Macroeconomic costs of unemployment and public budget effects of labour market policy measures

Abstract

"Against the background of overall fiscal costs of registered unemployment amounting to DM 150 billion in 1999 this paper deals with the function of active labour market policy measures in accordance with the Social Code III in easing this situation. The paper is intended to examine the extent to which labour market policy can support employment in the economy as a whole and ease unemployment and to look into how the individual measures can be assessed under economic aspects. Here the net costs of labour market policy are decisive (gross costs of the measures minus decreases in expenditure and additional income as a result of avoided unemployment). The calculations of this relief for the labour market and the cost-benefit considerations can only provide elements of efficiency considerations. They are partial analyses which contain uncertainties as a result of existing method problems. There is still a lot of work to be done in the fields of aggregate impact analysis. The overall self-financing rates of employment-creation measures for 1999 amount to between 66% and 89%, depending on whether indirect relief effects are excluded or included. For the budget of the Federal Employment Services itself they are estimated at 20% to 30%. In the case of measures to promote further vocational training the overall self-financing rate is estimated at 60%. For the budget of the Federal Employment Services the figure is 31%. The strain on the national budget is eased considerably in each case, as there is lower expenditure on both unemployment assistance and tax revenue. This alone justifies a contribution from the national government to the budget of the Federal Employment Services." (Author's abstract, IAB-Doku) ((en))

Cite article

Spitznagel, E. & Bach, H. (2000): Volkswirtschaftliche Kosten der Arbeitslosigkeit und gesamtfiskalische Budgeteffekte arbeitsmarktpolitischer Maßnahmen. In: Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Vol. 33, No. 3, p. 500-517.