)), the on-going reforms in Finland and France rather strengthen those aspects than revise the role of external providers altogether. Countries are strengthening co-operation and co-ordination between stakeholders to maximise the performance of their chosen organisational model for ALMP provision. The performance of ALMP systems depends strongly on the co-operation and co-ordination between relevant stakeholders and their capacity to design and implement ALMPs. As building capacity requires additional resources, strengthening co-operation and co-ordination has become a particularly important policy lever in the context of tight resources. Co-operation and co-ordination models are established from scratch in countries that are restructuring their organisational landscape of ALMP provision, sometimes merging organisations for this purpose. Other reforms focus on strengthening co-operation and co-ordination between existing organisations, without reshuffling the responsibilities for ALMP design and implementation altogether (e.g. establishing a new co-ordination model in France in 2024-2027, one-stop shops jointly by the PES REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 2026|5 and the municipalities in the Netherlands in 2024, a network of the regional and national PES in Spain in 2023). Continuous improvement processes ensure ALMPs meet the labour market needs Continuous improvement processes should be the default mechanism to keep ALMP systems up to date. Such constant small-scale revisions enable PES to update services and measures, streamline administrative procedures, modemise infrastructure and incorporate new evidence without major disruptions. Systematic small-scale revisions can be managed in an agile way, as these do not generally need particular political push or commitment. For continuous improvement processes to be successful,

administrative procedures, modemise infrastructure and incorporate new evidence without major disruptions. Systematic small-scale revisions can be managed in an agile way, as these do not generally need particular political push or commitment. For continuous improvement processes to be successful, these should rely on change and quality management frameworks and be well-rooted in PES organisational culture. Continuous improvement process can also help adjust ALMPs to address megatrends. For example, OECD countries have significantly adjusted their PES and ALMPs via continuous improvement processes over 2023-2024 to support the green transition. Altogether 73% of OECD PES have taken steps to support the green transition, including 50% of OECD countries adjusting specific ALMPs (Lauringson, Pantelaiou and Westlake, 2025(4). Training programmes are most common ALMPs to support the green transition, providing the necessary skills for greener jobs for unemployed, displaced workers and people at risk of job loss, as well as supporting employers going through transformation to retain their staff. Many of the adjusted ALMPs aim to address the twin green and digital transition simultaneously. Sometimes major reforms in ALMP systems are warranted Reforms in ALMP systems change the organisation and content of ALMP provision significantly. Reforms are comprehensive changes that affect many functions and processes of PES, significantly alter the eligibility or target groups of ALMPs, modify the organisational landscape of ALMP provision or entail extensive reshuffling of tasks and co-ordination models of providers of ALMPs and other types of services and measures. In case of major reforms, all of these changes take place simultaneously. Large-scale reforms can offer high potential returns. Above all, a reform in an ALMP system might be necessary if the improvement processes have not been taking place continuously, systematically and in a sufficient scale. A large catch-up with the labour market needs could be relevant also in case new permanent shifts in labour market needs arise (as e.g. in the case of the reform in Poland in 2025), as well as when new evidence on policies becomes available that requires a rethink in the overall approaches

sufficient scale. A large catch-up with the labour market needs could be relevant also in case new permanent shifts in labour market needs arise (as e.g. in the case of the reform in Poland in 2025), as well as when new evidence on policies becomes available that requires a rethink in the overall approaches (e.g. as in the upcoming reform in Australia). Reforms entail significant risks that need to be carefully weighed. The full benefits of a reform are likely to emerge only after some time, while disruption risks in ALMP provision are considerable for several years when dismantling existing organisations and approaches. As such, major reforms in ALMP systems are a very relevant but not an everyday policy tool as too frequent overhauls can be more damaging than beneficial. Six OECD countries launched a major reform of their ALMP systems in 2025 Several OECD countries are undertaking substantial reforms of their ALMP and PES systems, reflecting shared pressures from structural labour market changes, labour shortages and fiscal constraints. Almost two-thirds of OECD countries have reformed their ALMP system in the past 16 years, REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 20266] including almost a quarter of OECD countries starting such reforms in the last two years (Figure 2). Six OECD countries (16%) launched an ALMP reform in 2025 or were designing a reform for the coming years. Australia aims to significantly revise its employment services, following an in-depth assessment of the system. Australia shifted from its fully contracted-out jobactive to Workforce Australia in 2022, introducing online self-services for those closest to the labour market and freeing up resources for those further away. At the same time, the Australian Government launched a thorough investigation of the performance of employment services via a dedicated committee (that consulted the OECD among many other actors) that concluded that the current system had serious shortcomings (Parliament of Australia, 202314)). In 2024, it was decided that a comprehensive reform in the system was necessary to move from

performance of employment services via a dedicated committee (that consulted the OECD among many other actors) that concluded that the current system had serious shortcomings (Parliament of Australia, 202314)). In 2024, it was decided that a comprehensive reform in the system was necessary to move from overly bureaucratic and compliance-driven system to person-centred quality service that better support sustainable employment and meet employers’ workforce needs. The government has already adjusted mutual obligation and compliance settings and announced further changes to administrative processes for mainstream employment services (Workforce Australia), as well as introduced new models in 2025 to support jobseekers with disabilities (Inclusive Employment Australia) and jobseekers in remote areas (Remote Jobs and Economic Development Program) (Parliament of Australia, 2024:s; Australian Government, 2025(1g)). Figure 2. Two-thirds of OECD countries have reformed their ALMP system at least once during the past 15 years National reforms in ALMP systems in OECD countries by the starting date of the latest ALMP reform in the country Austiia / p Belgium Canada Chile Colombia New Zealand Hungary Norvay Slovak Republic Slovenia Swizerland United States Before 2009 2009-18 2019-21 w o man el Note: ALMP — active labour market policy. Only national reforms strongly affecting ALMPs provision or PES are indicated in this Figure, excluding other functions that some of the PES fulfil. For example, many PES are also responsible for unemployment benefits, but reforms in benefits are not indicated in this figure. Furthermore, many OECD countries have revised activation criteria for unemployment benefit recipients over the past years, which are also not marked as ALMP reforms in the figure. Reforms in ALMP systems that only touch upon digital transformation of PES are not included either. The figure depicts the latest ALMP reform in a country, while some OECD countries have reformed their ALMP system several times over the past 15 years. In Finland, decentralising the system of employment services has been challenging in its first year of implementation, in 2025. The responsibility for organising employment services was transferred from

system several times over the past 15 years. In Finland, decentralising the system of employment services has been challenging in its first year of implementation, in 2025. The responsibility for organising employment services was transferred from the central government to municipalities and newly formed local employment areas (co-operation of several municipalities) on 1 January 2025 as a result of the government decision back in 2021. This reform aims to bring employment services closer to employers and jobseekers, better integrate these with other services and strengthen responsiveness to local labour market needs. The national government retains a strategic guidance role, co-ordinating and supporting the system (MEAE, 202417)). The first year of reform implementation has been challenging due to the difficult labour market situation, new infrastructure, difficulties to fully deliver the services in some municipalities and lack of staff and funding for employment REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 2026|7 services — the latter issues being addressed by the government in 2026 (European Commission, 20261s; Yle, 2025p9)). An early assessment of the reform also points to gaps in political support, communication, co-operation and trust between stakeholders, lack of change management and clarity of responsibilities, too tight reform schedule, and differences between municipalities in their capacity (Owal Group, 2025p0). Denmark is reforming its employment services to decrease administrative burden, provide support based on individual needs and diversify service providers and delivery models. This reform aims to cut the costs of the system that has historically been the most expensive among OECD. The political agreement for the new set-up of the system was reached in April 2025, following a thorough set of recommendations by a group of experts (including academics and researchers) in 2024 as tasked by the government in 2023 (OECD, 202621j; OECD, 2025). The reform is being implemented in two phases. The first phase to be implemented in 2026 (in February and July) will bring above all a range of

the government in 2023 (OECD, 202621j; OECD, 2025). The reform is being implemented in two phases. The first phase to be implemented in 2026 (in February and July) will bring above all a range of simplifications in processes and set the premises for the municipalities to decide on the organisation of employment services (instead of the so far mandatory job centres), while giving more space for the unemployment insurance funds and private actors to provide such services. The second phase in 2027 will introduce a new regulation of ALMPs, further streamlining rules and focussing on labour market outcomes (STAR, 2026(22). Iceland is implementing a major reform to better support people with disabilities with strong implications for ALMP provision. Amendments approved by the parliament in June 2024 took effect in September 2025 and aim to simplify the benefit system, strengthen rehabilitation pathways and improve incentives for labour market participation among people with reduced work capacity. The reform places greater emphasis on co-ordinated and integrated support, and the role of the PES in facilitating employment where feasible, marking a shift from passive income support towards activation and labour market integration (OECD, 2025; Félagsog hisnzedismalaraduneytid, 202523)). Poland has modernised its ALMPs and increased their accessibility, adopting a new comprehensive legislation for PES and ALMPs that came into force in June 2025. The reform expands ALMP access to additional groups (e.g. inactive, older workers, farmers, people with disabilities etc), redesigns ALMPs to shorten job search duration, increase labour mobility and lead to sustainable quality employment, simplifies and automates administrative procedures, modernises PES offices, and strengthens the focus on job quality and employer needs (Kancelaria Prezesa Rady Ministrow, 202424;; OECD, 2025p25)). The United Kingdom is preparing a major reorientation of its employment support system to transform PES (Jobcentre Plus) from a benefit-focussed administration into a more personalised

quality and employer needs (Kancelaria Prezesa Rady Ministrow, 202424;; OECD, 2025p25)). The United Kingdom is preparing a major reorientation of its employment support system to transform PES (Jobcentre Plus) from a benefit-focussed administration into a more personalised employment and careers service, with phased roll-out expected from late 2026 onwards. The new service will have stronger links to skills provision, local services and employers, supported by enhanced digital services (including the "Jobcentre in your pocket” online solution). Central to the reform is the creation of a new national Jobs and Careers Service, integrating Jobcentre Plus and the National Careers Service. The reform of employment services was announced in the Get Britain Working White Paper, published in November 2024 (His Majesty’s Government, 2024pg). While the need for a reform is broadly accepted, delays in publishing more detailed implementation plans has raised some concerns (UK Parliament, 202527). Further reforms are likely to emerge in the short term as expectations for modern employment support that provides high return on investment increase. For example, the Norwegian Government set a target to significantly increase its employment rate by adjusting ALMPs and PES approaches in its white paper in 2024 (Regjeringen, 2024 2g)), and is setting up an expert group as of early 2026 to thoroughly review whether its PES and welfare administration is functioning properly and is well equipped for the future (Regjeringen, 202629]). REFORMS OF ACTIVE LABOUR MARKET POLICIES TO MEET EVOLVING LABOUR MARKET NEEDS © OECD 20268| Evidence is key to ensure successful reforms The recent and ongoing reforms provide insights on the factors for successful reforms. These include strong political commitment, wide stakeholder engagement and capacity, and a st