EUROPEAN COMMISSION Brussels, 17.9.2015 SWD(2015) 176 final COMMISSION STAFF WORKING DOCUMENT Analytical Supporting Document Accompanying the document Proposal for a Council Recommendation on the integration of the long-term unemployed into the labour market

{COM(2015) 462 final}



Contents 1.Introduction 2.Long-term unemployment trends 3.Problem Definition 3.1.Transitions from long-term unemployment to employment 3.2.Focus of the initiative 3.3.Low coverage of activation support 3.3.1.Registration with employment services is declining 3.3.2.Participation in active labour market measures is limited 3.3.3.Conditionality of benefits is not always enforced 3.4.Discontinuity in service delivery 3.5.Activation design – Individualisation of service and labour market relevance of support 3.5.1.An heterogeneous group 3.5.2.Services are not sufficiently tailored to individual needs 3.5.3.Low employer engagement 3.5.4.Support is not always leading to increased employability 4.The Envisaged initiative 4.1.Objectives 4.2.Job integration agreements

5.articulation with existing measures 5.1.Links with other policy instruments 5.1.1.The EU Semester process 5.1.2.Support to the long-term unemployed through the European Structural and Investment Funds 5.1.3.Mutual learning at EU level 5.1.4.Active inclusion initiatives and fundamental rights 5.1.5.Reforms undertaken at national level 5.1.6.Additional action needed 5.2.Lessons learned from the Youth Guarantee 6.Effectiveness of the envisaged recommendation 6.1.Increasing coverage of activation support (specific objective 1) 6.2.Continuity and coordination in support delivery (specific objective 2) 6.3.Increased effectiveness of interventions: individualised support (specific objective 3) 6.4.Increased effectiveness of interventions: employer support (specific objective 3) 7.Expected impacts and costs 7.1.Expected impact on transitions to employment 7.2.Expected impact on poverty and social inclusion 7.3.Overall economic impacts 7.4.Implementation costs 7.4.1.The role of the European Structural and Investment Funds

7.4.2.Monitoring costs 7.5.Budgetary impact 7.6.Timely impact and implementation risks 8.Evaluation and monitoring 9.Stakeholder consultations and expertise used 9.1.Stakeholder consultations 9.1.1.Labour Market Observatory (LMO), European Economic and Social Committee (EESC) 9.1.2.European Social Fund Committee 9.1.3.European Network of Public Employment Services 9.1.4.Employment Committee 9.1.5.Social Partners 9.1.6.Social Protection Committee 9.2.Expertise used Annex 1 Abbreviations and glossary of technical terms used Annex 2 - Supporting data and analysis



1.Introduction The strengthened economic activity in the European Union has a positive impact on employment, but progress is subdued and the situation is very different across the Member States. In 2014 the level of unemployment varied from 5.0% in Germany and 5.6% in Austria to 24.5% in Spain and 26.5% in Greece. Since mid-2013, employment has risen and unemployment has fallen in the EU. As economic growth strengthens, labour market conditions should improve further. Long-term unemployment rates also increased and remained at high levels in 2013-14, most markedly in the Member States (MS) most hit by the crisis. Action is already undertaken to support MS in securing a rapid return to work of those who are long-term unemployed in order to prevent the permanent loss of their skills and capabilities. But more is needed to complement the mechanisms already in place and to reinforce their effectiveness, notably by a more coordinated approach

This report presents the problems addressed by the initiative, the effectiveness of the solutions proposed and provides an image of the estimated impact of a Council recommendation to support the integration of long-term unemployed (LTU). The initiative (2015/EMPL/005) is one of three elements contained in the Commission Work Programme 2015 item on Promoting Integration and Employability. Stakeholders were consulted in the preparation of the report in the period February-June 2015. Main results and positions expressed have been taken into account throughout the process. A summary of the stakeholder consultations is included in the last chapter of this document. A public consultation was carried out on the ‘Your-Voice-in-Europe’ web portal between 19/02 and 15/05/2015. Twelve weeks were allocated for responses. The consultation was supported by a summary of context and scope of the envisaged initiative. A summary of the consultation responses is available online. 2.Long-term unemployment trends After six years of subdued growth and low labour demand, LTU numbers doubled in the EU. Half of the unemployed are now long-term unemployed (more than 12 million people or 5% of the active EU population), 60% of whom have been jobless for at least two consecutive years. The economic crisis led to a surge of LTU, reversing the progress made before 2009 in re-integrating the long-term unemployed in the labour market. Unlike overall unemployment, LTU has had an increasing trend of growth since the beginning of the crisis and it is now at historically high levels (Figure 1). This is partly due to positive developments in terms of ensuring the long-term unemployed remain on the labour market rather than fall into inactivity by narrowing pathways to early retirement and linking social benefits with activation requirements. Figure 1: Long-term unemployment rates and share of LTU among unemployed, EU28 Source: Eurostat, LFS, data seasonally adjusted (unemployment rate) [une_rt_q] and non-seasonally adjusted (long-term unemployment rates) [une_ltu_q] Left axis: Unemployment rates (% of labour force). Right axis: unemployment share (% of unemployed) Structural dimension The increasing share of the LTU in total unemployment and decreasing one of the short-term unemployment STU indicate that the job recovery risks benefiting mainly the STU leaving the existing LTU even longer in unemployment and risking further deterioration of their employability and making the LTU structural (Figure 2). Figure 2: Evolution of short term versus long-term unemployment, 2008-2014 Source: Eurostat LFS [lfsa_upgan], reference population aged 25-74 years Different subgroups of the unemployed return to employment at different rates, with LTU being less responsive to economic recovery . The slow decline reflects cyclical factors such as an insufficiently strong and broad recovery but also the persistence of high structural unemployment. The ECB warns that a significant share of employment losses during the crisis could become permanent, with structural unemployment stabilising around 10%. Pushing down unemployment therefore requires reinforced efforts to tackle its structural component. EU Dimension

The 12 million stock of the long-term unemployed at EU level masks a significant amount of diversity at MS level. Most recently, the LTU rate ranged from 1.5% in Austria and Sweden to almost a fifth of the total labour force in Greece (19.5%). Still, LTU rates increased in all MS except for Germany since 2008, as shown in Figure 3 below. Figure 3. Change in LTU rates EU-28, 2008-14 Source: Eurostat Labour Force Survey (LFS) [une_ltu_a] 3.Problem Definition 3.1.Transitions from long-term unemployment to employment The on-going economic recovery already started to decrease short-term unemployment, limiting inflows. However, job finding rates among the LTU decreased and continue to be low, as shown by the lines for 2009 and 2013 in Figure 4. Job finding chances diminish quickly with unemployment duration (Figure 4). If 29% of unemployed succeed in returning to employment by the end of the first unemployment year, less than 17% do so beyond 2 years. Figure 4. Transition rates from unemployment to employment by unemployment duration Source: Eurostat, EU-LFS, ad-hoc experimental calculations of transition rates. EU24 (without BE, LU, NL, PT) Country differences in transition rates from unemployment to employment are large. There is therefore huge potential for improvement: Over 40% of LTU find a job before the second year of unemployment in DK, EE, SI, compared to less than 20% in EL, SK, RO, IT, BG (Figure 5). Figure 5. Transition rates from unemployment to employment by unemployment duration, 2013-2014 Source: Eurostat, EU-LFS, ad-hoc experimental calculations of transition rates. Note: 'U' refers to unemployment duration; only countries with available data included; lower reliability of data for Austria regarding unemployment duration above 2 years; reference population 15-74 years old. In spite of lower chances to find a job, fewer unemployed are demotivated and become inactive. Transitions to inactivity dropped during the crisis, more so in the MS most affected, e.g. EL, HR, SK . This shows that transitions to employment are a more acute problem than transitions to inactivity. 3.2.Focus of the initiative Structural factors on the labour and product markets play an important role in explaining the high long-term unemployment rates and the unemployment duration. Several barriers prevent the LTU to return to employment:

Investment and regulatory constraints limiting job creation or job reallocation between sectors and firms, Lack of responsiveness of the labour market: oHigh taxes on labour that do not reward the work effort enough, wages not in line with productivity, rigidity in employment protection and lack of responsiveness of working arrangements, lack of a constructive social dialogue may act as deterrents to hiring; oBenefits trap: Too high or too long income replacement levels can diminish job search efforts; oLow educational achievement and attainment: low skills and levels of qualifications make it difficult to (re-)enter employment. Insufficient support to the LTU: Low public expenditure on employment services and active labour market policies (ALMPs) and low LTU participation in ALMP measures and lifelong-learning correlate strongly with lower transitions to employment. Important as they are, the first two challenges fall outside the remit of the proposal. The European Semester continues to address structural barriers on the labour and product markets. The low skills of the workforce will be tackled as part of the same CWP initiative "Promoting integration and employability" under a forthcoming skills initiative, while the Commission Investment Plan addresses investment constraints. These actions will have to be considered in a more comprehensive set of ambitious reforms needed to facilitate the adjustment of labour markets and foster economic growth. As underlined in the Annual Growth Survey (AGS) 2015, structural reforms, fiscal responsibility and investment are priorities. Simultaneous action in these three priority economic policy areas is critical to restore confidence, reduce the uncertainty that is impeding investment and maximise their strong mutually reinforcing effects. In this respect, there is no one size fits all solution at the national level. In particular, labour market reforms have to take into consideration country specific institutions, which can help explain divergent experiences across countries in terms of their long-term unemployment rates. Apart from effective active labour market policies targeting the long-term unemployed, including the role of public employment services, other important institutional factors relate to the design of unemployment benefit and social security systems, employment protection legislation, and taxation. The actions proposed under this recommendation are in line with the country specific recommendations issued in the context of the European Semester and they should be implemented in full compliance with the rules of the Stability and Growth Pact. The initiative would tackle the quality of support to LTU and its root problems: low coverage of activation support, ineffective design of activation models, both in terms of individualised support to jobseekers and of employer involvement; and the discontinuities in support to the LTU. Figure 6 below summarises the "problem tree" for the initiative, outlining the problems identified, their drivers and consequences, further detailed in the next section.



Figure 6. Problem tree for the initiative 3.3.Low coverage of activation support 3.3.1.Registration with employment services is declining Registration with the PES of the long-term unemployed decreased during the crisis and the rates vary widely among MS. Around 73% of the long-term unemployed declare to be registered with the PES, compared to 77% in the pre-crisis period (average 2004-2007). Registration rates are high (above 85%) in countries as diverse as DE, ES, SK, much lower (around 50% or less) in IT, UK, NL, BG and very low in RO (Figure 7).

Figure 7. Long-term unemployed by Member State, stock and share registered with the PES, 2013 Source: Eurostat LFS 2013, missing data on registration in IE. Countries with higher levels of LTU participation in ALMPs achieve higher transition rates to employment. Low registration rates limit the access to support and limit the ability to tackle the real stock of LTU. 3.3.2.Participation in active labour market measures is limited In 2012 available data indicate that LTU over 25 had a participation rate of 13.5% in ALMPs. Involvement in ALMP measures is often linked to the receipt of unemployment benefits and less often to other forms of social assistance. In 17 MS, unemployment benefits end by the first year of unemployment. On average, 24% of the LTU received unemployment benefits in 2013, down from 36% in 2007. A first driver of low coverage is the insufficient priority for LTU interventions compared to interventions for the short-term unemployed. In spite of making up half of the unemployed, the LTU receive one fifth of support. Much under-investment occurs by design: 22.1% of ALMP expenditure is explicitly (and not exclusively) targeting LTU. According to the MLP database, only eight countries target more than 30% of ALMP measures explicitly (but not exclusively) to the long term unemployed. Ireland (64.6%) and Finland (72%) are the only MS to target more than half of expenditure on LMP measures to the long-term unemployed. Indeed, more than half of the countries for which the proportion is known (14/25) target less than a fifth of expenditure at the long-term unemployed. Table 1 – Groups of countries by expenditure on LMP measures targeted at long-term unemployed % expenditure Groups of countries <10% CZ, RO, DK, FR, LV, LU, HU, NL, SK 10-20% EE, LT, MT, AT, PT 20-30% BG, DE, PL 30-40% BE, IT, SI 40-50% ES, HR, SE >50% IE, FI Unknown EL, CY, UK Source: DG-EMPL, LMP database (own calculations) While the share of LTU increased, dedicated expenditure decreased from 28.4% of ALMPs in 2008. Only DE, DK, SE and UK offer a right of placement on LTU support services or measures, achieving above average transition rates, while seven others are using performance targets on LTU activation. 3.3.3.Conditionality of benefits is not always enforced A second driver of low coverage is the lack of enforcement of benefits conditionality. Current national legislation in 21 MS links social assistance benefits to registration with the PES and in 26 MS to mandatory participation to activation measures. The impact on coverage depends on the degree to which conditionality applies to registration with PES, to participation in ALMP measures and on whether graduated sanctions are applied. In 11 MS, sanctions are not gradual: the unemployed are simply erased from the PES registry and lose the associated benefits for a period of time. This can create perverse incentives for leaving out the long-term unemployed from activation services.



Table 2: Conditionality for social assistance recipients Job search efforts required Compulsory registration with PES Mandatory take-up of activation measures De-registration for refusal Graduated sanctions Countries AT, BE, BG, CZ, CY, DK, EE, FI, FR, HR, HU, IE, LV, LT, LU, MT, NL, PL, PT, RO, SE, SK, UK AT, BE, BG, CZ, DK, EE, EL, FI, FR, HR, IE, IT, LT, LU, MT, NL, PL, PT, RO, SE, UK AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI, FR, HR, HU, IE, IT, LU, LT, LV, NL, PL, PT, RO, SE, SI, SK, UK BG, CZ, HU, LT, LU, MT, PL, PT, RO, SK BE, CY, DE, DK, EE, FI, FR, NL, ES, SE, UK Sources: ESPN (2015) Integrated support for the long-term unemployed – A study of national policies ; Vern (2012);*Regional variation

Some countries impose unpaid community service activities (BE, BG, CY, HU, NL, PT, RO, SK) or a mandatory participation to activation measures (all MS except EE, EL, ES, FR, SK), sometimes along with sanctions such as cuts in benefits, in cases where the participation is not satisfactory. PES from 12 MS report data on the share of the registered unemployed receiving social assistance benefits; they range from a high share in IE (76%) to very low shares in EL (only 1%). When enforced, activation conditions for the receipt of social assistance have a strong effect on participation in active support and on transitions to employment. However, given the low coverage of activation offers, existing conditionality is rarely enforced. 3.4.Discontinuity in service delivery The PES primarily focus on unemployed eligible for unemployment benefits. When eligibility ends (on average after 14 months), the LTU may be eligible for non-contributory minimum income or other social assistance benefits. In 10 MS the unemployed may still receive contributory-based benefits after 12 months of unemployment. In general, the average duration of unemployment benefit is much below the maximum duration in most MS. The main driver behind fragmentation is the lack of coordination of service delivery. The shift from the responsibility of the PES to other authorities leads to potential discontinuity in service provision. In 11 MS, the PES hands primary responsibility to social assistance authorities. In 21 MS both PES and social authorities are involved, creating a potential for ambiguity and grey zones. Table 3: Inter-agency coordination of offers for long-term unemployed Coordination of offers Countries Single point of contact for benefits and activation BE, CZ, DE, DK, FI, IE, NL,UK Project-based partnerships AT, BE, CZ, DK, FI, HU, LT, PL, SE Formalized agreement between agencies BE, CY, DE, EE, ES, FR, LU, NL, PT, SK, SI Legal obligation to cooperate CY, DE, FI, PT, RO, SE, SI DATA EXCHANGE AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI, FR, HR, HU, IE, LU, LT, LV, MT, NL, PL, PT, RO, SE, SI, SK, UK Full data exchange DK, NL, SE, NL For benefits eligibility BG, EE, FI, LT, MT, PT, RO, SE, SI For preparing activation plans DE, FI, HR Source: ESPN (2015) Integrated support for the long-term unemployed – A study of national policies Among MS in which several agencies are involved, only seven provide for formalised agreements that regulate the cooperation between agencies (BE, CY, DE, ES, LU, NL, SK). Their scope (data sharing, cross-referrals), depth (degree of management coordination, shared resources, common performance monitoring) and coverage (only in some municipalities or for subgroups of LTU) vary considerably. Nine MS promote an institutionally coordinated offer of service delivery, in the form of a single point of contact or a one-stop-shop. A single point of contact refers to coordination of front-line services and client intake, through a system of cross-organisational referrals and data sharing. In DK, they integrate client intake, follow-up, employment services and sanctions. Broader one stop shops entail joint provision of several functions in one organisation. In UK, NL (local Werkpleinen within the UWV Company) and DE they also disburse benefits. In FI, municipal LAFOS centres integrate supporting social services, but not benefit disbursement. In NO all functions are integrated. Blurred responsibilities between PES and social authorities affect the coverage of activation. They could result in "parking" difficult cases or, when agents have incentives to reduce assistance rolls to over-use of ALMPs and "revolving door" effects, with loss of efficiency. Unclear pathways to support lead numerous LTU to de-registration once their unemployment benefit ends. Limits in coordination also hinder coverage and individualised service delivery. They diminish the capacity to enforce benefit conditionality and hinder access to adult learning, debt counselling, migrant integration support (language courses, recognition of qualifications) and to supporting social and family services (elderly or child care, addiction, health or rehabilitation support), thus limiting activation impact on the personal barriers to work. 3.5.Activation design – Individualisation of service and labour market relevance of support Effective activation design combines individualised services to jobseekers and to employers and a tailored ALMP offer to increase the involvement of the employers and reinforcing the relevant skills for employability. 3.5.1.An heterogeneous group As emphasised by the Employment Committee (EMCO) in the stakeholder consultation, the group affected by LTU is heterogeneous. Specific groups such as persons with disabilities and the Roma are more affected. LTU rates are double as high among the low qualified and third country migrants (Figure 8 and 9). LTU rates increased faster for the low qualified (Figure 8). By 2025 employment for the low qualified is expected to decrease by 10% and that low qualified workers are increasingly out-competed by medium-qualified workers in elementary occupations. Unemployment among the low qualified is three times higher than among high-qualified persons, while LTU increased faster among the low qualified during the crisis. Workers with low basic skills are 1.8 times more likely to be unemployed and run a high risk of inactivity: only 55% of the low skilled surveyed in the PIAAC study were in employment, showing their fragile link to the labour market. Re-entering the labour market often requires acquiring a formal qualification, but low qualified persons remain more than 4 times less likely to take up lifelong learning opportunities than high qualified persons.

Figure 8: EU28 Long-term unemployment rate (aged 20-64), total and by level of education, 2004 to 2014 Source: Eurostat, LFS Some groups in the labour force are particularly affected by long-term unemployment. In some EU countries, the share of the third-country nationals among the long-term unemployed is particularly high and on the rise, e.g. in Belgium 12%, in Spain 15%, in Sweden 16% of LTU. In comparison, the share of third-country nationals among the economically active population of the latter countries is at about 3% in Sweden and Belgium, and at about 9% in Spain. Figure 9. Third-country nationals as a share of the long-term unemployed, 2013 and 2008 Source: Eurostat, EU-LFS ad-hoc calculations. Note: low reliability of data for CY, CZ, LU, SI; country selection based on data availability. The diversity of the group points to a lack of a one-size-fits-all solution. Support should start from each person's specific needs. This requires a differentiated approach and a broad tool box matching the individual barriers to work. 3.5.2.Services are not sufficiently tailored to individual needs Limits in individualised service are a first driver of ineffective activation design taking the form of insufficient profiling, lack of generalised use of individual action plans (IAPs) and limited use of integration contracts or targeted action plans in social assistance. As illustrated below, many MS lack a coherent system for referral to the support they need and for follow-up. A pre-requisite for individualised support is an effective profiling of clients, able to identify employment barriers. Profiling allows in turn the differentiation of support, through "client segmentation" within employment services. This aims to . . This is particularly the case in countries with limited resources, where caseworkers have high workloads. lientrofiling Table 4: Use of profiling and segmentation in the PES, 2014 Profiling and client segmentation Profiling, but no client segmentation Profiling systems under development/revision No profiling/ client segmentation Countries BE, BG, DE, EE, FR, IE, LV, LT, PT, SE, SI, UK AT, DK, FI, MT, NL ES, HR, HU, PL CY, CZ, EL, IT, LU, RO, SK While jobseeker capabilities are affected by the unemployment duration, profiling is only used in the first months of unemployment and no re-assessment occurs systematically. When updates are done, they are more likely to be a review later in the process. Moreover, it is unclear to which degree profiling is systematically used when clients are cross-referred between organisations, for instance for long-term unemployed on social assistance. IAPs are key administrative tools linking the needs and objectives of jobseekers to the offer of support services and ALMP measures. In 10 MS, PES do not offer IAPs to all registered unemployed and 17 lack targets for their completion. The extent of use of individual action plans differs: while some MS use it for all registered clients, others only use it only for sub-segments or on a programme basis (Table 5).

Table 5: Use of individual action plans within the PES, 2014 Individual action plans for all clients Administrative targets for filling in action plans Individual action plans only for specific groups/ programmes Countries AT, BE, BG, CZ, DE, DK, EE, FI, FR, HR, IE, LT, MT, PT,SE, SI, SK, UK AT, BG, CZ, DE, EE, FI, HR, LT, PT CY, EL, ES, IT, LU, LV, NL, PL*, RO, SK Source: European Network of Public Employment Services, 2014 questionnaire on business models. *To be extended to all clients according to new legislation Administrative targets for completion of action plans range from 3 days in the UK to 5 months in the Czech Republic. Some PES use action plans only for certain categories e.g. workers younger than 25 and older than 50 unemployed for more than 6 months in Poland or workers below 50 in Belgium (Brussels region), or recipients of unemployment benefits in Portugal. For some other PES, individual action plans are not formalised and come close to job-search counselling sessions (e.g. in Greece, Malta or Romania). Evidence from PES peer learning indicates that in some countries (e.g. in SK, LT) profiling and individual action plans systems within the PES were abandoned under the pressure of high caseloads during the crisis. Social integration contracts Social integration contracts offered by social assistance authorities target a segment usually more remote from the labour market. Integration contracts differ from action plans insofar as they focus on addressing the social conditions underlying the unemployment spell and focus on enabling social services – psycho-social counselling, housing support or debt counselling for instance. Integration contracts target beneficiaries of unemployment/social assistance and are drawn up by social assistance agencies , while IAPs are managed by the PES. 12 MS provide integration contracts that target beneficiaries of social assistance, guaranteed minimum income scheme or recipients of specific programme schemes. Except for DE these countries have both IAPs within the PES and integration contracts in the social assistance agencies. Nevertheless, apart from France and Portugal, there is no formalized transition foreseen between action plans drawn up by the PES and integration contracts. Their incidence is hard to assess, as they are rather localised initiatives. This creates a duality of support between PES and social authorities in the 12 MS where they are offered. Two countries developed a seamless approach, integrating them with IAPs in a common instrument (DE, UK). Most integration contracts provide individualized support for the unemployed. In 7 MS, signing an integration contract is an obligatory requirement in order to receive social assistance benefits. Integration contracts may include a plan defining which steps have to be taken in order to reintegrate the unemployed into the labour market (in BE, DE, ES, FR, LU, PT, SI) or can be linked with activation measures (in BE, DE, ES, FR, LU, PT). Higher intensity interventions with reduced caseloads, in the range 70-100 clients/ employment counsellor impact positively employment outcomes and client satisfaction. Individual follow-up offers further gains in tackling lack of motivation and complex barriers to work. However, intensified individual follow-up occurs sporadically and generally is programme-based: 19 MS lack dedicated LTU counsellor roles . 3.5.3.Low employer engagement A second driver of ineffective activation design is the low employer engagement. Effectiveness of activation measures depends on the degree of employer buy-in. 58% of employers surveyed in 5 MS find government support ineffective for dealing with LTU. Firstly, developing an employer service offer which builds a long term direct relationship to employers leads to improved LTU placement results. The PES allocate between 4% (HR or EL) to 20% (LV or LT) of staff to employer services. Secondly, employment incentives generally increase LTU transitions to employment but can have high displacement effects. Even if 48% of ALMP LTU participants benefit from employment incentives, such schemes are grossly under-funded. In actual spending on LTU, 26% of the ALMP budgets are spent on employment incentives. This can further the risk for placement in low quality, unsustainable jobs, a concern expressed by the European Trade Union Congress (ETUC) in the consultation. Often, the MS' nominal commitment to private employer support is not followed through. 31% of ALMP expenditure for LTU goes to public works, more than the expenditure for employment incentives. There is however ample evidence on the ineffectiveness and inefficiency of such programmes on returns to employment. Public work schemes show however a high degree of resilience. In a survey from 2013, their average duration was no less than 17 years. Public work schemes were expanded during the crisis in HU, LV, LT and CZ and new schemes were adopted in 2014 in SI and EL. Figure 10: Distribution of expenditure by category of LMP measure and by LTU status, EU, 2012 (%) Source: DG-EMPL, LMP database (own calculations)

Note: Data not available for EL, CY and UK in 2012. These are therefore excluded from the EU figures 3.5.4.Support is not always leading to increased employability A third driver of ineffective activation design is the lack of employability relevance of support. Skills mismatches are a root cause of LTU, increasing with duration of unemployment. Broader unemployed participation in training and life-long learning is associated to higher transitions to employment. In spite of this, training is one of the least frequently offered ALMPs, making up 15.7% of LTU participations in ALMPs, corresponding to 20.8% of ALMP expenditure. The joint employers' contribution emphasises the need to align training to the employer's needs.



Figure 11. Distribution of participants in LMP measures by category and LTU status EU, 2012 (%) Source: DG-EMPL, LMP database (own calculations). Note: Data not available for EL, CY and UK in 2012, which are therefore excluded from the EU figure. Workers lacking basic skills or formal qualifications are more affected by LTU. Results of OECD’s Adult Skills Survey show that 20% of Europeans have inadequate basic literacy and number skills and in the case of digital skills the figure increases to 25% Low skilled unemployed are four times less likely to participate in life-long learning. In order to benefit from suitable training, boosting their basic skills is required. Support for basic skills is sparingly integrated in support, with 7 MS offering LTU some support for addressing basic skills. Upskilling the low-skilled long-term unemployed is a complex long-term project for which their period of unemployment can be put to good use. The process builds on the assessment of each individual’s skills and skills needs, can include validation and accreditation of existing skills and follows up with referral to a training course/ adult education, preferably including on-the-job training, supported by counselling and guidance throughout the path to stable employment. An essential ingredient for such a complex process is cooperation between employment services and private or public adult education services. Start-up support increases employability of the unemployed with lower skills or part of vulnerable groups. In few MS, start-up subsidies are targeting explicitly LTU. Even if not leading to higher overall job creation, their re-employment effects are generally positive. Start-up support programmes however represent 8.4% of participations and 4.7% of expenditure of ALMP measures for LTU. 4.The Envisaged initiative 4.1.Objectives The general objective is to support MS to increase the rate of transitions from LTU to employment.

Within this general framework, the specific objectives of this initiative are to support MS to: (1)Increase coverage with higher registration and active support for the long-term unemployed (2)Ensure continuity and coordination between relevant services (3)Increase the effectiveness of interventions aimed at both long term unemployed and employers; 4.2.Job integration agreements The proposed initiative combines the introduction of the Job integration agreements (JIAs) for jobseekers at the latest when they reached 18 months of unemployment with general policy guidance on individual assessment and on strengthened links with employers. The threshold of 18 months is chosen due to the large drop in transitions to employment between 12 and 24 months (Figure 4) and to match existing dates for intervention. Most MS proposing similar interventions act within the period (SE and FI at 10 months; UK and DE at 12 months; DK (pilot) at 16 months). The design of the JIAs builds on three steps which open a pathway to job integration: (1) encourage registration with an employment service; (2) assess individual needs and potential; (3) propose a plan for return to work under a JIA approach. These three elements can be implemented in a flexible way corresponding to the specific situation in MS. JIAs would consist in a written agreement covering the service offer and the obligations, between the jobseeker and a single point of contact within an employment or social service. To allow a lower caseload and intensified support, the JIA would be targeted to beneficiaries at the latest when they reach 18 months of unemployment, irrespective of age or qualification levels. The creation of the single point of contact will not require full integration of employment services and (social) benefits disbursement. It could be set up through inter-institutional cooperation, focused on the relation with the client. JIAs would also include intensified individual follow-up (or 'case management') entailing intensified provision of employment services (counselling, guidance) and step-by-step monitoring of job search efforts. The policy guidance would serve to place JIA into a minimum frame of action common for all MS: The (re-)assessment of the individual skills, needs and prospects of all registered LTU before reaching 18 months of unemployment, based on the individual employment and support history. The re-orientation of ALMPs away from public works towards employer incentives, services for employers and reinforced up-skilling and start-up support for LTU. The target group would avoid any overlap with the Youth Guarantee. MS which do not have integration agreements along the lines outlined above would be required to set them up for the target group. Implementation can be expected to be gradual. All MS offer currently support to the LTU, using both national and ESIF financing (primarily ESF). Such support can be re-structured and integrated in JIAs. Countries with consolidated systems will be encouraged through the recommendation to institute a "last call" point of intensification of effort. A Council recommendation can provide MS specific guidance on the policy pathway, whilst accepting MS discretion in adapting implementing measures to national institutions and delivery models. This is in line with the principle of proportionality in Article 5 TFEU and meets the concerns raised by several MSs on the degree of prescription of the initiative. The recommendation introduces the approach of Job integration agreements, which will act as a focal point of integration support for the long-term unemployed. Under this approach, the following elements of flexibility for Member State implementation are included: - deciding the content of the offer included in the Job integration agreement to best tailor the individual circumstances of the beneficiaries and the labour market conditions; it can be focused on employment services, ALMP measures or social support services or a mix thereof;

- choice of organisations providing the Job integration agreements and of the coordinating organisation (governments, PES, regional or local authorities); - choice of public or private provision of support included in Job integration agreements; - the organisation of the single point of contact – whether this would be done through cross-referrals, data exchange, or wider organisational restructuring such integration of front-office functions, co-location or transfer of organisational functions between agencies; - the organisation of personalised services, whether this would take the form of a personal counsellor providing case management or would include on-line channels for follow-up - the means to reach higher registration, more employer involvement and more relevant support for employability. 5.articulation with existing measures 5.1.Links with other policy instruments LTU has been identified by the Council (ECOFIN and EPSCO) and the ECB as an impediment to growth and as a key challenge in the 2015 Annual Growth Survey. A number of initiatives at EU level are already in place to support employment, notably the European Semester recommendations and Employment Guidelines, the European Structural and Investment Funds – in particular the European Social Fund (ESF) and the European Regional Development Fund (ERDF), and mutual learning. 5.1.1.The EU Semester process The Council recommendation will support implementation at national level of the European Employment Strategy and of Europe 2020 goals on increasing employment rate and reducing poverty. The overall objectives of the European Semester process of economic policy coordination are supported by the integrated guidelines, which include both the Broad Economic Policy Guidelines and the Employment Guidelines. The former guidelines cover priorities such as boosting investment, implementing structural reforms, and improving the coordination, sustainability and growth-friendliness of public finances in order to contribute to growth and jobs at EU level. The latter ones cover priorities such as facilitating job creation, enhancing labour and skills supply, enhancing the functioning of labour markets, ensuring social protection and fighting against poverty. Within the European Employment Strategy, the current Employment Guidelines aim to address structural barriers linked to rigidities on the labour market and inadequate skills or insufficient investment in human capital. Elements in these areas which feature prominently in the country specific recommendations include reducing financial disincentives to work, adjusting wage-setting mechanisms and the benefits, shifting the tax burden away from labour, strengthening active labour market policies and modernising vocational education and training and apprenticeships. In addition, the newly proposed Employment Guidelines propose to reduce LTU "by means of comprehensive and mutually reinforcing strategies, including the provision of specific active support to long-term unemployed to return to the labour market" . The 2015 country specific recommendations acknowledge that LTU needs to be tackled by combining effective social assistance with employability. In this respect, they stress that efficient and effective vocational education and training programmes, including targeted adult learning play a key role in improving employability. They also note that the role of the PES needs to be strengthened in some MS and that active labour market tools could be more efficiently targeted to support the inclusion of those furthest from the labour market. Structural reforms of labour markets will have an impact on the LTU level in the medium to long term, as policy transmission channels take time to impact the labour market. By adding a focus on LTU, the current proposal can support that this group benefits from positive developments on labour markets quicker than otherwise, in combination with structural labour and product market reforms. Moreover, in the context of the streamlined European Semester, country specific recommendations (CSRs) focus on issues where reform is macro-economic relevant and requires urgent attention . Thus, LTU might not be mentioned in the CSR even if LTU is high in a particular MS. By providing specific guidance on the process of addressing LTU, the recommendation complements the analysis and guidance provided in the European Semester through country reports and CSRs. A common action framework aimed at increasing the performance of all MS would offer a basis for subsequent analysis of reforms and progress. For countries addressing CSRs related to LTU or related areas (activation or active measures), the recommendation provides further guidance supporting their implementation effort. For countries with high LTU levels who do not have CSRs in the area, it provides an EU level impetus for improvement of support to long-term unemployed. While the European Semester follows the structural reform priorities for each MS, the initiative would complement this through additional guidance, joining up different reform streams in the employment and social field with PES and social services capacity building. By reducing divergence in LTU rates, the initiative would strengthen the social dimension of the Economic and Monetary Union (EMU).

5.1.2.Support to the long-term unemployed through the European Structural and Investment Funds ESF-supported activation measures were equivalent to around 20% of the total ALMP expenditure in the EU between 2007 and 2013. The LTU account for 29% of the unemployment allocations supported by the ESF, slightly higher than in corresponding national ALMPs . Relative to the high LTU rates of the period, the same pattern of under-investment applies, particularly in MS with high LTU . Table 6. Share of ESF allocations to unemployed and long-term unemployed ESF allocation, EU28 2007-2013 2014-2020 Share of unemployed in ESF beneficiaries 31,3% > 41% …of which: long-term unemployed 28,2% > 25% Share of long-term unemployed in total beneficiaries 8,8% > 10% Source: DG Employment estimates based on past and current ESF programming On the basis of current programming for 2014-2020, the unemployed will constitute at least 41% of the allocations supported by the ESF; at least 25% of these will be for the long-term unemployed . The 2014-2020 ESF allocations allow room to increase the financing of LTU support and to enhance its efficiency. Under investment priority 8i on active labour market measures, 11.08 billion Euro were programmed for 2014-2020, with particularly high shares in SK, FI, and IE. Under the investment priority 8vii on increasing the capacity of labour market actors, 980 million were programmed, with higher allocations in IT and RO. 12,93 billion Euro were programmed under the social inclusion priority (9i), with higher shares in NL, FR, IE, BE. Early results from ex-post ESF evaluation identify on the basis of interviews with programme managers the following success factors for programmes addressing disadvantaged groups: (1) effective referral, engagement and outreach approaches; (2) provision of intensive support; (3) ensuring access to a relevant range of services; (4) ensuring continuity in support to participants. The recommendation tackles through the approach chosen (Job integration agreements) the entire spectrum of improvements identified in the evaluation of the ESF. It reinforces the referral system for long-term unemployed to the support needed, it encourages intensive, personalised support, and opens access to a broader range of services, under a contractual framework which entails continuity of support and follow-up. This goes beyond the usual reach of ESF programme-based interventions, as it tackles the basic set-up of interventions, on which further ESF interventions can be built. This also shows that with additional changes in the support delivery through the implementation of the recommendation, existing ESF budgets could be spent more efficiently, in particular in addressing issues linked to continuity of support and individualised referrals to support. While the European Social Fund (ESF) is the EU's main financial instrument for tackling long-term unemployment, other funds like the ERDF may also support the objectives of the initiative. In addition to the measures financed by ESF, ERDF measures within the existing operational programmes for 2014-2020 can support investment in infrastructure for employment services (investment priority 8d), vocational education and training and skills and lifelong learning (investment priority 10), as well as financing for self-employment and start-ups (investment priorities 8a and 3a). Ex-Ante conditionalities can also play a role in making sure that jobseekers (including LTU) can be better supported. A number of MS will have to fulfil them by the end of 2016 at the latest and report on fulfilment in 2017. Both ex ante conditionalities 8.1 and 8.3 focus on the capacity of employment services to deliver: (1) personalised services and active and preventive labour market measures at an early stage, which are open to all jobseekers while focusing on people at highest risk of social exclusion, including people from marginalised communities; (2) comprehensive and transparent information on new job vacancies and employment opportunities taking into account the changing needs of the labour market; (3) the setting up of formal or informal cooperation arrangements with relevant stakeholders. The recommendation provides guidance which supports MS who are engaged in strategic changes to meet the ex-ante conditionalities. The first and second ex-ante conditionalities are closely related to the first and second specific objectives of the Council recommendation. The establishment of JIAs will help implementation of both principles embedded in the conditionalities. However, while ex-ante conditionalities can play a role in improving the policy framework for effective implementation, they do not focus on long-term unemployed as a specific group and do not cover all elements of service delivery. The envisaged initiative could provide further guidance on how to best achieve results with LTUs when designing the framework and when implementing the operations. The ex-ante conditionalities and the initiative are reinforcing each other and do not duplicate. 5.1.3.Mutual learning at EU level In terms of sharing of good practices, actions supporting Europe 2020 reform implementation through policy learning are taking place and will continue (for example, regular peer reviews on LTU and active labour market policies as part of mutual monitoring within EMCO, as well as best practice exchange under the Mutual Learning Programme ). The PES Network is currently developing a "benchlearning" process to provide an overview of the performance of PES in all MS, in order to encourage mutual learning (peer-to-peer or group activities, analysis, cooperation, and exchanges). This will contribute to capacity building and increased awareness within the PES on effective ways of developing support for LTU. However, mutual policy learning takes place at a technical level and needs support at political level to ensure implementation of the agreed solutions. In addition, capacity building in the PES cannot influence the composition of ALMPs and has limited influence on social assistance authorities. Therefore, the above mutual learning processes are not sufficient to incentivise structural and process changes at the required level in the MS. 5.1.4.Active inclusion initiatives and fundamental rights Previous Commission initiatives focused on the active inclusion approach, encompassing outreach to groups such as the inactive or non-registered long-term unemployed that are the furthest from the labour market and face multiple barriers. The initiative reinforces protection of fundamental rights. Improving the access to support services and establishing an individualised services approach for long-term unemployed guarantees and further enhances the right to access to free placement services laid down in Article 29 of the Charter of Fundamental Rights of the EU. Furthermore, providing better protection of long-term unemployed duly observes the principles enshrined in Article 34 of the Charter of Fundamental Rights of the EU, since it improves the entitlement to social security benefits and social services protection in case of loss of employment, helps combating social exclusion and ultimately reinforces human dignity. Moreover, better individualised support, coordination of delivery, assistance for return to employment, training and for work experience would also contribute to a better implementation of the UN Convention on the Rights of Persons with Disabilities.

5.1.5.Reforms undertaken at national level LTU affects MS to a different extent, notably as the impact of the crisis has been uneven and countries differ in terms of macroeconomic situation as well as economic structure and labour market functioning. The policy response has also been uneven. Economic recovery and lower inflows to LTU and the improved budgetary situation open up opportunities for additional interventions. However, LTU is addressed by current reforms in less than half of the MS. Many well performing MS (e.g. EE, FI, FR, NL, SE) continue to improve their support, while other MS with high LTU rates have not undertaken initiatives (e.g. RO, EL, HR, SK), or the initiatives do not address the main problems (e.g. the launch of new public works programmes in EL, HR, SK). The momentum of reform in the MS most affected by unemployment is not likely to lead to a substantial change either in terms of priority given to LTU or in enhancing service delivery. This risks to increase the divergence in the impact of support and consequently in LTU transitions. Several MS launched additional ALMP programmes, combining services and counselling, provision of programme income, and additional subsidies for employers. While such initiatives can have a positive impact, they are limited, addressing the coverage problem with less focus on the problems of discontinuity and activation design. After dropping for the last 5 years by a total of 10%, expenditure on public employment services began stabilising during the last two years. In 2014, a small increase of expenditure on public employment services occurred in most MS. Creating a coherent referral and support system for LTU requires structural holistic change. Such changes occurred only in a handful of MS during the last decade (CZ, DE, EE, IE, FI) and none of the countries with above average LTU rates undertook the process. 5.1.6.Additional action needed Addressing the specific challenges linked to long duration of unemployment requires additional policy guidance and a more coordinated approach at EU level in addition to and supporting the existing frameworks. Existing national and EU initiatives can be expected to address the problem of insufficient coverage only partly. Smaller inflows to LTU during recovery and the launch of additional programmes in some MS can allow a partial re-direction of ALMPs towards LTU. Additional ESF support explicitly targets the LTU in the MS which received CSRs in the area in 2013, further reinforcing provision. However such interventions are mostly programme-based, and cannot be expected on their own to systematically improve the coherence of the support system and the enforcement of benefit conditionality. The problem of lack of continuity is likely to be least addressed by current initiatives. Recent national reforms led to better coordination only in a few MS, e.g. in ES through joint evaluation of ALMP programmes and the introduction of performance criteria for the allocation of funds on in IT through the start of the reinforcement of a central PES. The problem of ineffective design of interventions can only be partly alleviated through existing mutual learning. The PES Network can influence performance management in the PES and models for delivery of both individualised services and employer services. However, the establishment of partnerships and lasting cooperation between different authorities, as well as the required shifts in active measures, go beyond the PES remit. Divergent labour market national performance in terms of LTU rates and transition from LTU to employment may have both negative economic impacts and undermine social cohesion across the EU. The persistence of LTU can have a dampening effect on economic growth and is detrimental to potential output growth in the medium term. The longer the active population remains unemployed the more the risk that skills will be lost and the LTU may leave the labour force. This would imply both a waste of resources and an increase in social costs. A long period of unemployment can lead to an increase of NAIRU (non-inflationary rate of unemployment) and a reduction in the growth potential of the most affected MS and of the EU as a whole. A lower growth potential renders it more difficult to reduce public deficit and debt levels which exploded during the crisis. High LTU is thus a source of rigidity and further vulnerability in the economic recovery. Social cohesion is one of the Treaty's general objectives. However, the problem definition has demonstrated that the current national divergences regarding LTU support can grow further. Persistent long-term unemployment leads to skill erosion and obsolescence and lower utilisation of human capital in a context of demographic decline. It is a strong source of social exclusion and a serious obstacle to the achievement of Europe 2020 goals. In conclusion, additional action is required: "The situation of young people and the long-term unemployed in particular requires determined action. Benefit systems should combine adequate income replacement with activating and enabling services targeted at individual needs and delivered through one-stop shops (AGS 2015)". The recommendation would complement and support action at national level since: a) It will create a Political Momentum The Youth Guarantee has shown that a recommendation adopted by the Council increases ownership and gives a stronger political signal than cooperation at technical level. A politically visible commitment centred on one delivery approach with citizen visibility deepens mutual learning and creates stronger impact than purely technical exchange on good practice. Recognising the relevance of an EU level policy response, the Council invited the Commission "to develop proposals to help support the long-term unemployed, taking lessons from the introduction of the Youth Guarantees across the EU, while fully integrating them into the European Employment Strategy". b) The issue concerns all the MS

The performance of MS in supporting LTU towards re-employment varies significantly, partly because MS with low performance have not put in place adequate and effective integration policies, but also due to other factors such as overall macroeconomic performance and rigidities in product and labour markets. There is scope for performance improvement in most of the MS to address in an integrated way the three problems identified (coverage, discontinuity, activation design), thus allowing the economic recovery to translate more swiftly into a return to work for more of the long-term unemployed. The initiative will cover all MS with the aim to support a general improvement in the efficiency and modernisation of the integration process. It translates the lessons from mutual learning into an action framework aiming to raise service delivery performance in all MS. This should contribute in aspects related to LTU to the overall EU efforts towards upward social convergence. c) Need to reinforce and complement existing EU level interventions The recommendation will complement and reinforce the effectiveness of the existing tools. Providing a foundation for prioritising support aimed at job finding for the long-term unemployed at national level, it encourages the allocation of necessary resources, including support from the European Structural and Investment Funds. It also provides an impetus for greater administrative capacity, better cooperation between service providers and efficiency in public spending. 5.2.Lessons learned from the Youth Guarantee The Youth Guarantee (YG) was established by the Council in 2013 to address high levels of youth unemployment and inactivity resulting from the crisis and to improve school to work transitions. Similar to the current initiative, the YG proposes an intervention model based on an individual, coordinated offer. The current initiative also includes a three–step approach: registration, assessment and an offer, similar to the YG model. A full evaluation of the early impacts of the YG will be available in 2016. However, the evolution of youth employment following adoption and implementation reports already suggests a positive impact. The adoption of the Council recommendation and the political momentum that it created enabled the adoption of Youth Guarantee Implementation Plans by each Member State. Already the drawing up of these plans and the setting up of the YG schemes created new structures (for example YG coordinators) and ways of working together in the MS. The recommendation acted as basis for many of the CSRs on youth employment in the first European Semester in which the implementation of the Council recommendation was monitored. In 2014 there were 18 CSRs on youth employment (of which 8 explicitly mentioned the Youth Guarantee). The Employment Committee (EMCO) – in its preparation of Council deliberations - pursues multilateral surveillance on Youth Guarantee implementation. To underpin monitoring and multi-lateral surveillance, an Indicator Framework for Monitoring the Youth Guarantee was developed. This form of multilateral surveillance within the Council and across MS not only provides for thorough evaluation and continuous improvement of schemes, but also enables peer learning, creates peer pressure and strengthens ownership of the MS. The implementation of the YG acted as a driver for structural reforms in MS and has already lead to first successes on the ground. Reforms, including for example the stepping-up of early activation and intervention measures, the strengthening of Public Employment Services for the delivery of the YG, a renewed focus on the quality of education and training systems and better school to work transitions could be observed in many MS. Since the inception of the YG there has been a noticeable decline in youth unemployment. In April 2015, compared with April 2013, youth unemployment decreased by 935 000 in the EU28. The youth unemployment rate was 20.7% in the EU28, compared with 23.9% two years ago. The monitoring and regular reporting on developments concerning the design, implementation and results of Youth Guarantee schemes are part of the annual programme of work of the European Network of Public Employment Services. Qualitative reports on the impact of the YG on service provision in the PES demonstrates that a Council recommendation can produce significant changes to support delivery models, leading to increased effectiveness of delivery. Most PES recognise a significant impact of the initiative on their delivery capacity . Within the PES, implementation lead to a mainstreaming of a partnership approach (in 25 PES), to resourcing specialist youth caseworkers (in 18 PES) and specific management targets (in 18 PES). Two thirds of PES have engaged in outreach work aiming for higher registration rates, including through proactive partnerships and awareness campaigns and increased use of e-services . Almost half of PES have also developed pilot projects on youth employment in 2014. These include a strong focus on disadvantaged and vulnerable youth groups. Over half of PES also provided staff with training on specific aspects of working with young people in 2014. Since April 2013 (date of adoption of the Youth Guarantee recommendation), the youth unemployment rate in the EU started to decrease: from 23.9% or about 5.7 million people (April 2013) to 20.7% or about 4.75 million people in April 2015. The youth unemployment rate fell more than one would expect on the basis of the relationship between youth unemployment and GDP growth. Based on the experience of the Youth Guarantee, the design of the initiative addresses a number of points of concern raised in the European Court of Auditor's Special report on the EU Youth Guarantee . By stating clear requirements for a JIA and by defining as a clear outcome re-employment, the initiative gives orientation on a "quality offer" to the jobseekers. Secondly, by proposing a monitoring framework from the outset (included in Section 8 below), the initiative would allow tracking progress in implementation from the very beginning. It is crucial for ensuring a genuine individual approach that the choice of the offer done within JIAs is not pre-defined. The type of support offered (provision of employment services, of ALMP measures such as employment incentives, training, start-up support, or referral to social services or further education) should be defined based on the individualised assessment and on local labour market needs. While allowing autonomy in the choice of offer, it is important to ensure accountability and value for money through a sound monitoring framework. The quality of employment outcomes in terms of sustainability of re-employment and of the type of labour contract are captured by the indicators proposed.

6.Effectiveness of the envisaged recommendation The analysis of the overall effects is based on experience from MS that have already introduced similar measures. In the analysis of coordination of support, individualisation and employer relevance (Objectives 2 and 3), both the mechanism of impact and the effectiveness in increasing transition rates are presented, privileging among the sources used published evaluations with control groups and systematic reviews. While for each sub-section the analysis integrates evidence from evaluations in 5-8 MS, generalisations to EU level impact should be read with caution, as the fit of each scheme and the effectiveness may vary across MS. 6.1.Increasing coverage of activation support (specific objective 1) Reinforced support in a single point of contact has an outreach effect. The experience of countries that established one-stop-shops confirms its positive effect on extension of both registration and coverage of employment services. The table below presents the target group, based on up the stock of registered LTU over 30 unemployed for at least 18 months, as well as the effective target group (excludes countries which offer JIAs or quasi-universal coverage of LTU (DE, DK, SE, UK). Data for IE is missing. Table 7: Coverage of LTU support Numbers (1000) 1 Target group ( registered LTU - thousands) 4797 2 Effective targeting 3923 3 Net additional expected coverage On ALMP Subject to MS implementation and budgetary constraints. 4 On Employment Services Source: Own calculations based on LFS 2013 data, ad-hoc transitions calculations and the LMP Database. It is not possible to provide an ex-ante assessment of the expected increase in coverage of services and measures, based on the introduction of the offers within the JIAs. Experience in the countries which have already introduced JIAs shows that more precise targeting of individual needs would lead to a significant shift of resources from ALMPs to employment services. As the cost ratio of employment services to ALMPs can be roughly estimated at 3:1, this would entail an increase of coverage of long-term unemployed through employment services. MS retain however flexibility in the establishing the balance between ALMP measures and employment services in their provision mix, as well as control of resources allocated to LTU relative to other groups. JIAs targeted by duration (at the latest when having reached 18 months of unemployment) offer a balanced impact geographically, with relatively high impact in weak support countries and thus lowest deadweight loss. Given that on average the low skilled and the older workers have higher registration rates with the PES, increased coverage by duration will also benefit these groups. 6.2.Continuity and coordination in support delivery (specific objective 2) Two mechanisms ensure continuity in support delivery: 1) A systematic referral system to the support needed and 2) Data sharing mechanisms across organisations. Degree of coordination already in place: Single point of contact Partnerships / data exchange No formal coordination CZ, DE, DK, FI, IE, NL, UK AT, BE, CY, EE, ES, FR, HU, LU, PL, PT, SE, SI, SK BG, EL, HR, IT, LT, LV, MT, RO Based on Table 3 above. Table 8. Coordination of support delivery Mechanism Impacts on coordination and transitions to employment Systematic referral through single point of contact to services, measures and benefits The introduction of single point of contact led to increased re-employment probabilities and off-flows from benefits in the UK and accelerated job finding among the long-term unemployed in DE, while improving the quality of occupational matches . Intensified intervention through single point of contact In DE, the “Berlin Job-Offensive” offered intensified counselling and guidance by reduced caseloads (to 1:100) and higher contact intervals (every 4 weeks), increasing transitions to employment. Improved monitoring of job search activity and more credible threats of sanctions also increased transitions to employment in DE, DK and EE. Better enforcement of benefit conditionality A pilot from NL shows that intensified contacts focusing on rights and duties lead to higher job search intensity. Data protection, unclear division of tasks and lack of performance indicators risk hampering exchanges of information. 6.3.Increased effectiveness of interventions: individualised support (specific objective 3)

Three mechanisms ensure a stronger individualised support: 1) A minimal standard of service ensuring that administrative processes achieve tailored support, matching the needs and goals of jobseeker, while allowing case handler discretion and choice; 2) Re-orienting ALMPs towards employability support (up-skilling/basic skills/start-up support); 3) Re-assessment of the needs and employment prospects of the LTU. Impact will be higher on MS without individual approaches in place: No or limited impact Medium impact Stronger impact DE, UK, DK, EE, SE, FI, BG, FR, IE, LT, UK BE, AT, PL, LT, SI, SK, MT, NL, LU CY, CZ, EL, ES, HR, HU, IT, LU, PL, RO, SK Base on tables 4 and 5 above. Table 9. Individualised support Mechanism Impacts on individualised support and transitions to employment JIAs as individualised, tailored document for LTU JIAs guarantee a minimal standard of service individualisation for LTU and thus provide a quality standard for interventions. Delivery in a single point of contact allows dealing with the underlying barriers to employability which are accumulating during unemployment, with indirect impact on ALMP effectiveness. Establishment of a single point of contact can facilitate further relaying with life-long learning providers for up-skilling, as shown in the UK. Re-assessment of long-term unemployed An improved up-skilling offer can link individual re-assessment, referrals through the single point of contact and employer services, as shown in IE. Linking the content of the training/up-skilling offer to specific job requirements increases its effectiveness. Evidence from DE, NL, SE, PT and DK shows that lower caseloads and higher “contact intensity” have a positive impact. A model combining intensive support, caseworker discretion and monitoring of outcomes has a positive impact on both placement rates and on matching, lowering skills mismatches and increasing quality jobs for the long-term unemployed. Re-orient ALMPs towards employability support An explicit contractual approach commits case handlers to choices. By opening up access to the whole range of ALMPs and services, it allows a genuine effort to fit the participant's needs to the activation offer. Increased caseworker discretion The German MoZaRT pilots showed that when offered with higher discretion and lowered caseload, counsellors became more proactive imposing more sanctions on clients with low search efforts and registered more new vacancies. Similar results were obtained in the NL for the ProPOM trial. 6.4.Increased effectiveness of interventions: employer support (specific objective 3) Contact to employers impacts transitions to work. Among employers who did recruit from the LTU in the five countries covered by the IPPR survey, 56% recalled contacts with the PES, compared to 21% who did not recruit from the LTU. Two mechanisms ensure stronger employment support: (1) enhancing services to employers and (2) focusing ALMPs on the competitive labour market, reducing to a minimum public works. There is consistent evidence on the lack of effectiveness of public works on promoting transitions to employment. Impact is expected to be higher for countries with large public work schemes: Over 15% of all ALMP in public works (2012 data) Over 40% of LTU schemes / public works (2012 data) SI, SK, LT, PT, BG, IE, HU DE, FR, HR, CZ, LV Source: Own estimates, based on LMP Database, 2012. Table 10. Employer involvement Mechanism Impacts on employer involvment and transitions to employment Increasing partnerships with employers on LTU re-integration Evidence from effects of mutual learning within the European Network of PES show slow positive impact on reinforced PES employer services. Invite MS to shift resources from public works or other public job creation schemes towards strengthened employer services/ start-up support. In FR for instance the action plan for fighting LTU includes adjustments in the "insertion contracts", increasing their attractiveness to employers. Particularly in countries with high share of public works, re-allocation towards employer incentives can lead to significant efficiency gains for LTU. A number of studies find mixed results for employment incentives not accompanied by additional services towards employers or towards placement beneficiaries. Under JIAs services to the LTU and to employers could be organised back-to-back. Personalised interventions with employer involvement increase transitions to work for unemployed with longer duration, as shown by evidence from AT and SE. Sustainable re-employment is enhanced when employer incentives are based on an individual referral system allowing better targeting and mutual responsibilities. A German scheme for jobseekers aged over 50 that included counselling and training, based on close cooperation between local public authorities, service providers and employers also registered positive re-employment effects. The SE and AT schemes quoted above also show more positive effects for older workers. 7.Expected impacts and costs 7.1.Expected impact on transitions to employment Transition rates depend not only on the factors tackled by the initiative, but also on a range of exogenous factors including the broader macroeconomic environment, the degree of flexibility of the labour markets, the level and relevance of skills in the workforce. All these factors are highly country specific and therefore are not taken into account in the estimates presented below. JIAs offer a framework for upward convergence of support to the long-term unemployed in the MS. The possible convergence effect of the initiative can be presented under two scenarios: (1) the gap between the current transition rates and the top 3 MS in transition rates (DK, EE, SI) is closed by half; and (2) the gap to 3 countries with support very similar to the proposed JIAs (DK, DE, NL) is closed by half. The scenarios do not control for other intervening factors (increased labour demand, labour market flexibility, etc.) and are not based on a modelling of impact in the MS. They illustrate numerically the potential gains from a process of convergence in the quality of support. Table 11. Estimated additional LTU transitions to employment

Estimated additional LTU transitions to employment (1) Half-closing gap to top 3 performers 380.000 (2) Half-closing gap to top MS with JIA 254.000 Numerical annual estimates based on the assumption that the gap between the current transition rates and the top 3 MS in transition rates (DK, EE, SI) is closed by half (scenario 1 in first row) or that the gap to MS with support systems similar to that proposed by the recommendation (scenario 2 in second row). Own estimates, based on Eurostat transition experimental transition data and LMP Database Based on the more conservative scenario (2) above, the potential annual gains in transitions to employment are illustrated below for the MS most concerned for which both transition data and ALMP data are available. Table 12. Estimated additional LTU transitions to employment, by country BG CZ EL ES FI FR HR IT LT PL PT RO SK 5200 2100 37200 100500 1100 19000 10500 37000 2900 14500 6700 2900 12700 Numerical annual estimates based on the assumption that the gap between the current transition rates is half closed relative to MS with support systems similar to that proposed by the recommendation. Own estimates, based on Eurostat transition experimental transition data (2013/14). While transition rates vary also due to specific labour market conditions, a better focus of integration policies would have impact independent from the macroeconomic situation and labour market structures. Figure 12 presents both the positive impact of the good structured support on the transitions to employment, as well as the impact of reforms on increasing transitions. Countries which have already increased individualisation of service work systematically with IAPs and have ensured data sharing for service coordination, thus offering more structured support to LTU achieve higher rates of transitions to employment (e.g. DK, EE, SE, CZ, FI, DE IE in Figure 12). Moreover, countries which reinforced support structures show considerably higher transition rates following reforms, as illustrated by CZ, EE and IE. This suggests the potential for improvement, although the figure below should be interpreted with care, as other factors such as macroeconomic trends or wider labour market reforms may affect performance. Figure 12. Support to LTU and transitions to employment Strongly structured support Profiling, IAPs to all, single point of contact or data exchange. Weakly structured support Gaps in profiling, IAPs, one-stop-shop provision and data exchange Source: Eurostat, EU-LFS, experimental ad-hoc transitions calculations. For CZ, EE and IE, data for both 2008/09 and 2013/14. In light of the figure above, the scenarios presented at the beginning of this section appear realistic. This is also in line with research outcomes on support for highly disadvantaged groups of unemployed where it is not unusual to find that the most successful programmes increase by 10% their employment rates. 7.2.Expected impact on poverty and social inclusion Long-term unemployment is one of the most significant determinants of poverty. Half of those who take a job also escape the risk of poverty, with a share varying from 20% in BG and RO to 65% in PT or SE. Chances to exit poverty are linked to the chances of successful transitions to employment. Figure 13 shows that on average half of those taking up a job exit from poverty. Transitions out of poverty depend amongst others on the type of contracts (permanent/ temporary, part time/full time), on wage levels and on the availability of in-work benefits.

Figure 13: Transitions to employment and exits from poverty Source: EMPL calculations based on Eurostat, EU-SILC 2010 longitudinal data; data for DE and IE missing. ( ESDE 2013 ). While the initiative would not target specific groups (such as persons with disabilities or partial work impairments, persons from migrant background, Roma, single mothers), strengthening individualised approach leads to more targeted solutions and improved ascertaining of support for return to employment. Support would be embedded in a simpler institutional environment improving the identification of specific barriers to labour market inclusion and providing a gateway for access to supporting social services, often needed to address multiple disadvantages. Given that the initiative is living flexibility to MS and focusing to the support infrastructure, the risk of diverting support away from groups more remote to the labour market emphasised in the consultation by the Social Protection Committee, is minimised. The impact on the overall level of social protection would be positive. Increased transition rates would relieve pressure on the social benefits budgets, but on the other hand more integrated provision can increase the number of claimants registering with the integrated services. Simplified service delivery leads to higher registration not only with employment services, but also with social authorities. Successful transitions to employment will mitigate the negative social consequences of LTU: lower educational achievement both for workers and for their children, family instability, deterioration of mental health, increased mortality and lower access to healthcare. At societal level, LTU is closely correlated with increased inequalities, poverty rates and social exclusion, decreased trust in public policy and social cohesion. 7.3.Overall economic impacts The initiative is likely to have a positive impact on EU competitiveness. Decreasing LTU would increase disposable income, increase aggregate demand and lower fiscal imbalances. The overall budgetary impact of the initiative can be expected to be positive by reducing benefit recipiency and increase of tax receipts, provided that other structural reforms are implemented to boost job creation. Offering more individualised support would improve the human resources matching of labour to productive opportunities. Ensuring more transitions to employment and bringing the LTU closer to the labour market would facilitate labour market transitions and re-allocation of labour across sectors, contributing to a more flexible labour market. Addressing LTU would also increase the contribution of labour to growth – which has been rather low during the last 6 years - and alleviate some of the demographic pressure currently building up . An indirect effect of the JIAs is the opening of employment services market to a plurality of delivery agents. By creating or further reinforcing the individual referral system, they lay the groundwork for performance based outsourcing of employment services. Research results show that past introduction of single points of contact led to an increase in private employment service provision. By emphasising simplified support, enhanced services and partnerships with employers, the initiative will impact positively on the business sector. Advocating a shift away from public works will help re-focus ALMP resources towards the competitive labour market and the needs of private employers. In a setting of low labour demand and limited fiscal space, employment incentives can be attractive instruments for supporting employment while also improving the employability of specific vulnerable groups. However, if not well designed, employment incentives may result in wasteful spending of public money, particularly if the subsidised jobs would have been created/maintained anyway (deadweight loss), or if the subsidies simply induce employers to hire/keep certain workers instead of others (displacement effects). They may also reduce productivity to the extent that they create incentives for companies to substitute more productive workers with less productive ones. If jobs are created only for the duration of the subsidy, this still improves employability of the involved workers, but the net social benefit is much more limited, or even negative. For these reasons, the foreseen initiative emphasises more employer services (e.g. pre-recruitment selection of candidates, pre- or post-recruitment workplace training, post-placement counselling and mentoring) rather than financial incentives for employers. While such services can still carry risks of deadweight loss, they are less likely to produce distortions on the labour market. Reinforced and personalised employer support is also likely to be more relevant for the small and medium enterprises (SMEs). Particularly small enterprises without HR departments can be expected to benefit more from employer services and direct contact with employer counsellors. Currently, .medium and large enterprises (100-1000 employees) were found to have more contact with the PES than small or very large ones. 7.4.Implementation costs MS need to continue to finance the IT infrastructure for benefit and ALMP eligibility and monitoring, and the administrative routines for handling services, monitoring and sanctions. Current costs for delivery of LTU support within the PES, social services or by outsourced provision are not available. The costs for LTU ALMPs average at 8.900 Euro/participant-year, varying from over 1000 € in RO, SK to over 16.000 € in SE, NL, DK. Such costs of basic service provision are likely to continue to vary strongly across Member States, with more investment needs in countries with lower administrative capacity. The initial costs for establishing the JIA infrastructure are the costs related to the organisational changes to achieve better coordination in order to offer an integration agreement through a single point of contact. They relate to IT, new administrative protocols, equipping or co-locating one-stop shops and staff training and are dependent on the extent of prior collaboration between the agencies in charge, which varies as shown in section 3.4 above. Available evidence suggests that the initial additional financing does not vary strongly with the level of capacity of national administrations. In Germany it amounted to 175 € per household in 2005, in Hungary to 300 € per person and for the case of Jobcentre Plus in the UK the roll-out costs were around 275 € per benefit recipient in 2008 (excluding infrastructure investment costs which were around the same amount). The running costs of offering the JIA offers are however more dependent on the administrative capacity of the administrations in charge.

The ICON study shows that running costs per participant vary considerably and are lower in countries with lower capacity. They are mainly related to staff re-assignment to ensure lower caseloads, while the ensuing administrative procedures of provision of job offers, referral to ALMP measures or monitoring entail only small additional costs, as in many cases they only need to be adapted based on current practice and integrated in the JIAs. For both initial and running costs, there are strong counter-financing effects through better integration rates into the labour market (shorter unemployment duration) and savings on benefits through better monitoring under JIAs. The single point of contact leads to savings through joint direct customer contact in employment and social services. Based on the ICON study, estimated additional costs are presented in more detail for 5 MS which differ in the extent of service provision to LTU, in resources and administrative capacity and in institutional setting (Table 13). The estimated costs are already incurred in Germany and Denmark, who would not need additional initial investment to fulfil the requirements of the recommendation. The running costs are built on a scenario assuming an individual qualified contact person for each beneficiary, the assessment of employment potential, the agreement of a JIA opening access to the full spectrum of ALMP measures/ provision of job offers and regular follow-up assuming a contact intensity of 3-6 months and caseloads between 1:150-1:250. They can be considered a minimum package of individualised support. In addition, the table estimates in the last row the additional costs of intensified intervention should Member States opt for an ambitious implementation of the recommendation, by considerably reducing caseloads for counselling the long term unemployed to 1:70-1:100. Such option would have the consequence of increasing the staffing of the implementing agencies. Table 13: Estimated additional costs in five EU MS Germany Denmark Hungary Italy Lithuania Initial financing 175 € per household (2005) - 300 € per person - - Running costs per capita per year* 1,380 € 522 € - 2,065 €** 156 € 175 € 163 € Intensified intervention per capita per year*** 300 € - - - 100 € * UB2-benefit recipient in Germany, LTU in Lithuania and registered unemployed in all other countries ** Depending on the data source used for calculating costs *** Additional costs for intensified (70 LTU jobseekers/caseworker vs. 250 LTU jobseekers/caseworker in the row above on direct costs). Source: ICON (2015) . While the table above shows estimates of both initial and direct costs per capita of provision of JIAs, the estimates should be interpreted with caution. The recommendation asks MS to put in place Job integration agreements which should fulfil certain standards, but does not prompt MS to provide a certain type of offer (e.g. counselling, training, work placement, referral to other services). The re-allocation of resources from public works could create additional budgetary space which could be used in interventions targeting employers on the competitive labour market. The cost of implementation in terms of expenditure on ALMP measures is therefore not included in the cost estimates in Table 13 above. The costs of additional counselling, translating into more intense intervention, are presented in the last row. This is fully in line with the objective of increasing the individualisation and effectiveness of support, which means that support should be adapted to the needs of beneficiaries and not pre-determined through administrative rules or targets. The estimates of running costs of provision should therefore be taken with caution, as they are subject to subsequent choices at MS level on the implementation tools. In light of the flexibility given to MS on the type of offers, a price estimate with regard to their content is not appropriate. It can be generally assumed that many of the offers included in Job integration agreements would be focused on employment services, rather than placement in ALMP measures (such as training, employment incentives, etc.). The data in LMP database shows that there is very wide variation in the cost of such services (whether provided internally in the PES or by other providers). Costs per capita average for instance between 31 and 1183 Euro/ participant in SI, or between 31 and 2655 Euro/participant in DE, depending on the complexity and intensity of interventions. Similarly, the average expenditure ranges from below 150 euro in PL or HR to over 1000 Euro in BE or DE. The optimal choice of offer should be therefore chosen by the implementing organisations in the MS, given individual circumstances and conditions on local and regional labour markets and cannot be adequately priced at EU level. Overall, implementation would entail additional costs related mainly to the initial set up of coordinated provision of support offers through JIA and the single point of contact. The running costs of provision, including both the initial assessment and the follow-up of JIA recipients, as well as the costs of offers (whether taking the form of employment services or placement on ALMP measures) can be expected to be covered mainly through re-allocations from existing expenditure on labour market policies and a stronger prioritisation of the LTU in the service offer. A precise estimate of these running costs is difficult given the high variation in the costs of such offers across MS and because of numerous offsets and possibilities to re-allocate within existing budgets. It is fair to assume that the initial investment would translate into gains ensuing from reduction of long-term unemployment at a later stage, as discussed in section 7.5 below. 7.4.1.The role of the European Structural and Investment Funds Part of the costs associated with implementing the foreseen changes could be mitigated by directing existing ESF budgets towards the actions envisaged in the initiative. According to the ESF Committee opinion, substantial amounts of the ESF are available for putting in place integrated LTU support structures and for the groups furthest away from the labour market. All MS are in a position to act. MS with more limited fiscal space and in need of deleveraging can make best use of ESF allocations. ESF funding dedicated to improving the capacity of labour market institutions is already budgeted in the Operational Programmes in BG, CY, CZ, DK, ES, FR, EL, HR, IT, PL, PT, RO, SK, covering all countries which received CSRs on employment service capacity during the last three years. JIA will impact differently provision of support in the MS. While countries which already have strong support systems in place will need to invest less to deliver JIAs, countries which are more exposed to LTU and also have a weaker fiscal position will need to invest more. However, the ESF allocations already follow the strength of the support system, as shown in the table below. Table 14: ESF allocations by expected impact on administrative costs Allocations for labour market capacity building High impact of the CR Low impact of the CR ESF allocations BG, CY, CZ, EL, ES, HU, HR, IT, PL, PT, RO, SK DK, FR No ESF allocations LU, LV, SI AT, BE, DE, EE, FI, IE, LT, MT, NL, SE, UK The one-off administrative costs of full implementation of initiative in one year would amount to 11% of average ESF annual allocation under the three relevant thematic investment priorities (8i, 8vii, 9i) in HU, 17% in PL, 27% in LT, 28% in IT, respectively 43% in FR . The initial costs are likely to be much lower in all MS.

In addition to the ESF measures, MS may also make use of ERDF under their existing allocations for the relevant thematic investment priorities to support the implementation of the initiative, namely by supporting job creation, and modernisation of public employment services and vocational education. 7.4.2.Monitoring costs No additional reporting envisaged either for businesses (including private employment service providers) or the voluntary sector. For the public administration, the introduction and the implementation of JIAs involve substantive costs affecting the essence of their activity, and they were analysed in the section above. While the initiative imposes administrative costs primarily on public administration, it will impose a very limited additional administrative burden related to reporting costs. The additional administrative burden for public administration would relate to the monitoring and evaluation of the initiative. Existing reporting and monitoring mechanisms will be privileged. National monitoring of the implementation of JIAs would become an integral part of the existing mechanisms for ALMPs, employment agencies and social authorities. EU level monitoring would partly use existing EMCO indicators and the existing LMP database. 7.5.Budgetary impact The medium-term budgetary impact could be limited or positive provided that other structural reforms are implemented, as the costs for running JIAs could be outweighed by increased tax receipts and benefit savings. Most of the estimated initial costs for setting up the JIA infrastructure would be recovered in one year through increased transitions to employment, assuming that these occur in a recovering labour market characterised by net job creation. There is scope to use the ESIF, in particular the ESF and the ERDF 2014-2020 allocations for supporting the implementation of the initiative. To assess the gains of the initiative, estimates have been adjusted from increased exits from unemployment in terms of savings on benefits and additional tax receipts, assuming a return to work with a 75% of average wage. For each LTU finding a job, associated gains in tax receipts and reduced benefit expenditure range from 440 €/year in RO to over 11.880 €/year. These estimates assume that there are no substitution effects, i.e. that more transitions from long term unemployment to employment do not hamper the chances of the short-term unemployed to find a job. Evidence on such substitution effects is mixed and seems highly dependent on the types of offers, with higher effects for demand-side offers such as employment incentives and much lower effects for supply-side offers such as counselling or training. Moreover, substitution effects diminish over time in an expanding economy, as capital adapts to higher levels of human capital and as the lower costs of matching for employers translate in more hirings at the same wage level. Even when strong substitution effects occur and even when the return to work is not sustainable, there is a net increase in human capital when the long-term unemployed are hired. Short-term unemployed workers have higher levels of employability and higher probabilities of re-employment. In contrast, for the long-term unemployed even a limited period of work gives a considerable boost to their employability. If combined with other structural reforms to boost job creation, the channels through which this recommendation can overall support the increase in employment rate are multiple (i.e. higher growth potential through lower hysteresis effects, decrease in structural unemployment through decrease of the hysteresis effects and higher job turnover, decrease in mismatch between labour demand and labour supply through the personalised services to long term unemployed, decrease in social exclusion, etc.). Costs and benefits presented below are based on an EU-wide average, which builds on the five case studies presented in the previous section. They are additional to the current costs and gains from ALMP provision: current ALMP expenditure on LTU can be estimated at 6.5 bn € per year (2012). The cost estimates are based on the assumption of an initial investment of 300 €r for all LTU targeted. Under these assumptions, 79% the one-off costs of establishing JIAs and their infrastructure are expected to be recovered in one year. Average annual benefit savings per unemployed finding a job amount to 1805€, while tax receipts assuming low incomes amount to 1714€. While the savings on benefits are immediate with transitions to employment, the additional tax receipts should be interpreted with more caution, given the possible substitution effects of labour market interventions. The estimate relies on the anticipated additional transitions to employment presented in section 7.1. Such positive impacts are subject to caveats on the likelihood of MS with weaker support structures achieve gains in transitions to employment comparable with countries which benefit both from stronger support structure and better functioning of labour market and positive investment patterns. Table 15: Estimated budgetary impact of the initiative for the first years following the implementation of the initiative (million Euro) Initial cost 1 141 mil € Savings per year 897 mil € Share of initial cost recovered within one year 79%

No additional impacts are envisaged for the EU budget. Implementation could be supported by the ESF under the 'Access to Employment' and the 'Active Inclusion' priorities. Proactive programme management through existing mechanisms foreseen by the Common Provisions and the ESF Regulations (e.g. reallocating funds within a priority axis, aligning programming and project selection criteria) could support the efforts of MS. Additionally, the ERDF may also complement the measures financed by the ESF in accordance with the allocations for the relevant investment priorities for 2014-2020 (not subject to reallocation), namely by supporting job creation, the modernisation of employment services and vocational education. Further to that, any MS wishing to provide additional funding to implement a new CSR on LTU could address a re-programming request to the Commission. Conversely, under measures linking the ESIF funds to sound economic governance, the Commission may make such a request to a MS where it is deemed necessary to support the implementation of relevant CSRs. 7.6.Timely impact and implementation risks A timely impact is important for the budgetary impact and for the effectiveness of the initiative in tackling the current LTU stock. Shorter lead time to implementation enables quicker transitions to employment, which pay off much more in terms of savings on benefits and in tax receipts. Experience of previous institutional integration measures in DE, UK, EE, AT show that setting up a one-stop-shop takes 1-2 years. The introduction of the German reformed support produced observable effects on transitions to employment within one year of its introduction. Setting up the lighter coordination mechanism (single point of contact) can be expected to take at most 1 year, depending on the MS' starting points. Further to the implementation lags, newly introduced JIAs would take time to produce effects on the possibilities of transitions from LTU to jobs. Such impacts can be quicker in expanding labour markets, with higher levels of job creation. The implementation of structural labour and product market reforms can thus support a quicker impact of the initiative. In cases with regionalised provision structures (e.g. BE, ES, IT, PL, FI) an additional layer of political arbitrage is needed due to the vertical differentiation of the agencies involved, as they are placed under municipal, regional or national authority, with different budgetary authorities. Main implementation risks refer to low levels of overall administrative capacity – mainly staff competence and resources for an individualised approach to jobseekers. CSRs on PES capacity were addressed to BE, BG, CZ, ES, FR, IT, PT, RO, SK during the last 3 years. Success factors include the clarity and harmonisation of the goals across the different bodies, a clear division of responsibilities (clear procedural rules), careful design of financial and administrative incentives for cooperation as well as the