Irish Economy
ESRI study says Irish unemployed return-to-work schemes including FÁS programmes generally useless
By Finfacts Team
May 13, 2011 - 5:52 AM

A study by the Economic and Social Research Institute (ESRI), published today, shows that Irish return-to-work schemes for the unemployed, including FÁS programmes, are generally useless. 

Last October, the board of FÁS, the State training agency, announced a planned rebranding as a “new world-class skills organisation” following abuse of its €1bn budget  -- even the aspiration to be bog-standard class should be welcome.

The ESRI says that under the National Employment Action Plan (NEAP), people in receipt of Jobseeker's Benefit (JB) or Jobseeker's Allowance (JA) who reach three months duration on the Live Register are identified by the Department of Social Protection (DSP) and referred to FÁS, for an activation interview. During this interview process, clients may be provided with job search assistance, and some may be referred to employment or training opportunities. The study is based on Live Register administrative data recorded from September 2006 to July 2008, so the evaluation refers to the impact of the NEAP over that time period.

The study (pdf) says many of those who become long-term unemployed suffer particular labour market disadvantages, such as skill erosion and scarring, leading to difficulty in re-entering employment. In addition, long-term unemployed individuals are more likely to suffer from social exclusion and poor health. From the perspective of the wider economy, long-term unemployment entails substantial financial costs in both welfare payments and lost revenue, as well as in lost production.

With respect to the FÁS activation referral plus interview component of the NEAP, the ESRI found that individuals who participated in this aspect of the process actually had a 17% lower probability of exiting the Live Register to employment, both in the short and medium-term, compared to a control group of individuals who were not referred for a NEAP interview. Furthermore, when the researchers compared current NEAP clients, who were either referred or interviewed and referred, with an alternative control group of clients who had been referred to a NEAP interview in the past - - during a previous unemployment spell - - they found that the current NEAP group fared no better than those who had been referred some years previously.

The findings with respect to shorter duration FÁS training programmes were more positive.

Overall, the study says that those who are assisted by the State while unemployed were less likely to return to work than the average welfare recipient. The researchers say that welfare recipients may have learned “as a consequence of the process, that they were unlikely to face monitoring or sanctions as a result of failure to search actively for, or obtain, employment, leading to some decline in job search intensity.”

The main findings of the study are:

1. There were problems of access to NEAP programmes: not all those who should have participated in an activation measure did so:

• A substantial group of jobseekers, about 25%, who were eligible for assistance under the NEAP were not identified and referred.
• Another group, over 25%, were not eligible for NEAP referral because they had received some form of assistance in a previous unemployment spell. The authors note that “this practice of excluding those who went through the NEAP process during a previous period of unemployment would appear to run counter to the underlying rationale of activation policies, namely, to assist those most likely to encounter difficulties in finding work.

2. Those who participated in the NEAP activation interview were less likely to become employed:

• Comparing the outcomes of those who were referred for a FÁS interview under the NEAP, including both those who attended and those who did not attend the interview, with a control group of those who were not referred, it was found that the NEAP was associated with a negative impact, with the chances of entering employment being about 17% lower for those who went through the interview process. This suggests that the interview element of the NEAP was an ineffective route to employment.

These two findings suggest the need for an overhaul of existing NEAP eligibility and administration, as well as provision of more intensive job search assistance. They also point to the potential benefits of Ireland following best practice in most European countries by developing a fully compulsory activation programme with effective monitoring and sanction mechanisms.

3. FÁS training programmes increased participants' employment prospects:

• Compared to a control group of individuals participating in a NEAP referral plus activation interview only, participation in FÁS training was found to increase an unemployed person's likelihood of exiting the Live Register by between 10 and 14%. However, the cumulative effect of training plus activation interview was either zero, or at best, weakly positive, due to the negative impact associated with the NEAP referral process.

The recent reorganisation of government departments with responsibility for unemployment is a potentially positive development. A number of important reforms have been implemented:

1. From January 2011, the DSP is to take a greater role in providing activation services for the unemployed, as well as for its more traditional role in paying benefits. This combination of income support and activation policies is similar to the role adopted by social welfare authorities in other countries.

2. The DSP is implementing a new case management system with a strong focus on activation, rather than just income support.

3. The Social Welfare Act 2010 provides for sanctions to be applied to unemployed persons on the Live Register unreasonably refusing to participate in training, education and employment offered by FÁS or DSP facilitators.

4. The DSP is introducing a profiling system for the unemployed, developed in collaboration between the Department and ESRI researchers. Profiling is a state-of-the-art statistically-based system for the early identification of those with a high probability of becoming long-term unemployed at the time they first become unemployed. This will facilitate the DSP and FÁS in delivering appropriate and necessary interventions with jobseekers according to their likelihood of becoming long-term unemployed, and provides the capacity to target resources on those who most need, and can benefit most from, activation measures.

5. The Department of Education and Skills (DES) is to take responsibility for education and training of the unemployed. A crucial issue in this reorganisation will be which Department assumes control over services to the unemployed.

The authors comment that “we need to shift from a provider-driven system, as has been implemented by FÁS as well as other training and education bodies up to the present, to a system that puts the unemployed client at the centre and responds to his or her specific education or training needs. A strong case can be made for the DSP to act as the broker to acquire high quality, appropriate and effective education and training from the market on behalf of its clients.”