28th May 2023


Austria's 'Job Guarantee' - same price, better outcomes

  • The cost (per individual) of the job guarantee scheme is €29,841.39. And the cost to the Austrian state of each unemployed person? Around €30,000 (Photo: Unsplash)
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In autumn 2020, the Austrian government's public-employment agency opted for a highly-unusual new employment policy — and created the job guarantee pilot programme (called MAGMA.)

The initiative, along the lines of a similar one in France since 2016, was born with the aim of eradicating long-term unemployment.

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The premise could be formulated as: what if those who wanted a job with good working conditions could get it? But a second question could be added: what if this job was also tailored to the needs of each candidate and met the local needs?

To that end, until 2024, €7.4m will subsidise jobs in the regular labour market or, in most cases, create them through social enterprises — or initiatives of the programme participants themselves.

The pilot is open to anyone who has been unemployed for more than nine months, includes preparatory training for up to eight weeks, and up to three years on the programme with a minimum, collectively-bargained wage, around €1,500 per month for full-time workers.

The profiles are diverse: women, people over 50, individuals with a medical condition, a migrant background, or lacking compulsory education levels (or too highly-qualified), according to Oxford University economists Lukas Lehner and Maximilian Kasy, who analysing the effects of the programme.

So far, their findings have demonstrated positive outcomes of the programme for both the community and its participants, plus the sustainability of these benefits over time.

Lehner and Kasy evaluated the economic and non-economic outcomes of the programme using a sample of 62 participants and reached three remarkable, even counter-intuitive, conclusions.

First, there are large positive effects of participation on economic wellbeing at the level of income and economic security. An expected effect, but not an automatic one, since participation is voluntary, i.e. no one is obliged to accept any offer and no one's future options are diminished by refusing an offer, although none of the more than 100 participants have done so to date.

Second, they found large effects on participants' well-being, measured through sense of purpose, social inclusion or recognition. Werner's case reflects this point well. Before participating in the programme, the 60-year-old man felt hopeless about finding a job. He sent more than 600 job applications in three years.

"Too old, too expensive, over-qualified, without long term prospects due to my age, with multiple university degrees seemingly over-qualified for service jobs... Many obstacles seemed to exist," he told the researchers.

He now works in the historical archive of Marienthal, a small town in the municipality, and says that the job guarantee proved to be extremely valuable and useful for him.

A third discovery was the large reduction of municipality-level unemployment due to the programme.

Zooming out, unemployment at the Austrian national level stood at seven percent in February 2023. With that percentage, two things can be done, either fund the long-term unemployment of these workers, or implement a policy such as the job guarantee — and yet the costs are similar.

€29,841.39 is the cost per individual of the job guarantee. And around €30,000 is what an unemployed person costs directly and indirectly to the Austrian government.

On the other hand, the psychosocial cost is higher for the unemployed than for the employed. "Participants really have improvements in their time structure, their collective purpose, or their social interaction through finding a job again," explained the economist Lehner.

So far, the programme sounds good. It does not cost more than having these people unemployed, and it also improves their welfare.

But these results have been achieved at a very small scale in an Austrian village — would this model work in other countries and at a larger scale? On the evidence of this and the French programme, the Oxford University researchers believe it could.

"It would need to be tested in different contexts, larger spaces and rigorously evaluate the results, but there is no reason to believe why it should not work in other high-income countries," concludes Lehner.

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