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Reacting to the Crisis: Supporting the Unemployed through Direct Job-Creation Schemes? A cross-national comparison

Felix Hörisch
Ruprecht-Karls-Universität Heidelberg
Felix Hörisch
Ruprecht-Karls-Universität Heidelberg
Timo Weishaupt
Universität Mannheim
Open Panel

Abstract

The most recent global financial and economic crisis that has affected not only the economic output in literally all industrialized nations, but has often also been accompanied with a rapid and significant raise in unemployment levels. Those persons, who had already been unemployed prior to the crisis, now face both fewer job vacancies and are in tighter-than-ever competition with “short-term,” and thus in the eyes of most employers, more employable jobseekers. Especially for low-skilled workers, labour-market entrants, older workers, minorities, or persons with other additional hurdles, the risk of becoming long-term unemployed has dramatically increased. Not surprisingly, in most Western countries voices become loud for the state to step in and create “employment opportunities” in the so-called second labour market. Among the OECD nations, about half have reacted – inter alia – by introducing or expanding temporary, public sector jobs in the so-called “second labour market”. This had also been a preferred option in the 1980s, following the oil shocks. Since then, however, these programs have increasingly been seen as ineffective and their use remains highly controversial. What then explains that numerous OECD countries have opted for this type of intervention, while others have not? By applying a mixed-methods approach, we first identify through the application of a discriminant analysis that the financial room for manoeuvre coupled with a rapid rise in youth unemployment are the best predictors for the introduction of direct job-creation measures. Subsequently we carefully trace the political events in three most different systems, including Germany, Sweden and the UK, thus elaborating on the how and why these two factors are crucial explanatory variables.