Unconditional job guarantee to be trialled in Austria, in world first

Pilot designed by Oxford University economists

Jon Stone
Policy Correspondent
Sunday 01 November 2020 21:45
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Jobs will be handed out to long-term unemployed people who want them
Jobs will be handed out to long-term unemployed people who want them

Out-of-work people in Austria will be guaranteed paid jobs as part of a new trial policy that could transform how countries deal with unemployment.

The pilot study, which will eliminate long-term unemployment in the town of Marienthal practically overnight, has been designed by Oxford University economists at the behest of the Lower Austria’s department of work.

It will see all long-term unemployed people in the town, an estimated 150 individuals, given work in fields such as childcare, gardening or home renovations, and paid a full wage.

Economists have long suggested that an unconditional job guarantee could make economic sense as a way of controlling unemployment – but the Marienthal experiment is the first time the plan has been trialled at scale.

Policymakers around the world will be watching the results of the three-year study closely, amid rising international interest in the approach. Proponents of a job guarantee include former US presidential candidate Bernie Sanders and Scottish Labour leader Richard Leonard, who has said the policy could smooth the economic recovery from Covid-19.

“With many jobs already lost and warnings of a tidal wave of unemployment around the corner, it’s understandable that the idea of a universal jobs guarantee is gaining interest,” said Lukas Lehner, one of the Oxford University economists who designed the pilot study and will analyse its results.

“As well as its economic costs, long-term unemployment takes a terrible toll on people’s health and wellbeing and on family and community life.”

The choice of Marienthal as the location for the study is loaded with symbolism: in the 1930s, it was the site of a ground-breaking social research study into how mass employment from the closure of the local textile factory caused social disintegration and and damage to civic life.

Researchers at the time established that the impact of losing a job went well beyond financial hardship and could have a profound psychological impact on a person concerned, and wider repercussions in their community. The new pilot study hopes to measure the opposite: how a guaranteed job could improve the well-being of a community and individuals in it. In a further symbolic flourish, one of the agencies involved in the job guarantee scheme is planning to open an office in one of the mill’s disused buildings, which still stands today.  

The area around Marienthal suffers from long-term structural unemployment, which has been rising since the 1980s. At the end of August, roughly one in five unemployed people in the region of Lower Austria, where the town is located, had been looking for a job for more than a year.

Bernie Sanders is one high-profile proponent of a job guarantee in the US

Under the terms of the new pilot programme, people in the town's municipality who have been unemployed for a year or more will be invited to take part, and given a two-month preparatory course consisting of one-to-one training and, for those who need it, access to counselling and medical support.

Participants will then be helped to choose a subsidised job in the private sector, or if none is available be supported to create a one based on their skillset and their knowledge of their community's needs.

The programme appears to have been well-received in the town so far. Jennifer, 43, has been unemployed since 2011, and is set to be one of the pilot’s participants.

“I did not want to leave the house. I didn’t want to let others know that I am not doing well,” she said. “To be part of this project feels like a dream come true. Lacking work you can’t think positively – with work you can. That’s most important to me. If that's right, everything else falls into place.”

The pilot is expected to cost a relatively modest €7.4m, and will be funded by the Public Employment Service of Lower Austria. The researchers say this amounts to a cost of €29,841 per participant, broadly equal to the cost to society of €30,000 per person unemployed for a year. The project’s employment activities are also expected to generate revenues of around €383,000.

The pilot project comes after significant interest across the world in a Finnish pilot study examining the impact of paying participants a universal basic income. The question of whether a job guarantee or a universal basic income would be a better approach to dealing with unemployment is a matter of discussion among some economists, and Lower Austria's pilot is expected to provide valuable evidence.

The economists who will observe the Marienthal experiment are associated with the Institute for New Economic Thinking at the Oxford Martin School, Oxford University. Professor Maximilian Kasy, co-designer of the pilot, said: “The idea of a jobs guarantee programme is an important addition to the toolkit of social safety provision, especially when participation is voluntary and the jobs offered are meaningful. I am excited to participate in this first ever rigorous, transparent, and independent evaluation of such a jobs guarantee programme.”

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