Effectiveness of One-Euro-Jobs: do programme characteristics matter?

Abstract

Recent German labour market reforms introduced a large scale workfare programme called One-Euro-Jobs to activate welfare recipients and improve their employment prospects. In programme design leeway is left to regional actors. Using administrative data and Propensity Score (PS) matching, this article investigates the association between programme design and effectiveness, so as to provide insight on how to increase programme effectiveness. First, effects of different types of One-Euro-Jobs according to planned duration and weekly working hours compared to ‘waiting’ are estimated. Second, programme types are compared directly to disentangle selection and programme effects. As expected lock-in effects are larger for participations with a longer planned duration, but not for those with longer weekly working hours. One-Euro-Jobs do not generally increase the employment prospects for East German men beyond 2 years after programme start and longer and more intensive participations even decrease employment prospects. In West Germany, One-Euro-Jobs generally increase the employment chances and longer participations lead to slightly greater employment opportunities roughly 2 years after programme start. The initial advantages of short participations decrease over time. Following these results, a reallocation of participants might improve programme effectiveness.

Keywords:

• activation
• microevaluation
• effect heterogeneity
• lock-in effects

JEL Classification::

• C13
• I38
• J68

Notes

¹ For a comprehensive description of the reforms see Jacobi and Kluve (2007).

² All data in this study exclude the 69 districts in which only local authorities are in charge of administering the UB II. For these districts, no systematic information is available in the period just after the reform due to problems with data collection. According to estimates of the Federal Employment Agency, around 13% of all welfare recipients were residents in these districts in 2005.

³ UB II consists of a base benefit currently (since January 2011) of 364€ per month for a single person plus costs of accommodation and heating.

⁴ However, we can only observe this effect if welfare recipients actually start the One-Euro-Jobs they are assigned to. If they never start the programme (but, e.g. leave UB II receipt), they do not belong to our treatment group (but possibly to the control group). This would lead to a downward bias of short-term effects for all programme types compared to ‘waiting’, fading away in the longer term. In pairwise comparisons, this should play a minor role.

⁵ If participants dropping out of programmes retreat from the labour market, effects of short participations could also be underestimated.

⁶ When looking at short training programmes, Biewen et al. (2007) do not distinguish between in-firm and classroom training. However, in-firm training has considerably higher positive effects than classroom training, probably due to the employer contact during the programme (Wolff and Jozwiak, 2007; Stephan and Pahnke, 2011). Thus, the higher effectiveness of short programmes found by Biewen et al. (2007) could be driven by the employer contact during short in-firm training.

⁷ For the discussion of different nontreatment definitions see Sianesi (2008) or Stephan (2008).

⁸ For a comprehensive description of the method, see Caliendo and Kopeinig (2008) and Frölich (2004).

⁹ The exact specification of covariate sets for the probit estimations differs over the subgroups. First, some variables have to be defined in a broader way for smaller sample sizes. Second, a number of covariates are not important for the selection and have been deleted. The probit estimations are available upon request.

¹⁰ The distributions of the PS are available on request.

¹¹ The standard absolute bias for a single covariate is defined as

¹² The exact calipers implemented for matching are available upon request.

¹³ Overall, East German men and women in our sample spend on average 2 to 3 months in regular employment within the 28 months after programme start, whereas West German men and women are on average regularly employed for 3 to 4 months in that period.