Bridging allowance as an instrument of labour market policy : a provisional appraisal

Abstract

"Since 1986 the Federal Employment Services has used the so-called 'bridging allowance' to support previously unemployed people in setting up their own businesses. This allowance is intended to guarantee the social security and subsistence of the person setting up the business (and the members of his/her family) during the start-up phase, until the young enterprise has consolidated - at least to a reasonable degree. In general such assistance programmes are brought into being in order to create an alternative to unemployment in particular for qualified unemployed people - this alternative being selfemployment. This is intended to have positive effects for the labour market in two respects. Firstly the person setting up the business eases the strain on the unemployment insurance scheme with his/her step into self-employment. Secondly the newly established businesses may - if they are successful - result in further employment impulses and thus make an additional contribution to combating unemployment. In the last three years alone about a quarter of a million previously unemployed people have set up their own businesses with the help of the bridging allowance. Not least the annual finance volume of some one billion Marks with which the Federal Employment Services have supported those setting up the businesses is a reason to examine the utilisation of these financial resources and at the same time to make a comprehensive evaluation of the assistance instrument. In the past decade the assistance programme, which has in the meantime been improved and made more convenient for those receiving the allowance, has already been scientifically examined by the Institute for Employment Research at the Federal Employment Services. The current research project follows people who became self-employed in the years 1994/1995 with the help of the Employment Office. The objective of the study is to obtain in particular information concerning the whereabouts of those who received the allowance, about additional employment impulses coming from the assisted business start-ups, about the (net) effect the assistance has had on the labour market as well as about the determinants of success. The provisional appraisal of the bridging allowance so far is positive. About three years after setting up businesses a good 70% of those who received the bridging allowance are still selfemployed. A further 5% still do the work for which they received financial assistance, but as a secondary activity. On the whole at present there is an average of one employee for every person who originally received assistance to start up a business. Although it is still too early to regard the consolidation phase of the new enterprises as completed, anyone who survives the first three years has taken a major step in setting up a permanent self-employed business. This is also confirmed by the cautiously optimistic estimations of the future by the vast majority of those who remained in self-employment. As regards the net effects of the support programme on the labour market or any effect on the economy as a whole, it is not yet possible to make any adequately sound estimations with the present level of knowledge. It can, however, be shown that the success of the measure is impaired only slightly by deadweight effects. A large part of the resources is obviously used in agreement with the objectives." (Author's abstract, IAB-Doku) ((en))

Cite article

Wießner, F. (1998): Das Überbrückungsgeld als Instrument der Arbeitsmarktpolitik. Eine Zwischenbilanz. In: Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Vol. 31, No. 1, p. 123-142.