The bridging allowance as an instrument of labour market policy

Abstract

"Sine 1986 the Federal Employment Service (Bundesanstalt für Arbeit) has used the socalied 'bridging allowance' (Überbrückungsgeld) (§ 57 Social Code III) to assist 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 during the start-up phase until the young enterprise has become consolidated - at least to some extent.<br> Positive effects are expected for the labour market in two different respects. Firstly the person setting up the new business eases the strain on the unemployment insurance scheme with his/her step into self employnent. Secondly, if they are successful the newly established businesses may result in further employment impulses, thus contributing to the fight against unemployment.<br> 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 finance volume of some DM one billion per year with which the Federal Employment Service has supported those setting up the businesses is a reason to examine the utilisation of these financial resources and at the same time to make an evaluation of the support instrument.<br> At individual level the provisional appraisal of the bridging allowance so far is positive. About three years after setting up their own business a good 70% of those who received the bridging allowance are still self employed. A further 5 % still do the work for which they received the financial support, but as a secondary activity. On the whole at present there is an average of one additional employee to each person who originally received financial support to start up a business.<br> As regards the net effects of the support programme on the labour market or an effect on the econozny as a whole, it is not yet possible to make any adequately sound assessments 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 being used in agreement with the objectives." (Author's abstract, IAB-Doku) ((en))

Cite article

Wießner, F. (1998): The bridging allowance as an instrument of labour market policy. A provisional appraisal. In: IAB Labour Market Research Topics No. 30, p. 1-23.