Outsourcing Employment Programmes: Contract Design and Differential Prices

Abstract

In many countries employment services and labour market programmes, whether delivered by public agencies or contracted providers, are found to be less effective in meeting the needs of more disadvantaged job seekers compared to other unemployed people. This article reviews evidence on how countries that outsource employment programmes design outcome-based payments, contracts and differential prices to ensure more equitable outcomes. It considers the extent to which such mechanisms have mitigated the risks of ‘parking’ and ‘creaming’ which are commonly associated with contracted out employment services.

Young people not in education, employment or training (NEET): Recent policy initiatives in England and their effects

“…These targets were linked to the proportion of young people who were recruited and retained on the programme, through strict eligibility criteria, as well as to the number of programme participants who secured sustained outcomes as a direct result of their programme participation. This delivery model has been utilised extensively within welfare-to-work programmes, notably in Australia and the USA, over sustained periods of time (Finn, 2010). However, it is less common within initiatives targeted at younger groups, which are largely outside the welfare system and where there is much greater focus on supporting initial engagement or re-engagement into education or training, as well as securing work outcomes.…”

“…This involves procuring provision from a small number of 'prime contractors', whose funding is linked to the achievement of sustained job outcomes for programme participants. Prime providers are expected to establish their own 'supply chains', through sub-contracting arrangements with a range of small, medium-sized and specialist contractors (Finn, 2010). With the launch of the Work Programme in 2011 and the Youth Contract in 2012, this approach was accompanied by 'black box' contracting, which gave prime providers the flexibility to decide individual service provision, within a system driven by job outcome related payments.…”

Activation and Active Ageing? Mature-Age Jobseekers' Experience of Employment Services

“…This reflects a broader turn 'towards activation' (Finn, 2010;Larsen and Wright, 2014: 455) over recent decades, as rights to welfare have increasingly become conditional 'on the basis of individual responsibility to sell one's labour through the market' (Shutes and Taylor, 2014: 204). Australia has often been at the forefront of this turn towards active rather than so-called passive welfare measures, introducing compulsory registration with employment services and mandatory reporting of job-seeking efforts for social security claimants in the late 1980s (Deeming, 2016).…”

Broken Hierarchies, Quasi‐markets and Supported Networks – A Governance Experiment in the Second Tier of Germany's Public Employment Service

“…At the time of concluding the contract, the principal (employer or purchaser) may not know exactly what he wants, or what he will want at some later point in time during the fulfilment of the contract. Assuming, however, that the exact content of the desired service, possibly conditional on varying circumstances, is known, the spelling out of this will cause huge transaction costs, result in information overload through texts too long and complex to really guide people's behaviour, and give rise to opportunistic interpretation of the clauses of the contract (see Finn for examples). In employment services, it seems practically impossible to define outcomes in such ways as to definitely preclude ‘creaming and parking’.…”