Helping People Find Jobs Doesn’t Keep Them Employed

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It appears that government helping people find jobs doesn’t actually keep them employed. The reason being that government ends up finding them not very good jobs, ones they don’t stay in. Tht is, government is about as good at fining jobs for people as it is at everything else, not very.

An interesting insight for those government job guarantee programs, no?

Job search assistance does not boost employment: New evidence
Lionel Cottier, Yves Flückiger, Pierre Kempeneers, Rafael Lalive 27 October 2018

In contrast to other labour market interventions, job search assistance appears to be effective in helping job seekers to find jobs. This column examines the effects of such a programme targeting the long-term unemployed in Geneva. Those participating in the programme experience a short-term increase in employment compared to other job seekers, but this gain evaporates in the second year after assignment. These results suggest that the programme places job seekers in lower-quality jobs.

Unemployment is one of the most important challenges in many labour markets. Long-term unemployment is particularly troublesome because job seekers who have been looking for a job for more than a year can become discouraged, or experience severe reductions in cognitive functioning due to depression or hopelessness. At the same time, many job seekers have not recently been looking for a job, and enter unemployment after long periods of employment. Job seekers might simply lack the skills to engage in successful job search.

Labour market authorities address the job search problem through programmes that offer job search assistance (JSA). JSA programmes can help job seekers by offering career counselling and skills assessment, providing guidance on writing job application packages, preparing for job interviews, or locating appropriate job openings. Programmes offering job search assistance may monitor to what extent job seekers follow job search guidelines. Job search assistance is available throughout the unemployment period, and its intensity often increases over time.

JSA appears to be effective in helping job seekers to find jobs, quite in contrast to other labour market trainings. JSA is therefore considered to be one of the most successful elements of the mix of active labour market policies (Card et al. 2010, 2018). The long-term effects of JSA on employment are not well understood. Whether effects are persistent in the long run depends on a programme’s capacity to deliver substantial training gains to job seekers who would not have found a job without the programme.

Three recent studies document long-run effects of labour market programmes. Programmes that lift more job seekers into employment can generate persistently positive effects. Manoli et al. (2018) study a Programmes for the newly unemployed in Nevada that consistently delivers positive effects. Maibom et al. (2017) also study a programme for the newly unemployed and document positive effects of a job search assistance program in Denmark. Programmes that deliver the same number of jobs faster will also improve employment in the short run, but not permanently. Petrongolo (2009) studies a tightening of eligibility requirements that forces people to accept jobs faster, generating improvements in employment in the short run, but reductions in the long run.

We analyse a new job search intervention that targets the long-term unemployed (Cottier et al. 2018). The question is to what extent job search assistance can deliver persistently positive effects for the long-term unemployed. The long-term unemployed likely use job search strategies that are not successful, and JSA may improve these strategies and thereby creating long-lasting employment. Yet the long-term unemployed are also hard to place, and JSA may push job seekers into jobs of lower quality thereby increasing employment in the short run but not in the long run.

Specifically, we study the effects of a JSA programme designed by Les Maisons Hestia (Hestia), a job placement firm in Geneva, to help the long-term unemployed. The JSA programme offered both guidance on writing job application packages and help in finding job vacancies. JSA case-workers called prospective employers to inquire for vacant positions and referred candidates from their pool of clients. Over a period of one year, a total of 890 job seekers were randomly selected to potentially receive the services of Hestia’s intensive JSA programme. Among those selected, 50% were in line with eligibility criteria for the programme. In all of our empirical analyses, we compare Hestia and control job seekers, measuring ‘the intention to treat’ effects of being assigned to Hestia’s services.

We find that about after six months, employment is four to five percentage points higher, and unemployment benefit receipt about six percentage points lower, for job seekers assigned to Hestia compared to control job seekers (see Figure 1). The programme was very successful in placing job seekers into jobs during the first 12 months after the pilot started. Yet, the employment gain from the first 12 months evaporates in the second year after assignment, and turns significantly negative in the third year after assignment to programme. Assignment to JSA produces a sinusoidal pattern in employment – immediate employment gains, followed by employment losses later on.

Figure 1 Difference in employment rate of job seekers assigned to Hestia versus control job seekers

Note: Month 0 is the month when assignment took place. The figure shows the period from two years before assignment to five years after assignment. 

Like the previous literature, we find that transitions from unemployment to employment are about 50% higher among job seekers assigned to Hestia, especially in the period four to six months after assignment, which is just before payments to Hestia decrease. However, job seekers assigned to Hestia are more likely to leave their new job in the first three months after it started, when most job finders are in the probation period. Hestia job seekers are somewhat less likely to leave employment in months ten to twelve after their job started, but substantially more likely to leave their job 13 to 18 months after the new job started. JSA has a sinusoidal effect on employment because it speeds up entry into employment, while lowering attachment to the new job, perhaps because of the lower quality of the new job.

We look at the effects of Hestia on job quality. Job seekers served by Hestia are somewhat more likely to have a permanent contract, albeit not significantly so. Average earnings are not affected by Hestia in the first two years after the programme started despite the higher employment rate among Hestia’s job seekers during that period. While not statistically significant, Hestia job seekers are more likely to have a supporting role in their new firm, and are more likely to work part-time than the control group job seekers. This pattern of results suggests that Hestia placed job seekers into jobs that offer somewhat lower quality. Hestia force job seekers to implement its suggestions by threatening to trigger a benefit sanction process through its contacts with the public employment service.

JSA programmes can place job seekers quickly, but at the expense of employment stability. Evaluations of JSA programmes should assess whether job quality is affected and adopt a long time horizon in order to see whether employment stability is affected. Information on job quality alone may not be powerful enough to detect deterioration of quality. Long-run information on employment shows whether JSA affects employment stability.