When it comes to describing the situation of the disenfranchised in Britain, Conservative and Labour politicians are never short of good quotes. In a speech following the London riots of August 2011, David Cameron talked about the ‘120,000 most troubled families’ in the country, and promised help from mentors − ‘family champions’, as the government called them. For his part, Tony Blair (Blair, Reference Blair2011) held forth about a sub-group of people ‘outside the social mainstream’ demanding ‘deeply specific solutions’. Even left-leaning media expressed the concern that many of our poorest people are now ‘culturally hostile to work’ (Ashley, Reference Ashley2011).

This hard core of jobless, familyless, helpless people has long been a headache for policy-makers, even before the financial crisis hit the world economy. For there is something very specific about them: first out of work when the economy slows down, they are also the last ones back in when growth accelerates. The reason behind this sad fact is known: long-term joblessness dramatically increases the risk of depression, divorce, substance abuse and pretty much everything that prevents from living a ‘normal’ life.

Combating Unemployment is a key contribution to this reflection on what policy can achieve to prevent long-term unemployment. Co-authored by Richard Layard (Emeritus Professor at the London School of Economics and co-director of the Centre for Economic Performance) and Stephen Nickell (Warden of Nuffield College, Oxford and previously Professor at the LSE), it condenses and amplifies some thirty years of research on labour market institutions. This volume, published on the occasion of the award of the IZA Prize in Labour Economics to its authors, should be on the reading list of all serious students in economics for at least two reasons.

First, Layard and Nickell have considerably clarified the way in which policy interventions such as employment protection legislation, collective bargaining, taxes, active labour market policies and unemployment benefits influence the level of wages and prices. One of their most enlightening conclusions is that stricter employment protection regulation does not necessarily increase the overall level of unemployment. However, strong dismissal protection for regular contracts tends to increase the persistence of unemployment by making it more difficult for employers to make punctual adjustments to their workforce. This results in higher long-term unemployment which is very difficult to overcome due to loss of human capital and motivation.

In the same way, Layard and Nickell have shown that generous unemployment benefits are not necessarily harmful to achieving low unemployment if they are granted for only a limited time and if they are accompanied by services to assist jobless individuals to actively search for work. Therefore, according to the authors, active labour market policies and ‘activation schemes’ based on the rights and duties of beneficiaries are indispensable complementary measures in a system with elaborate unemployment benefits.

The second reason to read Layard and Nickell is that few economists have matched the impact that they have had on academic research as well as policy. It is commonly admitted that their work has had direct influence on the activation policies implemented in the UK in the 1990s and onwards, most notably Labour's different New Deals implemented as off 1997. In Europe, this insight has since become a major guiding principle in reforming labour market policies in Denmark, the Netherlands and Germany. Globally, key documents such as the OECD Jobs Strategy (1996) and the European Employment Strategy (European Commission, 1997) mirror the ideas developed in this essay. In many ways, Combating Unemployment is a case study of how research translates into policy.

That said, far from being a book of the past, Combating Unemployment contains lessons that could still be valuable for countries with high levels of structural unemployment. In Italy for example, half of those without work have been so for more than a year. In France, the government is considering imposing stronger conditions and sanctions on claimants of unemployment benefits. In Spain, young people have recently demonstrated against the dualism of the labour market, characterised by mollycoddled ‘permanent’ workers and easy-to-fire ‘temporary’ workers. More than in the UK, it is probably in these countries that the book ought to find its readership.

If there is one thing that betrays the ‘age’ of these articles, it is their focus on older workers and lone parents as main victims of long-term joblessness. The situation of young people, whose unemployment rate has risen dramatically in the past five years, is hardly ever mentioned. Yet, the harm it is doing to those affected and to society at large will be felt for decades. This problem is even more acute in Britain, where the youth unemployment rate is more than three times that for the population as a whole. We look forward to the authors’ next book on this worrying matter.