Evaluation of the Austrian Public Employment Service's Integration Allowance: Use, Impact and Policy Options

This study examines the role, design and effectiveness of the integration allowance. A dynamic matching design with several counterfactual comparison scenarios is used to analyse causal effects, supplemented by estimates of deadweight effects. The results show clear positive effects on employment and earned income. Recipients of the allowance have a higher probability of employment, significantly more days in employment and higher cumulative earned income. According to the estimates, although almost half of the employment outcomes among recipients would have occurred even without the allowance, there are still significant positive long-term effects. The main effect of the integration allowance lies in facilitating access to employment; additional effects within existing employment relationships are minor. Particularly strong effects, coupled with low deadweight losses, are evident among older unemployed persons, those with health impairments and the long-term unemployed. The results therefore argue in favour of continuing to make central use of the integration allowance – particularly for the benefit of the growing group of older unemployed persons – whilst at the same time advocating an even stronger focus on target groups and a more differentiated approach to the use of support, particularly with regard to the intensity of support, based on support needs, expected effects and deadweight effects. The analyses of funding intensity provide no robust evidence that higher funding percentages or longer funding periods within schemes already implemented systematically lead to better employment outcomes. This argues in favour of moderate standard support, with targeted intensification for individuals facing greater barriers to placement, limited unsubsidised employment opportunities, low free-riding effects and a greater need for stabilisation.