Lack of support prolongs unemployment

October 08, 2020

Everyone has to call in sick at work at some point. With caseworkers at the employment office, however, a sudden absence has direct economic consequences for a third party: The people they support are unemployed on average five percent longer if a meeting is canceled, which corresponds to a period of twelve days. This may sound rather trivial, but it can entail considerable costs for both the welfare state and the individual concerned.

Amelie Schiprowski, economist of the Cluster of Excellence ECONtribute at the Universities of Cologne and Bonn (Germany), evaluated Swiss unemployment insurance data from 2010 to 2012 and investigated how much the personal interaction with caseworkers matters for unemployed individuals. She found out: The duration of unemployment depends to a large extent on how reliable and committed the support provided by the employment office is.

Regular support important for reintegration

Caseworkers at the employment office help to reintegrate unemployment benefit recipients into the labor market. A spontaneous absence of a caseworker reduces the average number of meetings that an unemployed individual can attend. As there are only about two to three meetings per half-year, one missed meeting corresponds in the analyzed data to about 40 percent of support time. The cancellation of a meeting results on average in a five percent longer unemployment spell. This means in turn that regular support is very important for successful reintegration.

Quantity and quality are important

The economist divided the observed caseworkers into two groups according to their productivity; productivity means how quickly, on average, the people they supported found a job again. The result: Absences of less productive caseworkers have no negative effect, while the absence of a more productive caseworker extends unemployment by an average of 13 percent. The negative impact of a canceled appointment therefore depends on the quality of the support.

Investment in human capital can reduce duration of unemployment

The paper highlights the economic importance of staff at the employment office. "Caseworkers are underestimated as an important resource for welfare states," says Amelie Schiprowski. Every day of additional unemployment is expensive for the state. Unemployment could be decreased by reducing the workload of individual caseworkers to facilitate more individual meetings, and by investing into the quality of the support provision.
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Amelie Schiprowski received the Joachim Herz Foundation Prize for Economics for her paper. The study was published in the Journal of Labor Economics: https://www.journals.uchicago.edu/doi/10.1086/706092

Funding:

The work received financial support from the Cluster of Excellence ECONtribute at the universities of Cologne and Bonn, funded by the German Research Foundation (DFG) as part of the Excellence Strategy of the German Federal and State Governments. Furthermore, the study was supported by the DFG-funded Collaborative Research Center Transregio Economic Perspectives on Social Challenges of the universities of Bonn and Mannheim and the German National Academic Foundation.

ECONtribute: The only Cluster of Excellence in economics

The study was conducted within the framework of ECONtribute. It is the only Cluster of Excellence in economics that is funded by the German Research Foundation and a joint initiative of the universities of Bonn and Cologne. The Cluster's research focuses on markets at the interface between business, politics and society. The Cluster aims to advance a new paradigm for the analysis of market failure in light of fundamental societal, technological and economic challenges, such as increasing inequality and political polarization or global financial crises.

University of Bonn

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