Ways to improve the employment prospects

Table 3.4: Average duration of unemployment (quarters)

Receives social assistance Average Standard error N

No 9.8 5.96 567

Yes 16.2 7.24 355

Total 12.2 7.19 922

Source: Authors’ calculations based on the Labour Force Surveys of 2001 to 2004.

3.4. Ways to improve the employment prospects of welfare

unemployment assistance government will be inclined to choose the former, so that they can please the

claimant and also spare the hassle of organising public works projects. One way to correct incentives is to set the rate of subsidies from the central govern- ment in proportion to the degree of activation exerted by each programme.

Thus, the share of government financing should be lowest for social assistance schemes, and highest for active labour market programmes that facilitate re- employment in non-subsidised jobs. This would not necessarily imply a reduc- tion in public funds available for activation programmes but would change the share of central versus local resources.

3. The above measures can only lead to success if the responsible bodies have the necessary expertise and tools to promote employment. This raises two additional requirements: first, the availability of experts who are able to identify personal characteristics that may impede re-employment (poor social or cognitive skills, family problems, etc.) and to select the services best suited to removing or reducing any such obstacle. This may be feasible at the level of the 174 small regions (LAU1), since some measures have already been taken to build expert capacities in local public employment services (Busch, 2006).

Second, an appropriate range of quality services must be available to local gov- ernments – some relevant international experiences are discussed through an example in Chapter 6 of this volume. This may also require opening the mar- ket of employment services to non-profit or for-profit providers.

4. The fourth task is to separate the two functions of the social assistance scheme. There will always be people among those in need of support who can- not work temporarily or permanently. Both a commitment to human rights and social solidarity call for a solution that grants these groups access to some kind of support providing for basic needs. This is also essential for eligibility conditions to be enforceable, since – fortunately – there will always be com- passionate officials who are reluctant to enforce sanctions when they are aware that the claimant may not expect help from any other source.

ADMINISTRATION AND IMPACT OF PUBLIC WORKS PROGRAMMES Péter András Szabó

At present there are three public works programmes for unemployed people.⁴² Scheme A was introduced in 1991: it is organised by job centres and usually involves community services provided by local gov- ernments (cleaning public parks, ditches, etc.) As of 2000, Scheme A was extended to include any task that “affects the local population or munici- pality.” 50 to 70 per cent of all costs (as of 2002, 90 per cent if Roma workers or people over the age 45 are employed) are covered by the central budget, financed from the Labour Market Fund. County labour offices are authorised to allocate the budget (Laky, 2005).

Scheme B was introduced in 2000; organised by local government and serves as a work test for unemployed people claiming social assistance. The local government may claim 90 per cent of social assistance from the central budget. Workers on the scheme may be assigned to any local govern- ment task.

Scheme C was started in 1996, with the objec- tive of using nationwide or regional projects (flood safety and emergency, clearing public areas of al- lergenic vegetation, forestation tasks) to create job opportunities for the unemployed. Tenders are in- vited by the Public Works Council and the work activity itself is organised by local governments or participating public utility companies (waterworks, forestry, national parks, etc.). 60 per cent of Pub- lic Utility Programmes are financed by the central government budget, the rest is funded by the con- tracted provider (7 per cent) or other, regional or local sources (FMM, 2006). Table K3.1 shows the number of participants in the various public em- ployment schemes and their costs.

As set out by the regulations, Schemes A and B are intended to encourage employment rehabili- tation and a return to the primary labour market.

Surveys on the administration and efficiency of the schemes were carried out in Budapest in 1999 (Or- sovai, Palotai & Pálinkó, 2000) and in four coun- ties in 2001 (Fazekas, 2001), and the Hungarian Audit Office assessed the public works projects of 95 local governments in the same year (ÁSZ, 2002).

The results of these surveys and administrative data on return to work following long-term unemploy- ment agree in their conclusion that public works schemes have done little to reduce long-term em- ployment. Orsovai, Palotai & Pálinkó (2000) find that 28 per cent of workers hired on public works projects move back and forth between active and passive labour market programmes, and Kertesi (2004) argues that it is precisely these schemes which are responsible for large groups of untrained Roma workers being trapped in a situation with no way out: spending years in badly paid and insecure jobs alternating with social assistance.⁴³

According to data from the Labour Force Sur- vey of 2003–2004, the proportion of workers re- turning to public works schemes is estimated at 37 per cent (Table K3.2). The preliminary results of a research project of the Hungarian Institute of Economics led by Gyula Nagy in the summer of 2007 indicate that the situation has not changed over recent years. Local governments tend to offer temporary employment rather than work oppor- tunities that facilitate rehabilitation and improve labour market chances.

Public works schemes – far from fulfilling their original functions – are also used as a supplemen-

42 The Hungarian titles are “Közhasznú” (Type A), “Közcélú”

(Type B), and “Közmunka” (Type C). 43 According to data in the Roma survey of 2003, barely 30 per cent of the working-age Roma population is employed and the job loss and job entry rates are around 25 to 30 per cent among Roma people, compared to a rate of below 10 per cent among unskilled non-Roma workers (Kertesi, 2004).

unemployment assistance tary source of financing municipal activities. The

gradual extension of activities eligible for central government financing, the flexibility of the regula- tions and the almost complete absence of supervi- sion allows larger municipalities to have their basic tasks and other tasks that do not strictly serve the community performed by public workers (ÁSZ, 2002). The Audit Office survey recorded a case, for instance, where teaching assistants in a Veszprém

county primary school were employed on a Scheme B project from the start of the school year in Sep- tember through to its end in June and were put on unemployment benefit for the summer holiday – in full compliance with current regulations. Another example is the district council in Budapest which was brought into the media spotlight for employ- ing a gypsy band for merry making and labelling them as community workers.

Table K3.1: Costs and participants of public works schemes (2002 and 2005) Number of participants Public costs

(thousand people) (billion HUF)

2002 2005 2002 2005

Scheme A^* 22 22 11.9 12.8

Scheme B^* 12 17 9.4 14.4

Scheme C^** 14 15 5.6 7.1

Social assistance^** 113 159 22.1 32.3

* Monthly average. ^** Annual average.

Note: Hungarian GDP was HUF 22,000 billion in 2005.

Sources: National Employment Service CSO, Finance Ministry, Ministry for Work and Welfare.

Table K3.2: Participation patterns among public works employees, 2004 (%) Number of observed quarters

3+ 4+ 5+ 6+

Staying on scheme 28 21 18 17

Moving on and off 37 48 52 57

Exit from scheme 35 31 30 26

Total 100 100 100 100

Observations 98 75 50 23

Notes: Data were taken from Quarter I 2003 to Quarter II 2004 in the CSO Labour Force Survey. Those people were included who did not participate in public works schemes in the first quarter of 2003 but entered a scheme in the next quarter and were observed for at least 3–6 quarters. The Labour Survey records considerably fewer public workers than suggested by administrative data. Assuming that the majority of workers employed in these schemes by local governments for extended periods consider themselves to be “proper” employees, the above results overesti- mate the proportion of people moving on and off the programme.

Source: Author’s calculations based on the CSO Labour Force Survey of 2003–2004.

The explanation for the use of Scheme B in ways which are far removed from the original inten- tions is that local governments are not motivat- ed and not appropriately prepared for organising public works programmes that offer rehabilita-

tion. Smaller settlements lack institutions which could arrange public employment schemes (Faze- kas, 2001). The Audit Office report (ÁSZ, 2002) reveals that local governments rarely have an em- ployment policy of any sort: only three out the 95

municipalities reviewed had a regular report on the employment situation and an action plan for necessary interventions.

Scheme A projects run by job centres have not proved to be any more successful in improving employment prospects, which suggests that lack of expertise cannot be the main reason behind the problems. The main causes are more likely to be found in the fact that neither the monitoring sys- tem, nor the financing arrangements create incen- tives to improve the employment chances of com- munity workers. Monitoring is the responsibility of job centres but they have insufficient resources to cover this task as well as their expanding range of other functions. As a result, monitoring activities are limited to the audit of financial accounts: it is often left unchecked, for instance, whether or not all workers report for work and the job centre may not even know the number of workers registered with the local government (ÁSZ, 2002).

Although the Ministry is aware of the poor effi- ciency of the schemes, it appears to have resigned itself to the situation. The recommendations of 2002 of the Audit Office concerning the assess- ment of programme results and the improvement of their efficiency were discarded by the Ministry for Employment on the grounds that “the most important function of public works schemes is to provide employment opportunities as a last resort for unemployed workers who would otherwise find no jobs.” (ÁSZ, 2002).

The situation is not entirely hopeless, however, since a number of initiatives have been launched

which could succeed in improving long-term em- ployment chances even in multiply disadvantaged regions struggling with an unskilled workforce, scarce capital and isolation. An initiative of this kind is the Cserehát programme launched in 2005 with support from the government and the Unit- ed Nations. The programme seeks solutions which depart from traditional standardised development projects controlled by an external authority, and rests, instead, on the involvement of local part- ners. Important elements of the programme are first, that it targets small regions rather than single towns or villages and second, it relies on a collabora- tion of non-profit, private and public sector agents.

It is based on the principle that a programme can only be successful if it relies on the participation of local stakeholders, if it is they who select the solu- tions best suited for themselves and if external re- sources and professional support needed for imple- mentation is made available to them. As a first step, the Cserehát Programme Office surveyed local de- velopment partners and project ideas. Based on this they provided support to local actors, mostly from disadvantaged municipalities, to develop proposals for some large scale projects that may successfully bid for EU funds as they become available between 2007 and 2013. The first results of the programme were presented at a conference in May 2007, where the organisers reported that a network of around 2500 active local development partners had been created from a hundred settlements in their small region in the first year following the launch (Csere- hát, 2007).

rise in disability claims

4. A LABOUR MARKET EXPLANATION FOR THE RISE