Can Workfare Provide Full Employment – And are there Potential Trade-offs?

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 31.05.2007, 12:15 - 13:30


Presentation by 

Hubert Hieke (Ryzard Lazarski University of Commerce and Law, Warsaw)


Irrespective of the recent macroeconomic upswing, persistent high levels of unemployment and a considerable amount of long-term welfare recipients have become a familiar aspect of Germany’s economic and social reality. Proposals for reforming the welfare state are numerous and various concepts compete vigorously for public attention Advocates of workfare programs admit that the general acceptance of their proposals are currently not fully accepted and supported by the general public as well as among many policy makers. Is it that the public does not comprehend the positive implications of workfare? Or is it rather that several essential issues have not been elaborated to the extent necessary by economists and the public, therefore, feels uncomfortable about the vagueness of essential aspects of workfare?
It is our view that advocates of a German workfare sector (e.g. Bonin/Schneider, 2006; Bonin/Kempe/Schneider, 2003; Zimmermann 2005) have made important progress in assessing the general issue; however, important aspects have not yet been fully addressed:
1. Will only welfare recipients be able and allowed to participate in workfare programs?
2. Are there clear and transparent regulations and work descriptions for workfare participants and what are the substitution effects? Can they be largely disregarded or neglected?
3. Will there be a clearly defined minimum wage/income level irrespective of macroeconomic conditions or will they considerably change even in the short run as advocates of alternative welfare programs such as Sinn (2005) imply?
4. How flexible are the programs (supply of workfare) and what are the most effective economic penalties to non-participants?
5. How can it be assured that workfare does not become a statistical devise for hiding and disguising failed macroeconomic and labor policy at the regional, national and EU level so that workfare does not become an easy tool for governments to claim statistically permanent full-employment?
6. Will the success of workfare programs primarily be assessed according to budget considerations?
7. Is there an inherent trade off between job quality aspects and education on the one hand and keeping workfare programs "unattractive" in order to limit substitution effects with the regular labor market?
According to our view, workfare has some potentially attractive aspects and seems to have been economically successful in other countries as well as at the local level in parts of Germany. However, only a clear and more extensive and transparent analysis of the issues listed above will attract further attention and possible support for workfare proposals.

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