Cost-benefit analysis of labor market programs : Applied to a temporary program in northern Sweden

Abstract: The study's objective is to evaluate the relief works and special projects that were in effect during the period 1983-1986 due to the labor force reduction of almost 2 000 persons at the LKAB Mining Company in 1983. These reductions caused the Swedish Parliament to set up a special labor market policy organi­zation, the Malmfältsdelegation, which besides initiating relief works and spe­cial projects also functioned as an employment exchange, an employability assessment center, and a training organizer. The study has three mam chapters. In the first of these the welfare implications of public production in a disequilibrium model are analyzed. The back­ground to this is that the traditional cost-benefit rules are not very well suited to this particular evaluation problem. The object of the chapter is to derive rules within the context of a model that, whilst simple, resembles in essential points the real world situation within which the Malmfältsdelegation had to work. The delegation's relief works and special projects are represented, in the model, by production in public firms. The second mam chapter is a descriptive account of the Malmfältsdelegation's relief works and special projects. The variables discussed are costs, subsi­dies, temporary employment, and permanent employment. In this chapter the dis­tribution of these variables is accounted for according to type of subsidy-receiver, location of the projects, branch, and occupational groups. Furthermore, the plans are compared with the outcomes. The actual evaluation can be found in the final main chapter. By way of introduction, there is a discussion of what the labor market situation in Malmfälten would have been like in the absence of the temporary organization. With this as a lofetence, the actual incomes of the former LKAB-employees are compared with the incomes they would have had in two hypothetical alternative courses of events. The first of these implies that no extra labor market policy, measures had been taken and the other is based on the assumption that the former LKAB-employees had been offered labor market services to the same extent as other job-seekers in the inland area of northern Sweden. An analysis of the welfare effects of the Malmfältadelegation's relief works and special projects completes this chapter. This analysis is based on the cost-benefit rules presented in the first main chapter. The principle conclusions of the study are that labor market policy measures may give positive income and welfare effects in a region facing a situation similar to that faced by Malmfälten durinq the first half of the eighties. How­ever, the Malrnfältadelegation's measures have not been more effective than those of the regular labor market policy organization.