Public sector employment – stimulating regular employment or providing eligibility to unemployment benefits?
Public sector employment programs (PSEP) typically do not come out well in evaluations; at best they are shown to have negligible employment effects, at worst they are found to hurt participants' labour market prospects. However, for groups with weak labour market attachments, benefits from increased networks and labour market experience may outweigh negative lock-in effects.
One such group for which there are reasons to be more optimistic is unemployed recipients of social assistance (SA) lacking of previous labour market experiences. For this particular group, PSEP may also work as a means of providing eligibility to (earnings related) UI benefits. In contexts where a higher level of government is responsible for financing UI benefits whereas a lower level finance SA, there are incentives for the lower level governments to use PSEP as a means of shifting costs to the higher level. Although there is anecdotal evidence that such cost-shifting takes place, empirical evidence is scarce.
In this paper, we study a PSEP in the City of Stockholm targeted at unemployed SA-recipients and other individuals at risk of becoming long-term unemployed and ask to what extent participating in the program lead to future employment for the participants or if it simply transfers individuals from SA to UI benefits.