Abstract
AbstractJob creation programmes aim at increasing the employability of hard-to-place unemployed, and eventually integrating them into employment. Yet, previous evaluation studies have been pessimistic about their efficacy. For One-Euro-Jobs, a job creation programme for welfare benefit recipients in Germany, previous evaluations found unfavourable effects particularly for easier-to-place participants. Thus, in 2012 the legislator reformed the programme in order to target the hard-to-place more accurately. This study is the first post-reform evaluation of One-Euro-Jobs. We find that, although the programme is indeed better targeted than before, One-Euro-Jobs decrease participants’ employment chances within three years after programme entry. These outcomes are worse than those found for pre-reform participants. We cannot conclude with certainty whether the reform decreased the programme’s efficacy, but we identify channels through which the reform and other contemporaneous changes may have done so. These channels include changes in programme design features, changes in business-cycle conditions, and prolonged lock-in effects due to “programme careers”. To substantiate the latter explanation, we also provide novel evidence that One-Euro-Jobs seem to initiate programme careers.
Highlights
To tackle the hard core of unemployment, OECD countries devote substantial resources to job creation programmes
Using rich administrative data and statistical matching methods, we provide the first post-reform evaluation of OEJs, focusing mainly on employment effects
The mean standardized bias (MSB) was found to be in the order of . and a Pseudo R between . and . , meaning that almost no significant differences in means in the covariates remained between treated and matched controls (Table A in the Appendix)
Summary
To tackle the hard core of unemployment, OECD countries devote substantial resources to job creation programmes ( referred to as direct employment or public employment programmes). According to theory and previous evidence, focussing on the hardest-to-place should result in better OEJ participation effects Another relevant aspect of the reform was the abolition of qualification elements within OEJs. Examples of qualification elements include job application training, obtaining a schooling degree, training in communication and social skills, and continued vocational training (Uhl et al, ). Previous evidence found rather unambiguously that ALMP efficacy is countercyclical, i.e. effects are better when overall labour market performance is weak (e.g. Card et al, ; Forslund et al, ; Kluve, ; Lechner and Wunsch, ) This may suggest that, as hiring becomes more selective during downturns, ALMP programmes increase the labour market value of participants and improve their position relative to other jobseekers – even though total competition for jobs is stronger than in upswings. We try to trace our evaluation findings, and their deviations from those of previous evaluations, to these various channels of effects
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