The Impact of Non-Profit Temping Agencies on Individual Labour Market Success in the West German State of Rhineland-Palatinate
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Lechner, Michael; Pfeiffer, Friedhelm; Spengler, Hannes; Almus, Matthias Working Paper The impact of non-profit temping agencies on individual labour market success in the West German state of Rhineland-Palatinate ZEW Discussion Papers, No. 00-02 Provided in Cooperation with: ZEW - Leibniz Centre for European Economic Research Suggested Citation: Lechner, Michael; Pfeiffer, Friedhelm; Spengler, Hannes; Almus, Matthias (2000) : The impact of non-profit temping agencies on individual labour market success in the West German state of Rhineland-Palatinate, ZEW Discussion Papers, No. 00-02, Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim This Version is available at: http://hdl.handle.net/10419/24347 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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The programme that was limited to the period from 10/01/94 to 12/31/96, aimed at integrating unemployed people with reintegration difficulties into the primary labour market. The subsidies granted by the programme resulted in an increased trend towards “non-profit temping”, which on the one hand led to the formation of new non-profit temp agencies and on the other hand led to an extension of the activities of a number of existing non-profit organisations. Institutions engaged in “non-profit temping” have the explicit aim of facilitating the reintegration of unemployed into the primary labour market. To achieve this, they employ previously unemployed people and hire them out to other firms (borrowers) for a fee. While commercial lenders are generally not interested in losing good workers to the borrowers, the “non-profit temping” represents a new instrument linking the labour lending activity with the aim of reintegration into the primary labour market. Ideally, the temp worker will be hired permanently by the customer of the temp agency (borrower) and thus reintegrated into the primary labour market. The paper presents an econometric assessment of the effects of non-profit temporary employment agencies in Rhineland-Palatinate on individual labour market success. That is, the paper focuses on the question whether previously unemployed people, who were employed by a non-profit temp agency, show a higher rate of reintegration into the primary labour market than without „non-profit temping“. It is based on data of the German Federal Employment Services made available from files for computer-assisted job brokering. Using the computer-assisted job brokering-data and econometric matching methods, a control group of unemployed workers is selected that resembles the group of temporary workers in terms of their socio-economic structure and labour market history. The econometric comparison of the reintegration success reveals differences between temporary workers and control group. In our observation window (up to 5 months after leaving a temp agency), the reintegration success of temp workers was significantly higher than that of the control group. For example, two months after leaving the temp agencies, 27.4 % of the temp workers were employed in the primary labour market compared to only 11.3 % in the control group of non-temps after the same period. Furthermore temp workers stay approx. 15 days longer in the labour market within the first four months after leaving the temp agency. For a comprehensive evaluation of the programme in question, more extensive analyses would be required that should include other direct impacts (for example on earnings; on longer term impacts; on participants’ reduced use of social welfare etc.), indirect impacts (for example, on non-participants and through the forgone use of the money invested) and the longer perspective of the non-profit temp agencies in the evaluation. This task, however, is closely related to the need of better data. The Impact of Non-profit Temping Agencies on Individual Labour Market Success in the West German State of Rhineland-Palatinate* Michael Lechner+, Friedhelm Pfeiffer++, Hannes Spengler++, Matthias Almus++ + SIAW, University of St. Gallen, Switzerland ++ Centre for European Economic Research (ZEW), Mannheim, Germany Michael Lechner Friedhelm Pfeiffer, Hannes Spengler, Matthias Almus University of St. Gallen/ SIAW-HSG Centre for European Economic Research (ZEW) Duffourstr. 48/ 9000 St. Gallen/ Switzerland L 7, 1/ 68161 Mannheim/ Germany +41 71 224 2814 (phone) +49 621 1235 150, 284, 185 (phone) +41 71 224 2298 (fax) +49 621 1235 225 (fax) [email protected] [email protected], [email protected], [email protected] http://www.siaw.unisg.ch/lechner http://www.zew.de Abstract. The paper presents an econometric evaluation of the effects of subsidised non-profit temporary employment agencies - a programme of the West German active labour market policy - on individual labour market outcomes. The empirical analysis is based on individual data from files for computer-assisted job brokering in Rhineland-Palatinate. Econometric estimates based on matching methods suggest that the programme generated a statistically significant additional reintegration success of about 13 per centage points. Furthermore within the first four month after leaving the programme, the estimated effect was about half a month additional employment for the participants. Keywords: Econometric evaluation methods, matching, active labour market policies, temporary employment agencies JEL Classification: C52, J64, J68 * The first author gratefully acknowledges financial support from the Deutsche Forschungsgemeinschaft (DFG, grant 928/2) and the Swiss National Fund (SNF, grant 1214- 53735). The paper results from a project commissioned by the Institute for Employment Research of the Federal Employment Services (IAB-Projekt 10-483 A) and the Ministry for Labour and Social Affairs of the German Federal State of Rhineland-Palatinate. We thank Christian Brinkmann and Doris Bartelmes for valuable comments and support. Karl John and Karl Schäfer helped us to understand the complex public files for computer-assisted job brokering. Thanks also to Jürgen Egeln, who joined the project and to Martin Eichler for carefully reading a previous version of this manuscript. Introduction To fight long-term unemployment in Germany, in October 1994 a new promotional programme by the German Federal government started – “Guidelines for the promotion of reintegrating the hard-to-place unemployed by means of loans and subsidies to Temporary Employment Agencies” (GPTA).1 The programme that was limited to the period from 10/01/94 to 12/31/96, aimed at integrating unemployed people with reintegration difficulties into the primary labour market.2 The subsidies granted by the programme resulted in an increased trend towards “non-profit temping” (NPT), which on the one hand led to the formation of new non-profit temp agencies (NPTAs) and on the other hand led to an extension of the activities of a number of existing non-profit organisations. In this paper we assess the direct impact of these NPTAs on individual labour market success. That is the paper focuses on the question whether previously unemployed people who were employed by a NPTA show a higher rate of reintegration into the primary labour market than without NPT. Institutions engaging in NPT have the explicit aim of facilitating the reintegration of unemployed into the primary labour market. To achieve this, they employ previously unemployed people and hire them to other firms in return for a fee. While commercial lenders are generally not interested in losing good workers to their customers, the NPT represents a new instrument linking the labour lending activity with the aim of reintegration into the primary labour market. Ideally, the temp worker (TW) will be hired permanently by the customer of the temp agency and thus reintegrated into the primary labour market. This new instrument of active labour market policies (ALMP) is related to two general developments in Germany.