How job guarantee programmes can eliminate long-term unemployment
Piloting a job guarantee scheme for long-term unemployed people | ESRC Celebrating Impact Prize 2023
Lukas Lehner, one of the Oxford University economists who designed the pilot study and analysed its results, said, “With many jobs already lost and warnings of a tidal wave of unemployment around the corner, it’s understandable that the idea of a universal jobs guarantee was gaining interest. As well as its economic costs, long-term unemployment takes a terrible toll on people’s health and wellbeing and on family and community life.”
Professor Maximilian Kasy, co-designer of the pilot study and a leading expert in economic research methods and inequality, added, “The idea of a jobs guarantee programme is an important addition to the toolkit of social safety provision, especially when participation is voluntary and the jobs offered are meaningful. I was excited to participate in this first-ever rigorous, transparent, and independent evaluation of such a jobs guarantee programme.”
The Public Employment Service of Lower Austria funded the €7.4 million project. Structural unemployment had been rising in Austria since the 1980s and worsened during the COVID-19 crisis. At the end of August, one in five unemployed people in Lower Austria had been jobless for over a year. Marienthal has a history of social research, notably in the 1930s when the town studied the effects of mass unemployment. This new study revisited Marienthal to explore how guaranteed employment could transform the economy, community, and individual lives.
Sven Hergovich, former managing director of the Public Employment Service, who initiated the programme, said, “Against the backdrop of the most recent, and unprecedented, development in the jobs market, we must and will do everything we can to halt the rise in long-term unemployment.”
Main Findings
One of the pilot’s participants, Jennifer, 43, had been unemployed since 2011. She said, “I did not want to leave the house. I didn’t want to let others know that I am not doing well. To be part of this project feels like a dream come true. Lacking work, you can’t think positively – with work, you can. That’s most important to me. If that's right, everything else falls into place.”
1. Positive Impact on Economic Well-being: The experiment demonstrated large positive effects on participants' economic well-being, including employment, income, and economic security. These results were significant despite the voluntary nature of the program, where participants could still receive unemployment benefits if they declined to participate.
2. Improved Well-being Beyond Economic Gains: The experiment revealed significant improvements in non-economic aspects of well-being, such as time structure, activity, social contacts, a sense of collective purpose, and social recognition. These "latent and manifest benefits" of work, emphasized in sociology and psychology, showed that participants experienced increased social integration and a greater sense of belonging and status. This highlights the non-financial importance of employment in enhancing overall quality of life.
3. No Short-term Changes in Health and Economic Preferences: As expected, the program had little to no short-term impact on physical health or economic preferences, such as time and risk preferences, altruism, trust, or reciprocity. The absence of such effects validated the study's approach, confirming that the observed benefits were not due to external influences or "interviewer demand effects."
4. Reduction in Municipality-level Unemployment: At the municipality level, the program resulted in a significant reduction in unemployment, particularly long-term unemployment in Gramatneusiedl. This was not a guaranteed outcome given the voluntary nature of the scheme, but the near-elimination of long-term unemployment was notable. Importantly, there was no increase in short-term unemployment or evidence of negative spillover effects.
5.Sustained Benefits for Participants Over Time: While some anticipation effects were noted, most benefits materialised after employment started. Importantly, these positive effects persisted over time, with little reduction, indicating that the advantages of a guaranteed job provided lasting improvements in economic security and well-being.
6. Programme Costs: The programme resulted in a 28% increase in labour market policy expenditure, from EUR 1,397 to EUR 1,785 per registered long-term unemployed job seeker and month. Net costs for the state are lower, because some of the increased expenditures involve taxes and social insurance payments for participants. The increase in costs is matched by an equal increase of participants' income.
Impact
Policy Influence: The research had a far-reaching policy impact, shaping discussions and initiatives at the UN, EU, OECD, and ILO, as well as governments across Europe. Following presentations of the study at the European Parliament and European Commission, the European Commission allocated €23 million to fund job guarantee pilot programs across Europe. Additionally, the European Parliament passed a resolution with a broad majority, calling for job guarantee schemes across the EU, explicitly referencing the Marienthal pilot.
Media Coverage and Recognition: The project received widespread media attention, with features in The New Yorker, CNN, Financial Times, Forbes, and Business Insider. It was also covered by major TV and radio networks such as ARTE, ARD, ZDF, ORF, and Deutschlandfunk.
Awards and Recognition: The research earned several prestigious accolades, including the ESRC Celebrating Impact Prize, the European Innovation in Politics Award, and the Kurt Rothschild Prize (pictured below).
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