Implementing the Participation Opportunities Act: A Balancing Act between Budget and Hopes

During the negotiations for the grand coalition in Germany, Conservatives and Social Democrats agreed to launch a new scheme for long-term unemployed with little chance to take up regular employment. The coalition agreement of March 2018 set an ambitious goal: with a budget of 4 billion euros over four years, 150,000 long-term beneficiaries should enter subsidized employment. On January 1, 2019, the “Participation Opportunities Act” (POA) took effect. The law was widely praised because it addressed a problem that arose from the Social Code II or “Hartz IV” labor market reform: Due to its strong emphasis on “work first”, the reform led to neglecting long-term unemployed with multiple placement obstacles. Job centers did not have sufficient resources to support them appropriately. This was at odds with a central aim of the Hartz reforms, i.e. to improve participation opportunities for long-term unemployed. There seems to exist a broad political consensus that “Hartz IV” suffers from a design flaw – a flaw, which the POA intended to correct. While the implementation of the scheme faced many obstacles, like a lack of time, delayed support from the Federal Employment Agency and unclear regulations, our presentation will focus on its financial aspects. Job Center managers are facing the task to integrate the additional means into their “integration budget”, balancing resources between the POA scheme and other activities like further training. In addition, they can utilize an innovative instrument called “passive-active transfer” (PAT) that allows for using the “passive” benefits saved by the scheme for an “active” employment scheme. While most managers support the idea of increasing participation for the target group, they have to deal with high costs (in the first two years, job centers completely refund wage costs to employers) and the duration of the scheme, which may bind them for five years. The presentation is based on qualitative interviews with job centers managers and experts we led as part of our implementation study. We will elaborate on the following questions: How do managers balance hopes (for participation) and financial constraints? How does their concept of participation influence the implementation of POA? What strategies do they use to deal with conflicting goals of their internal policy? Do they feel that POA is a remedy for a design flaw of “Hartz IV”? Are they willing to spend the money although POA employment does not contribute to performance management measures? It turns out that most Interviewees celebrate POA as an urgently needed instrument to fill a funding gap for the promotion of unemployed who are remote from the labor market. They even praise politicians for the construction of the law. At the same time, they consider it too expensive and fear it might ultimately “blow up” their job centers’ integration budget. Particularly for job centers with small budgets, a policy geared towards participation becomes risk management. We will reconstruct the strategies job centers apply to balance participation with budget, or in other words: new hopes for long-term unemployed against financial constraints.