Successful Integration Of Recipients Of Unemployment Benefits II By German Consortiums (ARGEs) – Licensed Municipal Institutions Perform Better In Raising Employability

Recipients of unemployment benefits II who are assisted by consortiums (ARGEs) are more likely to start a job covering their expenses. Licensed municipal institutions, however, are more successful in increasing long-term employability of those seeking employment.

This is the result of a comparative evaluation of ARGEs and licensed municipal institutions with regard to basic financial aid (“Hartz IV”) of those seeking employment. This evaluation was carried out by several research institutes on behalf of the federal government. Among these was the Centre for European Economic Research (ZEW), Mannheim. The evaluation’s results were communicated to the federal cabinet on December 17, 2008. The evaluation also indicates that competition between the two welfare providers has lead to completely different approaches to the assistance of the unemployed. It shows that there is a lot of room for improvement in the support of those recipients of unemployment benefits who are fit to work. Due to the so-called experimentation clause in the German Social Conduct Book II (SGB II), there is a temporary competition between ARGEs as joint institutions of local employment agencies and the municipality on the one hand and municipal institutions licensed to advise unemployed people themselves on the other hand. The evaluation is designed to identify the strengths and weaknesses of each model.

It analysed the organization of basic financial aid in every district and municipality and found great differences. ARGEs mainly pursue a strategy of assisting a client with several placement obstacles with a specialised case management. Opposite to this, the personal contact persons at the licensed municipal institutions are often responsible for unemployed people who are difficult or easy to place. There are also differences in who places their clients on the labour market. Results tend to be better if only one person is responsible for both assistance and placement of a client.

There are also important differences in the implementation of SGB II between ARGEs and licensed municipal institutions: in the degree of autonomy of action of their managements, in the intensity of initial assistance, sanction provisions, IT structures, as well as in the procedures concerning controlling and defining their objectives. The two types of employment services exhibit more commonalities in the use of measures such as training programmes or measures increasing employability. In general, licensed municipal institutions are characterised by relatively low uniformity and standardisation, but a wider regional diversity. This goes hand in hand with a lower comparability of procedures and a greater local autonomy of action. Some of the organisational traditions of the former social welfare offices are still in place. ARGEs, on the other hand, are characterised by higher uniformity and standardisation across different regions, and by their more frequent use of sanctions. Local autonomy of action is lower and the procedures are influenced by the organisation of employment agencies. It is estimated that clients assisted by ARGEs are more likely to break free of financial aid. On an individual level, the difference is about 3.8 percent. Taking a macroeconomic view on things, these effects are weaker. A comprehensive introduction of the ARGE model would have reduced the number of benefit recipients who are fit to work by 84,000 each year, as compared to the model of assistance exclusively through municipalities. The licensed municipal institutions take the lead with regard to the placement in jobs which do not cover the client’s cost, the phenomenon of “stocker-uppers”. Assistance exclusively from municipalities also fosters an increase of long-term employability. However, a comprehensive exclusive assistance through municipalities would have generated additional costs of EUR3.1bn annually. The intensity of assistance is crucial for a successful integration into the labour market. The availability of a personal contact person and a close relation between counsellor and client positively influence integration into the labour market. There is plenty of room for improvement in this area, because regulations on the intensity of the assistance are far from being met. Immediate assistance is also crucial for a successful placement. ARGEs have an advantage in this field.

Short-term training measures such as applicants’ training or a test period in a job already increase the chances of a fast transition into a job which requires social security. This, however, does not necessarily rid clients of their need of financial aid. These measures are not always directed at those who would benefit from them the most. Combining agencies’ work with social integration services (addiction and drug counselling, credit counselling, psychosocial support) is easier in the licensed municipal institutions than in the ARGEs, but there is still room for improvement.

The results of the evaluation are supposed to help shape the future organisational and strategic design of the assistance provided to those seeking employment. They offer more than mere information on which type of employment service to consult.

The evaluation was carried out by the following institutions:

- Ifo Institute for Economic Research, Munich

- Infas Institute for Applied Social Sciences

- The Institute for Work, Skills and Training (IAQ), University Duisburg-Essen

- Institute for Applied Economic Research (IAW), Tübingen

- Institute for Urban and Regional Development, Fachhochschule Frankfurt am Main

- TNS Emnid, Bielefeld

- Social Science Research Center (WZB), Berlin

- Centre for European Economic Research (ZEW), Mannheim

For further information please contact

Prof. Dr. Holger Bonin (ZEW), Phone: +49/621/1235-151, E-mail: bonin@zew.de

PD Dr. Bernhard Boockmann, Phone: +49/7071/9896-20, E-mail: bernhard.boockmann@iaw.edu