Does Outsourcing Job Assistance Help Long-term Unemployed Job Seekers Find and Keep Jobs?

Abstract:

Finding jobs for long-term unemployed job seekers is a challenge. We study whether a private nonprofit provider of placement services (called Hestia) performs better than the standard public scheme in the context of a randomized experiment. Our data allow us to track labor market participation and benefit receipt two years prior to five years after assignment to treatment. We find that the Hestia manages to find jobs for its clients earlier, improving the employment rate by 4 percentage points, and reducing benefit receipt by the corresponding fraction in the first year. Yet, the initial employment gain dissipates completely, and becomes even negative and significant two years after assignment. Job seekers assigned to Hestia earn substantially less on the job than the Control group. These patterns are consistent with the private provider responding strongly to the financial incentive scheme in place, despite its status as a non-profit organization.