Privatization of Placement Services in Light of the TLM Approach
Venice, 10 April 2008
Petra Kaps & Holger Schütz
Wissenschaftszentrum Berlinfür Sozialforschung
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• Preconditions for Functional Quasi-Markets
• TLM - evaluation criteria
• Privatized Placement Services in Germany
• Competitive Tendering of Placement Services:
a comparison of 4 countries
• Conclusion
Contents
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• open market structure• incentives for efficient and quality-ensuring pricing
mechanisms• freedom of clients’ choice to promote competition• clear separation of principal and agent• maximum transparency of tendering procedures,
contracts and evaluation criteria• Low transaction costs• balancing motivation and interests of service
providers, the contracting authority and the customer• high-quality monitoring of provider performance
Preconditions for Functional Quasi-Markets
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• Productive efficiency through competition on
markets
• Responsiveness through freedom of choice
• Equality of individual opportunities through
incentive structure
(according to Le Grand/Bartlett 1993)
Quasi-Markets – evaluation criteria
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• Justice as fairness /equality of opportunities
• Individual autonomy/empowerment
• Solidarity in risk-sharing
• Effectiveness through cooperation and
functional specialization
• Efficiency through management by objectives
(according to Schmid 2002)
TLM – evaluation criteria
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
Introduction of Quasi-Markets
Contracting Out:• commissioning the provision of services
(various kinds of placement service for unemployed persons to private agencies, § 37 Social Code III - with a right to use private support after 6 months on UB I, but without choice between agencies)
• integration measures (for groups of unemployed needing intensive support for placement into the labour market provided by private profit or non-profit contractors, § 421i Social Code III – with no right)
Voucher-System:• placement vouchers
(right to use it for unemployed persons after 6 weeks on UB I, § 421g Social Code III)
The German case I
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
Impact analysis (2003-2005)
• In sum, poor integration rates and no net effect of the two instruments which are contracted out
• for 2005, placement vouchers show small positive gross and net effect for short-term unemployed, but there are windfall profits of at least the same degree
The German case II
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
Implementation analysis: Contracting Out
• Only limited room for private employment agencies to select participants; and no options for participants to choose between different providers as PES allocates them to the service providers
• conflicts between public employment agencies and private service providers about what placements are to be recognised and paid for
• lack of monitoring tools permitting easy supervision of private agencies
The German case III
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
Implementation analysis: Vouchers
• Licenses for market access easy obtainable, keeps transaction-costs low but produces quality problems
• Fixed prices means no market price formation• Strong social selection effects (creaming) • Incentives for deadweight persist• Quality assurance lies with professional
federations, but quality problems remain unresolved
• Transparency and monitoring of providers and market structure is not guaranteed yet
The German case IV
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
Results in light of the TLM-Approach
The German case V
Evaluation criteria Contracting Out Voucher
Individual autonomy/empowerment
No: very limited right to use,
no choice of agents
Yes: right to use, but only for a limited group (> 6 weeks on UB I)
Choice but intransparent quality of services
Justice as fairness/ intervention in favour of the disadvantaged
No: parking and creaming
long term unemployed are not entitled to services
No: parking and creaming/ long term unemployed are are not entitled to services
Solidarity in risk-sharing No/Yes: No cure no pay/no cure less pay
No: no cure no pay
Effectiveness through specialized agents in coordinated competition and partnership
Yes: specialized agents
No: partly coordinated competition, but no partnership
Yes: specialized agents
No: un-coordinated competition, no partnership
Efficiency through management by objectives
Low level of controlling,
No benchmarking or manage-ment by outcome objectives
No controlling, benchmarking or manage-ment by objectives
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• Tendering systems extremely complex, low risk sharing and in need for permanent re-regulation
• Initially strong reliance on market prices results in races to the bottom and deteriorating quality
• Strong price competition favours creaming and parking of the most disadvantaged groups as well as other forms of moral hazard by private providers
• Empowerment is not a central goal, choice is restricted
• Different degrees of coordination and competition among countries
• No clear positive net impact/increased effectiveness
Competitive Tendering of Placement Services: Germany, Australia, Britain and the Netherlands
International comparison
CAP-TLM Workshop, Venice, 10.-11-04.2008 Petra Kaps, Holger Schütz
• Tenders provide no incentives for needs-oriented services
• Competitive tendering by commissioned agency is unresponsive to local needs and prone to centralization
• Management by outcome objectives needed• Full decentralization brings about not only market
competition, but also uneven services standardsand regional fragmentation
• New forms of cooperation and PPP needed
Alternative public-private-mixesfor placement services
Conclusion