Economic Policy Review ISSN 1313 - 0544

Employment Measures - Expensive and Inefficient

Author: Zornitsa Slavova / 19.07.2010
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This week was held a final conference on the project "Assessment of the impact of services provided for employment as a tool for successful integration of vulnerable groups in the labor market”, developed by the Ministry of Labour and Social Policy (MLSP) in partnership with the National Statistical Institute (NSI ) and the Employment Agency (EA) and funded by the European Commission.

The main conclusions of the project come from a survey of NSI, which aims to show the net impact of the efforts, which the state makes to reduce the unemployment. For this purpose, NSI has conducted a survey among 1600 unemployed persons, registered at the employment offices in the last quarter of 2007. The main results of the survey show that:

  • 39% of the unemployed have been unable to find any job for over two and a half years.  Half of them did not looked for a job and registered themselves only to receive social benefits and access to other free services. The other half dropped out because they didn’t agree to operate the proposed work or to engage in programs and employment training [1]. Obviously the support scheme for people, who refuse to get help, doesn’t work.  And even though every rational individual would understand this, the state institutions considered that “these people need additional activities for motivating and activating, because they show lack of interest to the offered intermediary services” (?!?).
  • 1/3 of the respondents believe that the about job opportunities at the employment offices is not enough current and comprehensive. This is not surprising, given that the employers do not rely on the state in search of its employees, and according the study  many of them do not even know the services offered in the bureau. When asked "Have you used information from the website of the EA?”, 84% reply in the negative.  Important is also the fact, that most employers rely on private firms and are turning to employment offices only when they want to hire low-skilled staff. This is reinforced by another weakness of the Bulgarian administration, that is sufficiently rigid, slow and burdened to be able to provide updated information for the citizens and the businesses. 
  • Low-skilled workers find much harder work, and therefore, the study says, they should be directly involved in supported employment in the public sector. Experience with such measures, however, does not give specific results. It is enough to mention just a report by the National Audit Office, which showed that over a period of three years (2004-2006) the largest social program "From Social Assistance to Employment» underwent a complete failure, providing durable work for only 0.27% of the respondents, although over 350 million leva were spent.  The calculations show that each of the 800 unemployed, who found a permanent job after participating in the program has cost the taxpayers in Bulgarian almost half a million leva. There is no way to persuade anyone, that supported employment is a good solution for both unemployed and taxpayers. On the other hand the state took responsibility for finding jobs for the unemployed, which in no way can encourage them to seek options for themselves – the so called “Locking effect” appears (better work on social programs, rather than looking for another job).   

The study again showed that active measures on the labor market have minimal effect, do not significantly affected the employment of the unemployed and come expensive for those, who work – for the last 10 years the state has spent more than 1,2 billion leva for active measures on the labor market. The fact that a similar study, which shows what happens to the unemployed after using the services provided by the state, is made for the first time, demonstrates the effectiveness and efficiency of the administration. It is commendable, however, that the project is implemented and the results were published.

The alarming levels of unemployment in Bulgaria require rapid and effective measures. Obviously the state fiscal incentives are not one of them and will not lead to stable employment and decrease of the unemployment. The tendency toward decrease of in unemployment in recent months is most likely due to seasonal factors and would not continue beyond the summer, ie new wave of unemployment is expected at the end of the year. Now is the time for government to act effectively and ensure a favorable business environment, because only the private sector can provide long-term employment.

 

[1] See the article of the IME "Oh, this employment” concerning the change in the Law on Employment Promotion, which enables such persons to register again at the employment offices after 6 months.