A country can activate the supply of its skills by by encouraging people to offer their skills to the labour market. This can be accomplished in several different ways.
1. Identify inactive individuals and the reasons for their inactivity
People may have skills, but for a variety of reasons they may not be willing or able to supply them to the labour market. In most countries, significant numbers of individuals are out of the labour force by choice, or because of their personal/family circumstances, or because there are financial disincentives to work.
Labour-force participation rates – the sum of people in employment and in unemployment as a percentage of the working-age population – range from close to 90% in Iceland to below 60% in Turkey. Some socio-demographic groups are more likely to be inactive than others, notably women and people with disabilities or chronic health problems, particularly if they are also low-skilled. Integrating under-represented groups into the labour force has a great potential to increase the skills base in an economy. Targeting activation policies efficiently requires identifying inactive individuals and their reasons for inactivity.
Unused human capital represents a waste of skills and of initial investment in those skills. As the demand for skills changes, unused skills can become obsolete; and skills that are unused during inactivity are bound to atrophy over time. Conversely, the more individuals use their skills and engage in complex and demanding tasks, both at work and elsewhere, the more likely it is that skills decline due to aging can be prevented.
2. Create financial incentives that make work pay
Costly childcare services, tax systems that make work economically unattractive, or benefit systems that offer better compensation compared with expected salaries can make it uneconomical to work. For people with disabilities, incentives to withdraw from the labour force largely depend on their access to full disability-benefit schemes. A number of countries have either abolished partial disability benefits or have made full disability schemes exclusive to people who can no longer work.
In some countries, people who can still work are increasingly being counted as unemployed, and are thus subject to the so-called “mutual obligation”, whereby they have to comply with job-search and training requirements or risk losing part or all of their unemployment benefits. When examining beneficiary claims, countries need to shift the focus from assessing health status to assessing the remaining capacity to work.
3. Dismantle non-financial barriers to participation in the labour force
Inflexible working conditions can make it difficult for people with care obligations and individuals with disabilities to participate in the labour force. Part-time work is increasingly seen as a way to activate these groups. Less rigid working-time arrangements and improved working conditions, particularly for workers with health problems, can also make employment more attractive to these traditionally inactive groups. Employers, trade unions and government can work in concert to design these policies. To be effective, however, these programmes have to be combined with efforts to reduce employers’ reluctance to hire inactive individuals. In addition, since skills can atrophy or become obsolete during long periods of inactivity, these individuals may need re-training or up-skilling to improve their employability.