Unemployment in the OECD region is at historically low levels according to the most recent data (5.0 percent in September 2025) – yet underlying labour market challenges remain significant. More than 34 million people remain jobless and nearly one in five jobseekers face long-term unemployment. In southern and eastern Europe, the problem is even more acute. Weakening global economic activity – driven by geopolitical uncertainty, rising trade tariffs, and subdued consumption and investment due to higher prices and still restrictive monetary policies – has started pushing unemployment higher in many countries. This will mean longer unemployment spells, disproportionately affecting those already out of work long-term.
At the same time, employers in healthcare, education, construction, manufacturing and digital industries continue to struggle to fill vacancies. An ageing population, rapid digitalisation and the green transition are reshaping labour markets and compounding skills shortages. This creates an apparent paradox: millions remain without work, while critical sectors face severe and spreading labour shortages. If left unaddressed, shortages are likely to intensify, unemployment spells to lengthen and inequality to deepen.
A key policy lever for governments is investment in active labour market policies (ALMPs), particularly vocational training. Decades of research show that ALMPs – especially training programmes – help people transition into stable, better-paid and more productive work. They may look costly in the short term, as job search efforts may decrease and even cease during programme participation, but within two to three years, participants consistently achieve significantly stronger employment outcomes. Investment in training is an engine for productivity and economic growth. Closely aligning training with labour market needs reduces both unemployment and vacancy durations. Such investment can also alleviate bottlenecks in critical sectors and thereby ease wage-driven inflationary pressures.
Despite these benefits, OECD governments on average devote just 0.4 percent of GDP to ALMPs, with only 0.1 percent going towards training, according to a newly published TUAC policy brief. Expenditure on ALMPs in 2023 was the lowest ever recorded. Moreover, training expenditure has declined by over 30 percent since 2010. Sweden, for example, once a global leader in just labour market transformation, has cut training from nearly 1 percent of GDP in 1992 to only 0.06 percent in 2022. As shown in the graph, similar reductions have occurred in Germany, Denmark, Norway, Canada, Ireland and New Zealand.
Public expenditure (share of GDP) on training for unemployed individuals in selected OECD countries with available data
Source: OECD Dataset: Labour Market Programmes, Category 2 (Training)
This decline in investment comes at a time of profound change. The digital and environmental transitions are on track to transform industries, eliminating some jobs entirely, fundamentally changing work tasks, and creating new jobs that demand up-to-date skill sets. This powerfully increases the need for systems to help workers navigate this shift and effective tools that can connect people with new job opportunities.
Evaluations have consistently shown that well-designed training programmes deliver strong and lasting returns, particularly when they focus on the long-term unemployed and are linked to actual labour demand. Evidence strongly favours programmes combining classroom learning with on-the-job experience and close connections to employers seeking workers. Critics argue that ALMPs are costly, but the costs of inaction far exceed the outlay of funding such programmes: higher long-term unemployment, eroding skills, social divisions, as well as cancelled orders for companies – all reducing prospects for economic growth.
Beyond aggregate indicators, these policies shape people’s lives and livelihoods. Work provides dignity, security and purpose. The 2026 public budgets represent a critical opportunity to realign policies with evolving labour market needs. Countries that invest comprehensively in active labour market policy programmes can not only strengthen growth prospects, but also support pathways to inclusion, social cohesion and shared prosperity.