Cream-skimming, parking and other intended and unintended effects of performance-based contracting in social welfare services

We analyze the incentive effects of performance-based contracts, as well as their impacts on provider job placement rates, using unique data on Dutch cohorts of unemployed and disabled workers that were assigned to private social-welfare providers in 2002-2005. In a growing number of countries, the delivery of social-welfare services is contracted out to private providers, and increasingly so�using performance-based contracts. Critics of performance-based incentive contracts stress their potential unintended effects, including cream-skimming and other gaming activities intended to raise measured performance outcomes. We take advantage of variation in contract design in the Netherlands in 2002-2005, where procured contracts gradually moved from partial performance-contingent pay to contracts with 100%-performance contingent reward schemes, and analyse the impact of these changes using panel data that allow us to control for cohort types and to develop explicit measures of selection into the programs. We find evidence of cream-skimming and other gaming activities on the part of providers but little impact of these activities on job placement rates. Overall, moving to a system with contract payments fully contingent on performance appears to increase job placements for more readily employable workers, although it does not affect the duration of their jobs.

Prospects for the Welfare State

It is useful to distinguish between exogenous and endogenous factors behind contemporary and expected future problems for the welfare state. This paper tries to identify major problems of both types and to indicate alternative reform possibilities to deal with them. At the same time as several governments struggle with such reforms, new demands on the welfare state emerge. Although the basic structure of today’s welfare-state arrangements certainly can be kept, the reforms required are sufficiently large to create considerable conflicts across interest groups.Welfare State; Social Insurance; Human Services

New welfare policy instruments: international experiences and implications for social enterprises

In this paper recent approaches to the role of social protection systems within economic development policies are discussed. Important experiences are considered, in particular those implemented in medium and low income countries, where new tools for increasing the effectiveness of social and development policies have been tried and tested. Some lessons are also examined that prove useful for defining mechanisms that enhance the quality of services provided by social enterprises in the Italian context.social protection system, development policy, social enterprise

Assimilating Immigrants: The Impact of an Integration Program

Immigration policy design is an important and controversial topic in most developed countries. We inform this debate by evaluating the effects of an integration program for immigrants to Finland. The program consists of an individualized sequence of training and subsidized employment. Non-compliance is sanctioned by reductions in welfare benefits. Our empirical strategy exploits a discontinuity that made participation obligatory in May 1999 only for those who had entered the population register after May 1997. The results suggest that the program strongly increased the employment and earnings of immigrants and reduced their dependency on social benefits.Immigrants, assimilation, integration programs, regression-discontinuity

Expanding the welfare system : a proposal for reform.

The proposal involves the establishment of ?welfare accounts? for every person in a country. There are to be four accounts: a retirement account (covering pensions), an unemployment account (covering unemployment support), a human capital account (covering education and training), and a health account (covering insurance against sickness and disability). Instead of the current welfare state systems - where welfare services are financed predominantly out of general taxes - people would make ongoing, mandatory contributions to each of these welfare accounts. The balances in these accounts would cover people?s major welfare needs. The government is to set mandatory minimum contribution rates and maximum withdrawal rates from the accounts. The government is to have two budgetary systems: one in which non-welfare expenditures are financed through the existing array of taxes, and another system in which the public-sector expenditures on welfare services are financed through payments from people?s welfare accounts. The government would be able to redistribute income across people?s welfare accounts, but these redistributions would be constrained to be of the balanced-budget variety: total (economy-wide) taxes on each of the welfare accounts would be equal to total transfers into each of accounts. The public and private sectors would provide welfare services on an equal footing, setting prices for these services and competing with one another for the custom of the welfare account holders. We argue that moving from the current welfare state systems to a welfare account system may be expected to play a substantial role in reducing unemployment, encouraging labour force participation, promoting skills, reducing governments? budgetary pressures, cushioning people against economic risks, ensuring efficient provision of health and education services, providing social safety nets and redistributing incomes more efficiently.Sozialstaat; Reform; Einkommensumverteilung; Theorie;Welfare state , redistribution , social insurance , unemployment , health , education and training , pensions , sickness and disability ,;

Contracting welfare-to-work services: use and usefulness

This paper contributes to the broad literature on public services contracting in two ways: We provide an empirical analysis of contracting decisions in the provision of welfare-to-work (WTW) services, and we explicitly model two forms of external provision of WTW services by municipalities. We estimate both the WTW-contracting decisions of Dutch municipalities and their impact on the performance, measured as the fraction of Social Assistance recipients. The two forms of external provision are (1) Contracting with other municipalities and/or (2) Contracting-out services to private providers. Our findings suggest that contracting decisions are predominantly driven by cost considerations, both for the decision to contract with other municipalities and the share of contracting out to private providers. Municipalities with low WTW budgets or facing budget constraints are more likely to contract with external parties – presumably this reduces their costs and the risk of future budget deficits. We do not find contracting decisions to affect the performance of municipalities, measured as the use, inflow or outflow out of the SA scheme. From this alone, however, we cannot conclude that both the three provision modes are equally cost-effective too, as external provision may be less costly.

The drift of public spending towards the elderly: A generational analysis of the trend of public policies in Spain

The tendency for public welfare spending to be increasingly aimed at the elderly has been pointed out for the US and other developed countries. While population ageing is a common trend, it is not obvious why the shift in spending exceeds the trend in ageing, or why per capita spending on the elderly increases. We show that this is the case in Spain, identify the losers from this development, discuss the policies that underlie this trend, and propose adjustments based on Musgrave’s fixed proportions rule as an inter-generationally fair distribution.Intergenerational equity, Musgrave’s rule, Spanish social policy and ageing

Tax-benefits policies jointly run by the social partners. Labour market implications of the bipartite sectoral funds.

This paper focuses on the employment effects of tax-benefit policies implemented by Bipartite Sectoral Funds (BSFs), institutions established by workers’ unions and employers’ organisations, and conducts a preliminary theoretical analysis of their implications for employment based on a model of wage bargaining which includes the basic elements of a tax-benefit policy and allows for the internalization of benefits. The intuition is that the peculiar institutional profile of BSFs may favour the internalization of social benefits by the unions. If this actually occurs, it can be expected that the costs of the benefits will be shared between the employers and the workers. However the exact institutional profile of the funds crucially affects the degree of internalization. It is argued that this may actually occur provided that the exchange between wage and benefits is actually feasible in the context of current industrial relations, the workers attach a sufficiently high value to the benefits, and BSFs are autonomous from government interference

Investments in the human capital of the socially disadvantaged children: Effects on redistribution

Recently, early investments in the human capital of children from socially disadvantaged environments have attracted a great deal of attention. Programs of such early intervention, aiming at children's health and well-being, are spreading considerably in the U.S. and are currently tested in several European countries. In a discrete version of the Mirrlees model with a parents' and a children's generation we show the intra-generational and the inter-generational redistributional consequences of such intervention programs. It turns out that the parents' generation always loses when such intervention programs are implemented. Among the children's generation it is the rich who always benefit. Despite the expectation that early intervention puts the poor descendants in a better position, our analysis reveals that the poor among the children's generation may even be worse off if the effect of early intervention on their productivity is not large enough. --Early Intervention,welfare,redistribution,taxation

Cream-Skimming, Parking and Other Intended and Unintended Effects of Performance-Based Contracting in Social Welfare Services

In a growing number of countries, the delivery of social welfare services is contracted out to private providers, and increasingly, using performance-based contracts. Critics of performance-based incentive contracts stress their potential unintended effects, including cream-skimming and other gaming activities intended to raise measured performance outcomes. We analyze the incentive effects of performance-based contracts, as well as their impacts on provider job placement rates, using unique data on Dutch cohorts of unemployed and disabled workers that were assigned to private social welfare providers in 2002-2005. We take advantage of variation in contract design over this period, where procured contracts gradually moved from partial performance-contingent pay to contracts with 100%-performance contingent reward schemes, and analyze the impact of these changes using panel data that allow us to control for cohort types and to develop explicit measures of selection into the programs. We find evidence of cream-skimming and other gaming activities on the part of providers but little impact of these activities on job placement rates. Overall, moving to a system with contract payments fully contingent on performance appears to increase job placements for more readily employable workers, although it does not affect the duration of their jobs.social welfare, performance contracting