Institutional moral hazard in the multi-tiered regulation of unemployment in Austria Background paper

This paper has been written in preparation of a research project funded by the European Commission (on the Feasibility and Added Value of a European Unemployment Benefit Scheme, contract VC/2015/0006). This paper adds information and detailed analysis to the following deliverable of that research project: Institutional Moral Hazard in the Multi-tiered Regulation of Unemployment and Social Assistance Benefits and Activation - A summary of eight country case studies; but it was not a deliverable. We use the concept ‘institutional moral hazard’ to analyse intergovernmental relations within multi-tiered welfare states, specifically the domain of in unemployment-related benefits and related activation policies (the ‘regulation of unemployment’). This paper is one of eight separate case studies, it focuses on Austria. The Austrian regulation of unemployment involves the federal government, regional governments (Länder) and the federal Public Employment Services (PES). The dominant policy concerns were threefold: divergence between activation practices for social assistance and unemployment insurance caseloads, increasing heterogeneity between regional social assistance schemes and principal-agent issues concerning the PES. The federal government harmonized different activation practices by making the federal PES responsible for all caseloads. Furthermore, the federal government negotiated a nation-wide agreement with the Länder on social assistance schemes. Finally, the governance of the PES was reformed and more monitoring and minimum requirements were introduced.