Market Forces for the Unemployed? Training Vouchers in Germany and the USA

Authors: Hipp, Lena¹; Warner, Mildred E.²

Source: Social Policy and Administration, Volume 42, Number 1, February 2008 , pp. 77-101(25)

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Abstract:

Vouchers are meant to increase competition and consumer choice in public service markets. Using the example of training vouchers for the unemployed in the USA and Germany, we show, however, that deficits, both on the demand and the supply side of the market, create problems with preference alignment and market formation. Information asymmetries undermine choice by the unemployed and reduce government control over the training system. Ironically, restrictions meant to compensate for these information deficits further inhibit competitive market formation. Evaluation data on training vouchers from both countries show that voucher systems do not increase choice, but weaken the partnerships public employment agencies previously had with training providers, and may lead to a shortage of high-quality and specialized training, as well as creaming in the selection of training participants. Theoretical justification for vouchers is based on the notion of choice and consumer sovereignty. Using this framework to analyse the changed relationship between government, private training providers, and jobseekers, we challenge the efficacy of vouchers as a delivery mechanism in complex public service markets such as job training.

Keywords: Consumer choice; Privatization; Training; Vouchers; Germany; USA

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-9515.2007.00589.x

Affiliations: 1: Department of Organizational Behavior, School of Industrial and Labor Relations, Cornell University 2: Department of City and Regional Planning at Cornell University

Publication date: 2008-02-01