Pay-for-Performance Counseling and Take-Up Friction
RCTReview
Governments subcontract job placement services to private firms using financial incentives to improve efficiency over public employment agencies, but low program take-up and a reliance on short-term contractual placements limit long-term employment growth [9, 13-15]. Low participant enrollment combined with market displacement can fully offset the intended individual benefits of private career counseling [9, 10, 16].
Picture this
Imagine a gym hiring private personal trainers and paying them a cash bonus for every person who signs up and attends a single workout class. The trainers focus on recruiting people who are already moderately active, while most invited members skip the classes because they already have workouts scheduled, and those who do attend return to their original fitness level once the promotion ends.
What the evidence says
Only 35 percent of job seekers offered intensive counseling enrolled in the program, short-term employment gains at eight months were driven entirely by fixed-term contracts rather than permanent contracts, and all employment advantages disappeared completely after twelve months [6, 11, 15].
- Who was studied
- Subgroup of nearly 30,000 young, college-educated French job seekers assigned to private agency counseling across 235 communities [1, 5].
- How
- Randomized evaluation of government subcontracting to private counseling agencies offering outcome targets (enrolling participants, finding 6+ month contracts, and maintaining 6-month employment retention) with payments up to €2,100 per person [5, 14].
What to do
Structure public employment subcontracting agreements to require minimum enrollment benchmarks and tie financial rewards to long-term permanent job contracts rather than temporary positions [14, 15].
From the source
"Only 35 percent of the treatment group actually enrolled in intensive counseling, so the positive impact for those who enrolled was partially offset by displacement effects among those in the treatment group who did not enroll." [9, 16]
briefcase_job-placement-and-displacement.pdf