Estimating the Impact of a Russian Job Search Program Targeted on the Unemployed in Very Low-Income Families

K:\IAC\THogan\EMAIL INCOMING\NEW REPORTS TO WORK ON\DKosmynin\New Deliverable\07274-332.rpt.doc ESTIMATING THE IMPACT OF A RUSSIAN JOB SEARCH PROGRAM TARGETED ON THE UNEMPLOYED IN VERY LOW-INCOME FAMILIES Prepared for Improved Local Governance and Economic Development: Transition to Smart Growth United States Agency for International Development Contract No. 118-A-00-01-00135-00 Prepared by Raymond Struyk The Urban Institute and Kirill Chagin Institute for Urban Economics THE URBAN INSTITUTE 2100 M Street, NW Washington, DC 20037 (202) 833-7200 www.urban.org August 2004 UI Project 07274-332 TABLE OF CONTENTS ABSTRACT........................................................................................................................................II BACKGROUND..................................................................................................................................2 THE PERM BENEFITS-TO-WAGES PROGRAM...................................................................................3 THE EVALUATION.............................................................................................................................6 RESULTS........................................................................................................................................13 CONCLUSIONS................................................................................................................................15 REFERENCES.................................................................................................................................17 The findings are based on materials developed in the project, “Transition to Smart Growth,” jointly implemented by the Urban Institute and the Institute for Urban Economics (IUE), Moscow. Work on this paper was supported by the U.S. Agency for International Development. Opinions expressed are those of the authors and not necessarily those of USAID, the Institute for Urban Economics, or the Urban Institute. The authors thank Alexei Kolesnik for able research assistance and Anastasia Alexandrova for helpful comments throughout the project. They also are indebted to the many officials in Perm who cooperated so generously with this assessment. ii ABSTRACT This paper presents an impact evaluation of an active labor market program operating in over a dozen Russian cities. The program provides job search assistance and significant financial and social services support to unemployed workers who are members of very poor families. It is of interest because of high success (job acquisition) rates previously documented. The analysis shows that participants are significantly more likely to find and retain a job than a control group of similar workers who registered at the local Employment Centers at the same time. On the other hand, these workers were found to take jobs paying significantly lower wages than the controls. Importantly, data for an earlier participant cohort (but no controls) show that 75 percent of program participants remained employed more than a year after exiting the program. ESTIMATING THE IMPACT OF A RUSSIAN JOB SEARCH PROGRAM TARGETED ON THE UNEMPLOYED IN VERY LOW-INCOME FAMILIES The countries of Eastern Europe have devoted considerable resources to active labor market programs (ALPs); those in the Commonwealth of Independent States (CIS), considerably less. For example, data for three of the Vizegrad countries for 1995/1996 suggest around 0.5 percent of GDP was spent on ALPs.1 In contrast, in 1999 Russia’s spending on all employment programs was only 0.21 percent of GDP; merely 18 percent of this went for ALPs (World Bank, 2002). Additionally, unemployment benefits were nugatory and often months late in being paid.2 Even for Eastern European countries, however, there have been few impact evaluations of active labor market programs. The analyses for Hungary, Poland, and the Czech Republic summarized in the monograph by Fretwell, Benus, and O’Leary (1999) constitute the major exception.3 This paper presents the results of an impact evaluation of an active labor market program pioneered in Perm, Russia and since employed by several additional jurisdictions. Because an early assessment of the Perm program indicated that it was very successful in placing workers in jobs (Alexandrova, Chagin, and Struyk, 2004), the program proved attractive to other jurisdictions. By 2003, the program had been adopted by a dozen cities in Perm Oblast and the capital city in another region. It is, therefore, important to evaluate the program rigorously before it is adopted more generally. The next section provides background on ALPs in Russia. This is followed by a description of the Perm Ben