Active labor market policy by a profit maximizing firm

Ruud Gerards 1, Joan Muysken1, Riccardo Welters4
1Maastricht University, The Netherlands, 2NSI, The Netherlands, 3CofFEE Europe, The Netherlands, 4James Cook University, Australia, 5CofFEE, Australia

A wide body of literature reports that public efforts to lead the unemployed back to work are not very successful. This paper studies the Philips Employment Scheme (PES), a private sector program to help long-term unemployed back to work. For the period 1999-2005 we compare the PES to the public re-integration efforts and we find that the PES has a relatively low deadweight loss and a high net treatment effect. It is more effective than public re-integration efforts. Furthermore we find that even with a heterogeneous mix of participants, the chance of finding a job after the PES does not vary much between participants. In addition we have explored the notion that Philips might make use of the PES as an additional recruitment channel for regular vacancies within the company, and find evidence that seems to support this. Finally we point out some interesting avenues for further research.

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