Active labor market policies aim at a fast reintegration of the unemployed into the labor market. Since finding a new job requires both search effort and application skills, job centers may try to improve both by increasing the search requirements for unemployment benefit recipients and providing them with job search assistance, respectively. Two recent IZA discussion papers investigate how these approaches affect employment outcomes in Switzerland.
Stricter search requirements reduce unemployment duration
The paper by Patrick Arni and Amelie Schiprowski analyzes how the level of the search requirement affects the provision of effort, the duration of unemployment and re-employment outcomes. Since job seekers are randomly assigned to caseworkers, who vary with respect to how many applications they require per month, the researchers were able to isolate the effect of stricter search requirements.
Their study shows that the duration of unemployment decreases by 3% when the requirement increases by one monthly job application. Changes in the requirement mostly affect lower-skilled job seekers. For skilled job seekers, targeting the quantity of job applications appears to be less effective. Moreover, the effects are larger among individuals who exhibited lower levels of voluntary effort prior to the first caseworker meeting.
These results show that the setting of individual effort targets to steer job search can be a successful strategy for labor market policy. However, when considering the longer run, the authors find modest reactions of re-employment job quality to requirements. An additionally required job application causes re-employment spells to shorten by 0.3%, while the effects on wages are zero. Strengthening the requirement regime thus seems to only marginally reduce job quality.
Job search assistance raises employment only in the short run
The paper by Lionel Cottier, Yves Flückiger, Pierre Kempeneers and Rafael Lalive looks at the long-term effects of a job search assistance program designed by a job placement firm in Geneva to help the long-term unemployed. The program offered guidance on writing job applications and help in finding job vacancies.
In the short run, the program significantly improved job-seekers’ re-entry into the labor force, with a difference of around four percentage points compared to the control group. In the medium run, though, these positive effects vanish and both groups have a similar performance until approximately two years after the experiment. Then, the patterns revert: Treated job seekers are less likely to be employed than their control group counterparts. The difference is significant up to three years after the experiment and finally disappears when looking at a longer horizon.
The authors find that the program probably reduced employment stability by lowering job quality. Many participants leave their new job exactly once they qualify again for unemployment benefits. The results show that job search programs can place job seekers fast but at the expense of employment stability. Evaluations of such programs should thus assess whether job quality is affected and adopt a long time horizon to assess employment stability.