Conference on Shaping the Future of the European Social Fund ESF and Europe 2020 Brussels, June, 2010 Michael Wiseman The George Washington University

 Translates the European Employment Strategy (EES) into grants-in-aid for Member State (MS) projects consistent with EU priorities for employment and social inclusion  Funding priorities reflect this emphasis on economic mobility and human capital development  Beyond priorities, ESF projects are targeted at particular classes of people believed most vulnerable to unemployment and social exclusion  Some emphasis on development of institutional capacity 2

 €75 billion over 7 years is not “chicken feed,” but it is small compared to total MS spending on workforce programs  Object must be modest redistribution and promotion of certain types of activities that yield external benefits  Benefits include reinforcement of shared commitment to certain social and economic objectives  Learning is frequently cited as a benefit 3

 How do we get more of what we want for the money that we have? 4

 In looking for pertinent experience, I take my cue from three ESF features: (1) the employment/human capital orientation (2) the strategic rather than comprehensive character of funding, and (3) the targeting of specific groups  In the United States, activities funded under the Workforce Investment Act (WIA) have these features 5

 Created new, more integrated training and employment assistance system  Co-located wide range of federal government services in ~ 3,000 “one-stops”  Core is traditional Employment Service  Separate funding streams for adult, dislocated worker, and youth  Differentiates between core, intensive, and training services 6

 WIA is wholly federally funded ◦ Funding is by category, allocated across states by formula ◦ Accountability promoted with 17 performance measures ◦ Heavily reliant on common unemployment insurance system measures ◦ To receive each year’s formula allocation, states submit a plan and negotiate performance targets with regional Department of Labor office 7

 WIA spends about $4.2 billion per year for a total population of 310 million  The ESF spends about €10 billion a year— $12.4 billion (sorry)—for a total population of 500 million  Last year’s economic stimulus added another $3 billion to WIA 8

 Employment  Target groups  Focus on outcomes and institutional development  Both involve a fiscal and a guiding relationship between a central government and diverse member states 9

 ESF has much broader scope  ESF provides grants for activities that the member states wouldn’t otherwise undertake; these efforts come in addition to the core state-funded employment services  WIA funds the entire service; it is the states’ responsibility to administer the program  Boundaries of WIA activities are better defined than diverse ESF projects  Subsidiarity less of an issue with WIA  Proportionality issues also of less relevance; every state program is subject to the same auditing standards 10

 It is one thing to spend money in ways that satisfy the auditors. It is another to spend funds efficiently and productively  WIA attempts to encourage productivity with a “High Performance Bonus,” an increment in funding earned through achievement  This may offer insights and ideas for ESF planning 11

 Fixed pool of money distributed across states averaging better than 100 percent for target achievement and meeting minimum standards on all targets  Total amount approximately $10 million  States earn from $750 thousand- $3 million; NO variation by size  States have great flexibility in funds use  Political involvement varies  Funding and Department of Labor interest have declined 12

 Amount of funding  Target determination procedure  Counterproductive strategic behavior  Lag between achievement and reward  No performance feedback 13

 The bilateral state-federal relationship  Prescription: An Open Method?  Scenarios for ESF funding post-2013 sound WIA-like in establishing targets and linking funding to target achievement  Doing this will be more complicated than WIA  It may be productive to offset regulatory burden with second, “bonus” tier of more flexible funding 14

 Small step: Creation of small investment funds to “support and test promising approaches to training, breaking down program silos, building evidence about effective practices, and investing in what works.”  BIG step: Trialing of regression-adjustment of state and local workforce board performance targets for economic and demographic variation  Full roll-out anticipated for 2011, after 7-state pilots.  This development in target-setting deserves ESF attention 15