Private and Public Placement Services for Hard-to-Place Unemployed

Abstract

The authors analyze a randomized field experiment in two German labor market agencies that provide public and private provision of intensive job placement services. The findings, based on analysis of administrative agency data over 18 months in 2009–2010, show that assignment to public employment services reduced accumulated days in unemployment by one to two months, compared to an assignment to a private provider. The effects, however, were short-lived. Moreover, two-thirds of the effect is attributable to labor force withdrawals. Finally, several important differences in the modes of service provision are only partially attributable to inherent aspects of in-house production and contracting out.

Public or private job placement services—Are private ones more effective?

“…For instance, a performance management system based on management by objectives has been implemented in the German PES [4]. Local branches of the public employment agency are afforded more flexibility to allocate resources, but are also held accountable for the success or failure of their policies.…”

“…A randomized field experiment in two German labor market agencies from the years 2009-2010 assigned hard-to-place unemployed individuals to either intensive in-house placement services or to contracted-out job placement services [4]. Compliance was around 80% for assignments to privately provided services and 100% otherwise.…”

“…The design of the experiments, however, usually does not permit disentanglement of potential channels that may have had an impact on program effectiveness. Candidates for such channels are, for instance, the contents of services, differing caseloads (number of unemployed individuals per caseworker), and the performance standards in the private and public settings [4].…”

“…In addition, observed differences in the outcomes of private and public providers might only be partially attributable to the inherent aspects of each respective method. Examples include frictions in the transfer of unemployed individuals from public employment agencies to private providers, and the possibility that case workers in public services use sanctions against the unemployed as an incentive device [4]. Contract structures for private placement services might create relatively weak incentives for effective placement, while new internal performance monitoring systems in the PES might create strong in-house incentives.…”

“…The author also thanks Pia Homrighausen and Sarah Bernhard. Previous work by the author (together with Gerhard Krug) contains a larger number of background references for the material presented here and has been used intensively in all major parts of this article [4].…”