Municipal labor market policy - Marshalling yard or escape from public assistance dependency?

Due to an increasing fiscal burden by welfare payments, municipalities tend more and more to initiate employment and training programs under their own responsibility besides the Federal Labor Agency. However, critics object that this might predominantly be viewed as an attempt to shift fiscal burdens to the Federal Labor Agency rather than a policy option towards labor market integration of low-wage workers. In order to investigate this issue, the IWH carried out a country-wide survey within twelve municipalities and rural districts. The sample comprises 200 employable welfare recipients, among them participants of labor market programs as well as a reference group of non-participants. The results of the IWH welfare survey are at best suggesting a moderate success of program participation with regard to labor market integration. Nevertheless, the programs appear to be profitable for municipalities, since they succeed in bringing participants out of welfare dependency. In many cases, however, welfare is replaced by unemployment support, which means that only the fiscal responsibility changes. A shortcoming of the results has to be seen in the fact that municipalities tend to assign especially those people for program participation, who are already better fitting into requirements of the labor market. This seriously impairs the comparability of participants and non-participants. In view of the remarkable amount of expenditures it seems therefore advisable to put more attention on the effectiveness of the programs than has been done in the past. This could be achieved by a stronger orientation towards an experimental design of assignment for program participation.

05. September 2001

Authors Hilmar Schneider

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