Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 206
The Australian system, essentially risk-adjusting the value of the vouchers, might be
the best option, although it would introduce major additional complexities into the system
that may not be cost-justified. Another way to address the cream-skimming problem
might be to implement mandatory pooling, whereby all training facilities would have to
accept all candidates who present vouchers. By setting the voucher value at the
approximate cost of training an average individual, most training centres would
presumably receive close to the appropriate level of funding. Unfortunately, in so doing
we may incur significant decreases in the potentially valuable development of
specialization and expertise. One might also permit extra-billing for job placement, shortterm
classroom training and longer-term remedial education, utilizing the price system as
a signal of and reward for superior quality services, and allow the additional costs to be
financed by participants from income-contingent loan programs, especially for longerterm
remedial education. The best design choice in this area may be the Australian
system, but supporting evidence developed through additional careful studies across
multiple jurisdictions would give us more confidence in this conclusion.
One possible way of addressing the perverse incentive properties of governmentfinanced
vouchers would be to make payment to a JSA or training agency contingent on
success. Under such a system providers could be reimbursed for each client whom they
successfully reintegrate into the labour market or who stops receiving unemployment
benefits. The drawbacks of such a system include: increased incentives for suppliers to
engage in cream-skimming behaviour; increased risk and therefore reluctance to enter the
market by suppliers; and reduced incentives to respond to clients’ needs—that is, to ask:
is this job in my client’s best interest? Finding a system in which a balance can be struck
between increased participation in the labour force and promoting equality and individual
well-being is a challenging task. In a fully contingent system, however, the disadvantages
are daunting, and would subvert government’s objectives in this area. A funding scheme,
however, in which payment is partially contingent upon the ability of agencies to attract
clients and partially contingent upon the outcomes generated by these agencies, is clearly
superior to a system without performance incentives.
Government’s post-design role
The government’s post-design role in the labour market training context will be
substantial. Mechanisms will have to be set up to channel (or at the very least track),
unemployed persons through the three stages of the voucher program. At the first stage,
the government’s role would be quite minor, limited to sending out job-search vouchers
along with a list of agencies that are available to redeem the voucher. The most costeffective
way to distribute these vouchers would probably be with unemployment
insurance benefit payments. Because of the limited value of job-search vouchers there
would probably be no need for any proactive ongoing monitoring of facilities that offer
the job-search function. However, government would need to be sensitive to complaints
about agencies that provide egregiously inadequate service or refuse to redeem vouchers
for high-cost individuals—a flouting of the mandatory pooling requirement for job-search
facilitators. The tender process in the Australian system serves this function well. By
establishing a Customer Service Line through which consumers could make complaints
about providers and using this information in the re-tendering process, authorities were