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Direct job creation in Germany revisited: Is it effective for welfare recipients and does it matter whether participants receive a wage?

Author

Listed:
  • Hohmeyer, Katrin

    (Institute for Employment Research (IAB), Nuremberg, Germany)

  • Wolff, Joachim

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract

"Bringing welfare recipients into jobs is a major goal of German labour market policy since a reform of the year 2005. Direct job creation providing participants with temporary subsidized jobs mainly in the non-profit sector plays an important role for achieving this goal. There are three schemes that differ only with respect to a few features: traditional job creation schemes, One-Euro-Jobs and work opportunities subsidising contributory jobs. We study and compare the effectiveness of these three job creation schemes for welfare recipients starting their participation in these programmes in mid 2005. Looking at three similar schemes enables us to study the implications of different programme features for the effectiveness. One major differ-ence between the schemes is that traditional job creation schemes and work opportunities as contributory jobs provide participants with regular earnings, whereas One-Euro-Job participants only receive their benefit and on top a small allowance to cover costs of working. Hence, participation in One-Euro-Jobs in contrast to the other two programmes should provide higher incentives to search for regular jobs during participation. We estimate participation effects on employment outcomes, earnings and welfare benefit levels with propensity score matching using rich administrative data. We find that the programmes are partly effective in moving welfare recipients to work and reducing their welfare benefit dependency. Moreover, our findings imply that the incentives to search for regular jobs are not much lower for participants in the two schemes offering regular wages than for the alternative One-Euro-Jobs. Next, we find the most beneficial impacts for participants in work opportunities as contributory jobs which is the only scheme that can subsidize commercial jobs." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Hohmeyer, Katrin & Wolff, Joachim, 2010. "Direct job creation in Germany revisited: Is it effective for welfare recipients and does it matter whether participants receive a wage?," IAB-Discussion Paper 201021, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:201021
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    Cited by:

    1. Heyer, Gerd & Koch, Susanne & Stephan, Gesine & Wolff, Joachim, 2012. "Evaluation der aktiven Arbeitsmarktpolitik: Ein Sachstandsbericht für die Instrumentenreform 2011 (Evaluation of active labor market programs : a summary of recent results for the German program refor," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 45(1), pages 41-62.
    2. Wifo, 2017. "WIFO-Monatsberichte, Heft 6/2017," WIFO Monatsberichte (monthly reports), WIFO, vol. 90(6), June.
    3. Dengler, Katharina, 2013. "Effectiveness of sequences of One-Euro-Jobs : is it better to do more One-Euro-Jobs or to wait?," IAB-Discussion Paper 201316, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Berthold, Norbert & Coban, Mustafa, 2013. "Kombilohn oder Workfare? Wege aus der strukturellen Arbeitslosigkeit auf dem Prüfstand [Wage Subsidy or Workfare? Comparison of Two Designs to Reduce Structural Unemployment]," Discussion Paper Series 122, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    5. Wapler, Rüdiger & Wolf, Katja & Wolff, Joachim, 2018. "Do active labour market policies for welfare recipients in Germany raise their regional outflow into work? : A matching function approach," IAB-Discussion Paper 201808, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Eichhorst, Werner, 2015. "Low Pay as an Alternative to Public Direct Job Creation? Lessons from the German Case," IZA Policy Papers 99, Institute of Labor Economics (IZA).
    7. Wapler, Rüdiger & Wolf, Katja & Wolff, Joachim, 2022. "Do active labor market policies for welfare recipients in Germany raise their regional outflow into work?," Journal of Policy Modeling, Elsevier, vol. 44(3), pages 550-563.
    8. Katharina Dengler, 2019. "Effectiveness of sequences of classroom training for welfare recipients: what works best in West Germany?," Applied Economics, Taylor & Francis Journals, vol. 51(1), pages 1-46, January.
    9. Nivorozhkin, Anton & Promberger, Markus, 2020. "Employment Subsidies for Long-Term Welfare Benefits Recipients: Reconciling Programmes Goals with Needs of Diverging Population Groups," IAB-Discussion Paper 202027, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Zabel, Cordula, 2011. "Lone mothers' participation in labor market programs for means-tested benefit recipients in Germany," IAB-Discussion Paper 201114, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Katrin Hohmeyer & Joachim Wolff, 2018. "Of carrots and sticks: the effect of workfare announcements on the job search behaviour and reservation wage of welfare recipients," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 52(1), pages 1-23, December.
    12. Rainer Eppel & Ulrike Huemer & Helmut Mahringer & Lukas Schmoigl, 2024. "Active Labour Market Policies: What Works for the Long-term Unemployed?," WIFO Working Papers 671, WIFO.
    13. Kupka Peter & Lobato Philipp Ramos & Wolff Joachim & Möller Joachim, 2018. "Teilhabe für arbeitsmarktferne Arbeitslose durch einen Sozialen Arbeitsmarkt – Chancen und Risiken eines notwendigen Instruments," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 67(2), pages 154-163, August.
    14. Gerd Heyer & Susanne Koch & Gesine Stephan & Joachim Wolff, 2012. "Evaluation der aktiven Arbeitsmarktpolitik: Ein Sachstandsbericht für die Instrumentenreform 2011," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(1), pages 41-62, March.
    15. Joachim Wolff & Gesine Stephan, 2013. "Subsidized work before and after the German Hartz reforms: design of major schemes, evaluation results and lessons learnt," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-24, December.
    16. Rainer Eppel, 2017. "The Effects of a Job-Creation Scheme: Evidence from Regional Variation in Program Capacities," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(1), pages 161-190, January.
    17. Rainer Eppel & Helmut Mahringer & Petra Sauer, 2017. "Österreich 2025 – Arbeitslosigkeit und die Rolle der aktiven Arbeitsmarktpolitik," WIFO Monatsberichte (monthly reports), WIFO, vol. 90(6), pages 493-505, June.

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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