Market for jobseekers finally under reform

(Infographic: Dariusz Gąszczyk/CC BY-NC-SA ferrie differentieel & Jöran Maaswinkel DailyM)

28 May 2014 is a historic date for Polish labour offices and, hopefully, for Polish unemployed too. It is the first time in over 10 years that the government has amended the operational rules for jobcentres. The range of available tools is increasing, however there is still a lot that depends on plain human involvement.

The situation on the labour market is improving, although many people would probably say that they don’t see it. In April the number of the unemployed dropped again (also when calculated after the so-called seasonal adjustment). The unemployment rate also decreased and amounted to approx. 12.7 per cent after excluding the seasonal components, and in May it is likely to be 12.4 per cent (without seasonal adjustment), which is less by 1.2 percentage point as compared to the year earlier.

The number of job offers submitted to labour offices however is still decreasing. In April that decrease was lower than in March. Among other things, this was a result of a considerable number of subsidised job offers. And the outflow from the unemployment was driven mostly by these offers. It is possible that despite the economic growth the office employees do not try to acquire additional job offers as hard as they used to.

In the second half of the year we will most probably observe the first aggregate effects of two factors: the improving market situation and new operational mechanisms in labour offices. The current labour market reform is a rare example of an academic bringing his recommendations to life. For the changes to an enormous extent constitute the implementation of the ideas described by their author, Minister Jacek Męcina, in his book “The Working Poles and the Crisis of Fordism” of 2009 (original title: “Polacy pracujący a kryzys fordyzmu”).

Changes

1. According to the reform assumptions, 7 per cent of the means from the Labour Fund transferred to local governments for the financing of labour offices’ employees is to be divided into two parts: 5 per cent will still constitute the financing and 2 per cent is to be a bonus for the performance results of the given facility. A problem for many is that the said 2 per cent will be transferred to 75 per cent of the best institutions, meaning 252 of a total of 336.

Despite a lesser than expected effect, it is the very first case in the public sector when the remuneration (budget or bonus fund) in the offices depends on their performance.

2. The unemployed will be profiled. The first group is to include active unemployed who do not need any specialised help and only the access to job offers.

The second group will encompass the unemployed requiring support, who will e.g. participate in training or internship programmes.

The third group will include the unemployed not integrated with the labour market, i.e. people in danger of social exclusion as well as those who, out of their own choice, are not interested in taking a job, or who work within the shadow economy.

Every client of a labour office – both an unemployed person and an entrepreneur seeking employees – will have an adviser. However, the number of advisers may prove to be insufficient – it will be increased from 1.8 thousand to 2.5 thousand only, although labour offices employ as many as 20 thousand people.

Many international experiences (those of e.g. France or Germany) as well as those of Poland show that an excellent solution is to commission the services of job intermediary to external institutions. These experiences are well described by Mirosław Proppe from KPMG, who already executed a pilot project of such services in the region of Małopolska.

3. Labour offices will be permitted to transfer the handling of the unemployed from the third group, meaning those at the margin of the labour market, to external companies.

This will be possible within the framework of the Activation and Integration Programme which county labour offices will be allowed to execute in cooperation with social welfare centres. It all depends on whether the county authorities in cooperation with the municipal authorities decide to take advantage of that opportunity.

A budget of 160 million zloty will be allocated to these undertakings; approximately 14.2 thousand unemployed out of approx. 2.1 million registered unemployed(i.e. less than 1 per cent), will have the opportunity to be transferred outside the labour office.

People who refuse or cease to participate in the programme without a  valid reason will lose the status of an unemployed person. This will also apply to people who refuse to be classified within the given profile.

4. New solutions include among others: a grant for telework, an internship voucher, a settlement voucher to enable the unemployed person to leave their county, an activation benefit, a loan from the Labour Fund to create a job position or open own business, training programmes organised under tripartite training agreements concluded by the County Administration Office Head, the employer and the training institution.

5. A National Training Fund is to be established to finance training programmes for employees, which will be injected with monies from the Labour Fund.

6. For young unemployed (up to 30 years of age) the period during which a labour office is required to find a job, internship or qualification development offer for them, will be reduced from 6 to 4 months.

7. Employers hiring the unemployed up to 30 years old referred from a labour office will be exempt from the obligation to pay contributions for the Labour Fund and the Guaranteed Employee Benefits Fund for a period of 12 months. They will also have the possibility of a refund of the social security contributions and a subsidy for the remuneration of the unemployed hired by them. Similar privileges will be offered to those hiring an unemployed person 50+.

8. Another good idea is to oblige the units of public sector to submit information on vacancies to county labour offices. The office employees have also been obliged by the Ministry to seek the so-called “hidden job offers’, i.e. jobs offered by local employees but e.g. on poster pillars or in the local press instead of the county labour office. More adverts mean a bigger chance to find employment.

Assessment

The labour office reform will be a true revolution in the operations of those ossified institutions. The heads of labour offices tried to obstruct the introduction of the new provisions, but the most important ones are going to enter into force.

The biggest disadvantage of the reform is its delay. The reform assumptions were drafted in the summer of 2012. The government adopted the bill in November 2013 and the Sejm (Polish Parliament) passed it only in April 2014. During that time the unemployment started to decrease even without the reform. These actions are late two years at least.

Another issue is the subordination and the related accountability. Despite the fact that labour offices are governed by the Ministry, they are not directly subordinated thereto. As local government institutions they are first of all accountable to the County Administration Office Head.

Thus, the Minister may not e.g. implement staff modifications even if the given facility does not follow the recommendations. In the case of those institutions the decentralisation went too far – labour offices should to a greater extent be subordinated to the Province Head and the government administration.

The lack of possibility to track the further status of the unemployed also poses some risk. There is a concern that some labour offices will be rewarded for striking off the unemployed only to improve the statistics. As GRAPE UW writes on its internet pages, currently there are nearly 120 thousand people deleted from the registers by county labour offices’ employees per approx. 100 thousand of the unemployed who found a job. This means that over a half of the “drop” in the number of the unemployed arises out of actions of administrative nature rather than of the labour market situation improvement.

Health counter

One of the ideas presented by part of the experts – as described among others by Jan Baran in “Obserwator Finansowy” – and the Ministry of Labour and Social Policy is to separate the status of the unemployed and the right to health protection, which was included in the reform assumptions but eventually struck off.

The monthly administration costs of handling the process related to transferring the lists of the unemployed not granted an unemployed benefit but entitled to benefits financed by the National Health Fund – and on average one third of the unemployed addresses the jobcentres for that purpose – amounts to approx. 15 million zloty.

The county labour offices’ employees claim that the execution of the said procedure requires involvement of many employees in purely bureaucratic undertakings, which significantly reduces the number of employees involved in the activation of the unemployed.

Health insurance is the reason for which the unemployed take jobs – as shown by the research  of Craig Garthwaite, Tal Gross and Matthew J. Notowidigdo.

In the US state of Tennessee a public health insurance programme was discontinued in 2005, due to which the unemployed lost their entitlement to benefits. Only a private health insurance or finding a job entitled to health protection. During two years since the moment of the reform implementation, employment in Tennessee rose by 6 per cent – and that was the best result among all the states.

In Poland, unlike in the USA, it is the Constitution that guarantees the right to health protection. If it was not a task of labour offices, this obligation would be transferred to the welfare centres. The problem is that the aim of the welfare system is not to find employment for a particular person but to help people in need. People once referred to welfare centres rarely seek employment thereafter.

In order to increase employment we need to strive to keep people refusing to be employed within the area of operation of labour offices, whose aim is to help in finding a job. But the other proposals of the department move in the opposite direction.

The Minister of Labour recently proposed to introduce special “counters” to service those unemployed who only want to be entitled to health insurance but are not looking for employment. Such a solution has been added to the governmental “queue and oncology package” being developed by the health department.

The change in the principles of paying health insurance contribution would be of benefit for employers, among others, because their job offer would be answered by people actually interested in the job. Unfortunately this is only a half measure. In the future it may turn out that the majority of the unemployed resign from any activation and then the employees of labour offices will be provided with huge amounts of free time.

If the government is so convinced of that solution’s efficiency, it should test it in randomly selected counties as well as in a corresponding control group. The pilot project will prove whether the solution makes sense. But by then, I would not strike those off who are afraid and do not want to start a job because it will turn out that there will be no institution at all that could help to bring them out of the shadow economy or help to find employment.

The reform of the employment intermediary services has been awaited for years and it is good that it enters into force. The problem is that further steps of the department – instead of increasing the employment – may grow a group of socially excluded inactive people who will need financial support for the next tens of years. The benefit brought by the lack of queues in labour offices may be only short-term.

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