Job placement and displacement: Evidence from a randomised experiment

Bruno Crépon, Esther Duflo, Marc Gurgand, Roland Rathelot, Philippe Zamora

Youth unemployment in Europe seems to be sticking around. This column assesses youth unemployment policy in France using data from a controlled experiment. ‘Job counselling’ – a key French policy that prepares some job seekers for the recruitment process, and connects them with potential employers – seems to improve graduates' chances of employment only marginally. Moreover, the evidence suggests that what’s good for one graduate may be bad for another: the beneficiaries of intensive job counselling are more likely to find employment simply at the expense of other job seekers.

Youth unemployment is a growing concern in many countries, including France where more than a quarter of recent graduates cannot find stable work. Some of these young graduates do not benefit from resources like unemployment benefits because they lack a sufficient employment history.

The governments of several developed countries are increasingly relying on specialised job-search counselling to help young graduates find their first jobs. In 2007, the French Ministry of Labour began subcontracting job-counselling services for young graduates to private agencies, which were believed to be more efficient in this sector than the French public employment agency, Pôle Emploi. By preparing job seekers for the recruitment process, and by connecting them with potential employers, counselling agencies are thought to both smooth the process of finding work and create a foundation for long-term employment (Card et al. 2010).

Disentangling placement and displacement effects

However, it is possible that offering job counselling simply transfers job opportunities from individuals who do not receive counselling to those who do, creating a ‘displacement effect’. If this is the case, then the net effect of job-counselling programmes on the employment rate could be negligible. How do intensive job counselling services affect employment rates among those who receive counselling and in the overall job market? In a randomised evaluation, we examine the short and long-run impact of a French job-counselling programme as well as its displacement effects (Crépon et al. 2013).

A controlled experiment

The randomised evaluation was carried out from 2007 to 2010, covering 235 communities in ten regions throughout France. The goal of the evaluation was to assess whether offering job counselling created a displacement effect among job seekers who do not receive counselling, and how large this effect might be.

Nearly 30,000 young, educated job seekers were randomly selected to be part of the evaluation. These youth were generally in their mid-twenties, college-educated (they possessed at least a two-year degree), and had not found stable work for at least six months. Nearly two-thirds of the sample consisted of women. Because the job seekers had spent very little time working, 67% were not receiving unemployment benefits at the time of the study.

The evaluation used a two-step randomisation approach by:

First, randomly assigning the proportion of job seekers who would receive intensive counselling in a given community;

Second, randomly assigning job seekers in each treated community into the treatment or comparison group.

Individuals assigned to the treatment group were put in contact with a private agency for intensive job counselling lasting a year, while those in the comparison group continued to have the option of receiving standard job counselling from Pôle Emploi.

Since both treatment and comparison individuals were eligible to receive counselling through Pôle Emploi, this evaluation measures the impact of supplementing public employment counselling with more intensive counselling from a private provider. Researchers varied the proportion of eligible youth who were offered counselling within each community, to examine the effects of having more or fewer people receiving counselling in a local job market. If job counselling for some displaces others from jobs, then one would expect to see higher unemployment among young people who were not offered counselling in communities where some received intensive counselling.

Researchers followed individuals in the treatment and comparison groups for almost two years, keeping track of whether or not they participated in intensive counselling, how many times they met with their counsellor, what type of support they received, and their employment status.

Results

Individuals in the treatment group found work more quickly than those in the comparison group in the same areas.

After eight months, job seekers in the treatment group were 2.5 percentage points more likely to have found long-term employment, an effect that was mostly driven by men;

Increases in employment were also driven by job seekers who found fixed-term contracts, and there was no increase in permanent employment contracts.

However, all employment gains disappeared after 12 months.

Figure 1.

Individuals in the treatment group were no more likely to be employed than those in the comparison group (see Figure 1).

Providing intensive job counselling created a displacement effect, lowering the employment rate among the comparison group who lived in treatment areas;

In treatment areas, job seekers who were offered counselling were 2.5 percentage points more likely to have found long-term employment after eight months than their peers who did not receive counselling. However, these peers were 2.1 percentage points less likely to have found long-term employment than job seekers in areas where no one received counselling. The net effect of being offered the programme is, therefore, small and insignificant (left panel of the figure).

The low overall impact of being offered intensive counselling is partly due to the relatively low take-up of the programme.

Since only 35% of those offered intensive counselling chose to enrol, the direct benefit on those who took up the programme was essentially compensated by the displacement effects on the job seekers who were assigned to the treatment group but did not enrol.

Displacement effects were strongest in places where job seekers eligible for the program were competing for a smaller pool of jobs. In treatment areas with extremely competitive job markets, the employment rate among the comparison group individuals was lower by 7.7 percentage points than the employment rate in areas where no treatment was offered at all (right panel of the figure).

Policy lessons

Intensive job counselling in France helped young graduates find work slightly faster than their peers who did not receive counselling in the same areas, but did not increase their employment rates in the long term. This evaluation found no evidence for the presence of a ‘stepping-stone’ effect, where a fixed duration job in the short run can lead to a permanent position.

Positive impacts for individuals who participate in a programme do not necessarily indicate positive impacts for the population as a whole. Even if the beneficiaries of intensive job counselling are more likely to find employment, their success may come at the expense of other job seekers with whom they compete in the labour market. In programmes that have low take-up, this displacement effect may be large enough to result in almost zero effect on beneficiaries as compared to others not affected by the programme at all.

It is possible to empirically test large-scale labour-market programmes and generate evidence that can guide national policies. Most existing evaluations of active labour-market policies compare treated and untreated workers within the same communities, ignoring possible spillover effects. Without a large-scale, market-level evaluation, this study would have concluded that intensive job counselling has a positive impact in the short run; it would not have been possible to know whether a displacement effect existed, and whether it outweighed the benefits to individuals who participated in the programme.

References

Card D, J Kluve and A Weber (2010), “Active Labour Market Policy Evaluations: A Meta-Analysis”, Economic Journal, 120(548).

Crépon, Bruno, Esther Duflo, Marc Gurgand, Roland Rathelot, and Philippe Zamora (2013), “Do Labour Market Policies Have Displacement Effects? Evidence from a Clustered Randomized Experiment”, Quarterly Journal of Economics, 128(2).