Transcript Oxford_2005

The Governance of Public Employment
Services
Presentation to RESQ (Reform of Public Employment Services
Quorum)
December 2007
David Grubb
Employment Analysis and Policies Division, OECD
1 1
A “baseline case” for public
employment service (PES) governance



A “rule book” defines procedures for registering jobseeker and
vacancy details and matching (e.g. selecting jobseekers to
send to the employer).
Local employment offices are branches of the labour ministry
which pays salaries and manages finances; staff are civil
servants promoted on seniority and implementation of the rule
book.
Larger countries have regional offices which handle some
tasks (e.g. purchase and maintenance of buildings) and check
the rule book is followed.
2 2
1. Functions and
responsibilities
3 3
Placement, benefit administration and
labour market programme functions
– Job matching services are usually provided through one main
institution, which then is often called “the” PES.

The same “main” institution often also manages:
– Administration of unemployment benefits
– Funding of and /or referral of jobseekers to labour market
programmes, e.g. relief jobs and labour market training

OECD reviews of the PES in the 1990s by definition examined
the three functions and the activities of any particular national
institution. Examples of “integrated” PES with a single ministry
or agency responsible for approximately this range of functions,
include (or have included) Austria, Germany, Greece,
Luxembourg, Japan, Norway, Spain, UK and some Eastern
European countries.
4 4
The main institution sometimes also
does..


Labour market research and policy advice
Enforcement of labour regulations:
– Licensing of private employment agencies
– Administration of work permits
– Employer obligation to notify hires and separations (an instrument
for enforcing social security registration)
– Registration of disabled workers and enforcement of quota systems


Collection of UI contributions (more or less independent from
other social contributions in DK, FI, FR, KR, JA, SE, US)
Administration of non-unemployment beneficiary caseloads
5 5
Caseloads included/excluded

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PES-type institutions sometimes now administer “nonemployment” working age benefits [NZ (Work and Income), UK
(JCP), AU (Centrelink), NL (disability insurance, UWV), NO
(rehabilitation benefits)].
However, social assistance beneficiaries managed at
regional/local level, (even those required to work) may not be a
core client group (e.g. AT, CA, DE, JA, NO, CH). They might be
obliged to register with the national placement service while the
social assistance administration also provides many services (e.g.
DK, FR, LU, NL). This has changed in DE (Hartz IV) and NO
(NAV). In the US, UI and welfare (TANF) benefits are both
managed at state level yet employment services remain largely
separate.
A mong individuals receiving the “regular” unemployed benefit a
“not job ready” group may be partly ignored (IE), re-allocated to
special programmes (PSP, in AU), given a partial disability status
that still requires some availability for work (flex-jobs in DK,
reduced capacity in NL).
6 6
Sickness and
disability
benefits,
1999, % of
working-age
population
New Zealand
3.77
Spain
4.22
Belgium
4.64
Austria
5.45
Ireland
5.74
Australia
6.34
Germany
6.59
France
6.61
United Kingdom
7.22
United States
8.43
Slovak Republic
8.7
Netherlands
10.6
Denmark
11.31
Sweden
12.22
Disability benefit shares

Countries with a low
incidence of sickness and
disability benefits may find it
difficult to activate all
“unemployed” clients.
7 7
When benefit administration is
separate

MX has no unemployment benefit; the Servicio Nacional de Empleo
provides only job matching and training for
unemployed/disadvantaged workers but there is no functional split.

In many countries, separate organisations manage unemployment
benefits: AU, BE, DK, FI, FR, IE, PT, SE, CH…

–
In a few (PT, CH), the placement service can decide directly that a
particular client is not available for work and should be struck off or
sanctioned.
–
In others (AU, BE, IE) the benefit administration has separate powers of
investigation and decision. If it tends not to sanction (because the
organisations’ objectives differ, or because placement service evidence
is not accessible), the placement service tends not to submit cases.
–
In others, decision-making bodies with particular governance (DK,
ministry availability unit; FI, local committees; FR, Directions
Départementales, which are organs of the national ministry) decide about
benefit sanctions).
Quasi-autonomous appeal structures, which in principle implement
8
legislation, may influence case law and their governance.
8
When labour market training is separate

Take-up of training by the long-term unemployed tends to be low.
However in some countries “trajectories” (Dutch term) for the
hard-to-place often foresee remedial/ preparatory education
followed by vocational/specific skills training.
– The main PES organisation in GR, IE, PT directly manage training
centres which account for a major share of their spending. These
centres deliver apprenticeship training but also skills training of the
unemployed.
– In other cases (DK, FI, NL, SE) government no longer directly owns
training centres as in the past. Training remains important but is
sourced from a variety of providers.
– A few countries have a distinct institutional nexus for organising
labour market training: AFPA in France, WIA (600+ State and local
Workforce Investment Boards) in the US.
– Other countries provide virtually no public funding of
vocational/specific skills training for unemployed clients who do not
yet have an employer (e.g. Australia only funds New
Apprenticeships).
9 9
Which function dominates?

In Nordic countries, IE, training and programme implementation
(Community Employment) have had a big weight.

In NL, benefit administrations act directly as purchasers of
employment services.

Often the placement service has extensive freedom but focuses on
unemployment and related beneficiaries. e.g. because (a) reducing
benefit costs is a key justification for its budget (b) only this group
can be required to participate in intensive services © its outcomes
are easier to track.
10 10
Dysfunctions of integration and
separation

Integration
– If an “integrated” employment service has a global budget, in
recession it has to cut active spending (critique of German
PES highlighted by Schmid, Reissert and Bruche, 1992).
– Little attention may be paid to clients not on unemployment
benefits
– If only placement and benefits are integrated, little attention
may be paid to training.

Separation
– UI organisations with independent fund-raising (de facto
taxation) powers can have high benefit administration costs
(DK, FR, NL). NL was reformed 1995-2005 and FR is currently
undergoing reform.
11 11
2. “Hierarchical”
decentralisation
12
Agency status of the PES

PES senior managers, owing to “front line” experience
and day-to-day management work, can often manage
the PES more competently than labour ministry officials
or ministers. This is a key argument for making the PES
an agency of government with extensive autonomy.

Typical actions of the PES as a quasi-independent
agency include (i) PES director defends its actions in
public speeches and parliamentary committees (ii) the
PES publishes statements of strategy, takes policy
initiatives and conducts experiments.

On the negative side, an autonomous PES may tend to
cultivate its popularity with articulate clients (businesses,
local communities, executive search..) and prefer not to
engage with long-term unemployed and social
assistance beneficiaries (e.g. IE, NL 1991-1993).
13
Regional and local office autonomy

The locus of power is sometimes largely in regional offices e.g.
IE (before 2001), DK. Some countries have given local office
managers extensive autonomy e.g. FI, SE.

Typical arguments for autonomy are (i) adapt policy to local
conditions and (ii) allow the formation of partnerships at local
level (see below).

Arguments against are:
– High levels of autonomy allow radically different procedures e.g. for
vacancy handling and jobseeker registration and jobseeker
interviews. Performance monitoring based on comparable
quantitative indicators becomes impossible.
– The competence of managers at local office level is not consistently
high. Autonomy at local level will reflect “random” variation in
managerial ideas, more than responses to really different local
labour market needs.
14
3. Management by
social partners,
regional government,
local partnerships
15
Management by social partners

In some countries the social partners have an advisory role or
sit on the board at national level
– Inclusion of social partners has a “voice” role.
– The social partners tend to see only one side of the picture, e.g.
skill shortages (employers), rights of the unemployed (unions), not
the overall management problem.
16
Management by regional/local
government

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In the US, MX, political mastery of the PES is devolved to the
States.
In BE, CA, CH, ES, regional governments are masters of
placement services (and other ALMPs) while benefits continue
to be funded (and managed) at national level.
– Regions may refuse to enforce benefit eligibility requirements or
manage ALMPs as “carrousels” (requalify participants for
nationally-funded UI benefits) thus generating high unemployment.
– In CA, CH, ES, regions have some disincentive to do this since it
does increase entries to (regionally-financed) social assistance. It
seems unlikely that a region really benefits by drawing more
heavily on nationally-financed UI benefits. Thus Wallonia (BE), and
Geneva (CH) have moved partly into line politically.
– But operational barriers to cooperation (e.g. unrelated legal
frameworks and computer systems) main remain
17
Management by local partnerships
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In local partnerships, the local PES coordinates its work with
local actors: poverty relief and community care organisations,
business start-up agencies, chambers of commerce,
municipalities.
The PES may get help from other actors but will also need to
contribute to their objectives e.g. local economic development or
community services.
Risks
– Cooperation may fade, owing to different agendas of the local
actors
– Cooperation may channel PES funds to local organisations leaving
a legacy of spending commitments without weak accountability (CE
and LES, in IE – Boyle, 2005; subsidies to municipal government
employment, FI)
– In prosperous areas, articulate partners may represent the “local
establishment” and in depressed areas “community” organisations
may not really exist. Often the long-term unemployed, migrant
worker communities, etc. will not in fact be well represented.
18
4. Information
systems
19
PES records
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Functional splits (e.g. placement separation from benefits) and
outsourcing-type partnership arrangements can result in different
organisations holding records about the same individual, (e.g. benefit
organisations classify claimants by former occupation, placement
organisations classify jobseekers by occupation sought – double
administrative burden, inconsistent classifications, etc.
Co-operation and coordination agreed by top management often has
limited impact until sharing of (electronic) information is streamlined.
Extensive autonomy at local level often results in (approximately)
comparable entities e.g. municipalities, UI funds (in Denmark which has
multiple UI funds), external providers (in competitive markets) adopting
each their own IT system, at huge cost
Even if a common framework exists, autonomous bodies develop
different procedures for using it. If database entries are used for
performance management the can be “gamed” e.g. classify more
jobseekers as “not job ready”, record multiple “placements” for the same
individual, multiply the number of interviews recorded at the expense of
their duration.
For these reasons, IT systems require major investments, and
performance management within the PES may imply ongoing spending
on monitoring and auditing procedures.
20
Other PES uses of IT

PES are increasingly using tools such as CV depositories, call
centres, SMS to jobseekers, on-line career guidance and
training, etc. for services to clients.
21
5. Quasi-market
mechanisms, outsourcing
and“management by
objectives”
22
Governance of a quasi-market

A full quasi-market needs a “common currency” like Australia’s
“star rating” system for rating of provider outcomes according to
uniform criteria. Among the key “governance” questions are
(EmO 2005)
– Definition of the client intake group (e.g. for Job Network, all entries
to unemployment, after an initial filter into the Personal Support
Program PSP) and measuring covariates (personal characteristics,
local labour market characteristics) used to estimate relative
provider impact.
– Procedures for referrals (e.g. random assignment of clients to
providers) which also must ensure that (relative) provider impact
can be measured.
– The definition and measurement of outcome variables (EmO 2005
suggests measuring employment rates and earnings for 5 yeas after
entry, using social insurance contribution records).
– Possibly also the definition of exit procedures (for clients who turn
out to need a different type of service).
23
Where are functional integration and
decentralisation in a quasi-market?
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The bullets of the previous slide at first sight represent a very
different perspective on PES governance, as compared to
“functional integration” and “decentralisation” perspectives.
However with a suitable choice of outcome variable – assessing
providers on the basis of their long-term impact on benefit costs
and client earnings (and perhaps other life-quality indicators) –
quasi-markets will generate approximate the same services as a
(well-managed) traditional PES that integrates placement, benefit
administration and training functions.
Quasi-market provision ensures a high level of responsiveness to
local labour market conditions (a key advantage claimed for
decentralisation). As compared to a “decentralised” public PES,
staff hiring and contract conditions are much more flexible and
the staff profile better matches the ethnic, etc. distribution of the
client group. There is also (in Australia) a continuing public
“contract management” (field-work supervision) capability - e.g.
monitors the integrity of provider data and reports gaps in quasi24
market provision.
Blinkers of quasi-market provision

Quasi-market provision (with national measurement of
outcome variables) does not achieve all possible PES
objectives e.g. allow local partners to define the local
objectives, contribute to upskilling of the employed
workforce, etc.
– Australian-type quasi-market arrangements only motivate PES
actions that focus on jobseekers
– They motivate some vacancy acquisition but not open public
posting of vacancies (Australia now has a separate instrument,
job-placement-organisation licensing, to promote this)
– In a remote village, “local economic development” (e.g.
investment in public infrastructure that attracts new firms to the
area) might be the most effective strategy – a traditional PES
might (possibly) extent its remit to this, a quasi-market
provision will not.
25
Outsourcing

This refers to arrangements where providers are contracted to
provide particular services (e.g. Job Clubs, “bilans de
compétence”) whose impact on employment outcomes cannot be
measured because:
–
–


The service represents only a small part of the total service
“Creaming” or “gaming” of outcomes would not be controlled
Purchasers’ impressions of providers’ “reputations” may generate
the right incentives, but “reputations” might be gained through e.g.
attractiveness of premises or ability to “cream” clients, rather than
real service effectiveness. Outsourcing in practice may result in
long-term use of a “preferred provider”.
Poorly-evaluated outsourcing is not necessarily better than
poorly-evaluated public provision.
26
“Management by objectives” in a
traditional PES

PES “Management by objectives” can be interpreted as a “soft
approximation” to ideal “quasi-market” governance
arrangements. Key limitations are:
– It is not possible (owing to limitations on the sources of
variation) to accurately determine whether one local PES
outperforms another, in terms of impact on client
employment/unemployment outcomes (albeit CH claims its
estimates do this).
– Management by objectives uses intermediate indicators (e.g.
placements of the long-term unemployed), soft targets (e.g.
this year’s “target” is last year’s outcome plus 5%)
– (Usually) good/bad performance against target is interpreted
in a judgmental way and does not result directly in any
action.
27
“Rigidity” in PES staffing
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Efficient provision of employment services requires long-term
investment in human and other capital. An offer of de facto
lifetime employment to skilled professionals and managers may
well be a sound business strategy.
Central management may typically be aware that some PES
local office managers (for example) perform better than others,
yet not to take any action. The availability of accurate
performance measures might not change the situation.
Under outsourcing, providers may lobby for and obtain contract
durations and guarantees that limit short-term flexibility.
28