Employment effects of a German workfare programme at the establishment level

Abstract

We examined the impact of a German workfare programme for hard-to-place welfare recipients, the so-called ‘€1-jobs’, on staff in public and non-profit establishments. We applied static and dynamic panel models using IAB Establishment Panel data from 2005 to 2013. To account for regional influences, we linked the establishment data to indicators at the district level. We identified a positive complementary effect on high-skilled workers and a negative substitution effect on low-skilled workers. We interpreted these findings as follows: In that €1-jobs require highly skilled staff for management, instruction, qualification and support, this indicates that the programme generates jobs for skilled workers within the welfare-to-work industry. The negative effect that we found for low-skilled workers suggests substitution effects between the programme participants and regular low-skilled workers; although in this study, both effects were relatively small.