Pro-employment budgeting and employment policies

Many countries across the world have committed to promoting full and productive employment through the adoption of employment policies. While employment issues have gained visibility and influence in public policy documents, the same cannot be said of national budgets, which make little reference to employment. Yet, national budgets are a major tool to make change happen and ensure that employment policies are translated into real changes for the population.

Since employment outcomes depend on a series of interventions addressing job creation, job quality and access to jobs, it not only a question of considering budget allocations that have an explicit and direct impact on employment and under the exclusive responsibility of the ministries in charge of employment (such as labour market policies and public employment services), but all policies that have an influence on job creation.

Under the umbrella of pro-employment budgeting, three key approaches can be considered to improve the link between employment policies and financing:
  • Reviews of employment-related public expenditure
  • Employment objectives integrated in national financing frameworks (INFF) and medium-term expenditure frameworks (MTEF)
  • Employment funds
The overall objective of employment-related public expenditure reviews is to examine the gaps between resources (i.e. national budgets) and plans (i.e. employment policies). Beyond looking at shortfalls, such reviews also look at inconsistencies in allocations as well as the efficacy of spending, leading to a series of recommendations to maximize the impact of public expenditures on labour market outcomes as well as improvements that can be considered in the budget process to better take into account employment priorities.

Due to the multi-sector nature of employment, employment-friendly public expenditure reviews have a dual objective:
  • To identify the resources allocated to explicit employment programmes, public employment services and other employment-related structures, and to consider the measure in which they correspond to the priorities set by the employment policy and the needs of all population groups
  • To consider how employment is actually taken into account in the preparation of the various departmental budgets and the public investment programmes.
The ILO is currently developing guidelines to support employment-related public expenditure reviews as a first step to move towards a more comprehensive approach to pro-employment budgeting.

The goal of integrated national financing frameworks (INFF) is to assist member States with the strengthening of planning processes, linking policy priorities and financing of sustainable development and the Sustainable Development Goals (SDGs). An INFF addresses a range of financing sources, including domestic and foreign sources of both public and private finance, seeking to help a country address its investment needs in line with its development priorities, while managing risks. The link between INFFs and employment policies is an emerging area of work for the ILO.

In use since the 1980s, medium-term expenditure frameworks (MTEF) link planning policy priorities with financing and have been utilized in the majority of countries as means to provide a more strategic approach to resource allocation than is possible with annual budgeting. A few countries have integrated employment objectives into MTEFs. However, given the complexity and longer-term vision encapsulated in employment policies, further work is needed to strengthen this linkage.

Some countries establish a separate employment fund to support employment policy implementation. Governments typically use a combination of four main sources: (1) the government general budget, including budgets for line ministries implementing employment related policies; (2) unemployment insurance, such as the component for job seeking and access to ALMPs; (3) a special employment budget for the employment fund; and (4) external contributions, including funds from development partners and civil society.

For country examples of employment funds – see ILO’s report on From policy to results: Guidelines for implementation of national employment policies.

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