Should Local Public Employment Services be Merged with the Local Social Benefit Administrations?



new entrants into long-term unemployment that have had their first interview within two
weeks after filing their application, and the fraction of long-term unemployed that signed an
agreement (
Eingliederungsvereinbarung) with the job centre. These agreements define the
search requirements and training obligations of long-term unemployed. If long-term
unemployed do not comply with these obligations, they can be sanctioned. The fraction of
long-term unemployed that signed an agreement ranges from 72.9 % in regions with
Approved Local Providers to 74.1 % in regions with Joint Local Agencies. In regions with
Joint Local Agencies, 71.1 % of new entrants into long-term unemployment had their first
interview within two weeks, in regions with Approved Local Providers only 45.4 %. While
Joint Local Agencies seem to activate faster, Approved Local Providers take more time to
talk to the long-term unemployed. In job centres in regions with Approved Local Providers
the first interview lasted on average 52 minutes, while in job centres in regions with Joint
Local Agencies it lasted only 48 minutes. All three variables are not significantly different
from zero.

In summary the IV regression results suggest that Approved Local Providers have in
most cases chosen an organisational setup that is positively correlated with the job finding
rate. However, being cared for by an Approved Local Provider after controlling for
organisational characteristics is associated with a lower job finding rate for long-term
unemployed workers. The fact that the coefficient for the indicator variable for regions with
Approved Local Providers becomes statistically significant and even more negative as we
add organisational characteristics supports the hypothesis that although the regions that
chose to become Approved Local Providers were better in designing a good organisational
structure to increase the job finding probability of long-term unemployed workers, they
underestimated the positive effect that a merger of the local public employment service with
the local social benefit administration has on the labour market integration process of the
long-term unemployed.

From a policy perspective our analysis suggests two things. Firstly, local public
employment services and local social benefit administrations should be merged in order to
ensure a better one-stop-shop organisation for long-term unemployed and to increase the
transition rates from long-term unemployment to employment. Secondly, the job centres
should implement a generalised case management approach that compared to a specialised
case management approach treats all long-term unemployed with equal intensity and does
not leave some long-term unemployed uncounselled or unmonitored. Furthermore, job
centres should not rely on the vacancy recruitment service of the local public employment
service but should instead build up their own vacancy recruitment service in order to avoid
that the long-term unemployed have to compete with the short-term unemployed. In

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