MAGMA – a job guarantee pilot project

Abstract

Gramatneusiedl, Austria—

• Starting in October 2020, the Lower Austria regional Public Employment Service office initiated a three-year model project called Modellprojekt Arbeitsplatzgarantie Marienthal (MAGMA; “job guarantee pilot project”) to provide job guarantee measures to unemployed individuals who had been out of work for more than nine months.

• MAGMA has led to positive economic and non-economic effects, including a reduction in unemployment and an increase in employment, as well as positive effects on participants' financial situation, health, self-efficacy, and social inclusion.

• The MAGMA project has demonstrated the feasibility of a job guarantee programme and the need for an "employer of the last resort" for long-term unemployed individuals by adapting jobs to the needs of people.

What are the objectives?

In the early 20th century, Marienthal was a thriving industrial town, with a large textile factory employing a significant portion of the local population. However, the factory closed down in the early 1930s, leading to a devastating economic crisis in the area. This crisis was famously studied by a team of sociologists, who published their findings in the influential book “The Unemployed of Marienthal” in 1933 (Jahoda, Lazarsfeld and Zeisel, 2017).

Starting in October 2020, the three-year pilot project Modellprojekt Arbeitsplatzgarantie Marienthal (MAGMA; “job guarantee pilot project”) conversely offers a job guarantee for the long-term unemployed in the very same place. Initiated by the regional office of the Austrian Public Employment Service in Lower Austria, the programme aims to abolish long-term unemployment, counter its social and individual effects, and provide counselling to help participants secure employment in the regular labour market.

How does it work in practice?

MAGMA is implemented by the Public Employment Service in Lower Austria and carried out in collaboration with “it.works”, a private employment service provider. The jobs provided through the project include both regular and non-market jobs and are paid according to the relevant sector-level collective agreement. Participation in the programme is voluntary, and no sanctions are imposed if a job offer is rejected. It was proposed to everyone in Gramatneusiedl who has been either at risk of long-term unemployment (i.e. 9-12 months unemployed) or long-term unemployed (i.e. 12+ months). The initial duration for the project was set until spring 2024 and budgeted with EUR 7.5 million. The annual expenditure costs per participant amount to EUR 29 841 (Kasy and Lehner, 2022).

The private provider “it.works” provides preparatory training to participants. The training is tailored to individual needs, lasts up to eight weeks, and can include counselling, skills development, and support for health-related benefits. MAGMA provides guaranteed jobs for up to three years to participants who complete the training phase, with labour costs subsidised fully by the AMS for the first 3 months and 66% of labour costs for the following 9 months. At the same time, participants are encouraged to seek regular employment outside the programme. The pilot project was launched in two waves, with the first group of 31 participants starting in October 2020 and the second of 31 participants in February 2021. Out of the 62 participants, 45 were employed as of July 2022 (37 via MAGMA and 8 through a job outside of MAGMA), the remaining 17 were not able to participate either due to illness or because they had moved (Kasy and Lehner, 2022). The programme is set to continue until March 2024.

Participants who do not find a job on the regular labour market are offered employment at a newly established social enterprise, which pays the minimum wage set by collective bargaining in Austria. The social enterprise operates at the municipal and regional level and supports participants in developing and proposing their own project ideas. Social workers and instructors provide support as needed, and participants have access to occupational physicians. The programme allows for voluntary participation, once signed on the thr programme, attendance at the information event and the preparatory training phase are mandatory, however participants are not penalised for declining job offers (AMS, 2022).

What has been the impact?

There are two accompanying evaluation studies for the MAGMA project. “Marienthal.reversed”, examined the effects of transitioning from long-term unemployment to public or non-profit employment on the participants. The sociological study carried out by the University of Vienna identified three subgroups of participants and found that MAGMA has initial positive effects on participants’ financial situation, health, self-efficacy, and social inclusion. However, some participants experience stress, particularly the time limitation of the job offer has adverse effects. The study concluded that coping with the heterogeneity among participants remains a challenge as the project aims to meet the needs of a wide range of individuals (Quinz and Flecker, 2022).

A complementary counterfactual impact evaluation by the University of Oxford found that MAGMA showed positive effects on reducing unemployment and increasing income. The programme also had significant effects on non-economic outcomes, particularly on reducing COVID-related stress and improving subjective well-being, and “latent and manifest benefits” of work. The latter includes measures of time structure, activity, social contact, collective purpose, and social recognition. Long-term unemployment in the municipality was reduced by 1.5 percentage points, down to less than 1% of the working age population. Furthermore, the results of the study suggest a reduction of total unemployment by 1 percentage point, from 5% to 4% in 2021 and from 4% to 3% in 2022. The reduction of both long-term and total unemployment, indicate that MAGMA was successful in reducing unemployment in the aggregate and did not lead to crowd-out of other employment (Kasy and Lehner, 2022).

What can other communities learn from this example?

The MAGMA project has demonstrated the feasibility of a job guarantee programme and the need for an “employer of the last resort” for long-term unemployed individuals. One keystone for the success is a capable partner that offers “real work” with tasks that are relevant for the primary labour market. It is also vital, that the responsible public employment service (or other institution) has the resources required for intensive counselling of the unemployed before they enter the programme. Furthermore, it is necessary that all relevant institutions (e.g., PES, national and local governments, treasury, etc.) cooperate to combine their social security networks and commit for common funding of such a project.

Although the programme has provided many benefits for most participants, managing the heterogeneity among participants and offering enough security for every participant remains a challenge. However, by adapting jobs to people (for example by considering health conditions or care obligations), MAGMA has successfully integrated more people into employment. This is particularly significant given the recruitment difficulties faced by employers despite high levels of unemployment (Quinz and Flecker, 2023). Furthermore, the impact of MAGMA and findings of the complementary studies suggest that a job guarantee programme is a promising policy tool in reducing long-term unemployment and improving well-being of the unemployed.

References

AMS (Arbeitsmarktservice Niederösterreich) (2022), “AMS NÖ Modellprojekt Arbeitsplatzgarantie Marienthal (MAGMA)“, https://www.ams.at/content/dam/download/organisation/nieder%C3%B6sterreich/AMS-Folder_MAGMA_RZ_barrierefrei_neu_ua.pdf.

Jahoda, M., P. F. Lazarsfeld and H. Zeisel (2017), “Marienthal: The Sociography of an Unem- ployed Community”, Routledge, https://doi.org/10.4324/9780203786338.

Kasy, M. and L. Lehner (2022), “Employing the unemployed of Marienthal: Evaluation of a guaranteed job program”, INET Oxford Working Paper No. 2022-29, https://www.inet.ox.ac.uk/publications/no-2022-29-employing-the-unemployed-of-marienthal-evaluation-of-a-guaranteed-job-program/.

Quinz, H. and J. Flecker (2022), “‘Marienthal.reversed’ The effects of a job guarantee in an Austrian town”, https://ucris.univie.ac.at/portal/files/305789164/QuinzFlecker_ConferencePaper_ILPC22_Marienthal.reversed.pdf

Quinz, H. and J. Flecker (2023), “Marienthal Reversed: A job guarantee for long-term unemployed people”, The Forum Network, OECD, March 10, 2023, https://www.oecd-forum.org/posts/marienthal-reversed-a-job-guarantee-for-long-term-unemployed-people.

OECD resources

Marienthal Reversed: A job guarantee for long-term unemployed people | The OECD Forum Network

Further information

• Erstes Modellprojekt einer Arbeitsplatzgarantie | AMS NÖ (in German)