17 February 2000 • Deregulation of Placement Services. The Case of Austria • Gudrun Biffl

The late 1980s saw the beginning of a reform process of the Public Employment Service (PES) in Austria. It gained momentum during the 1990s and culminated in the creation of the Labour Market Service (LMS) as an independent public agency in 1994. The objective to modernise the PES was in line with attempts by the European Commission to increase the efficiency of the PESs of all member states as part of the EU employment strategy. The National Action Plan for Employment assigns to the LMS a key role in the implementation of the employment guidelines. Job matching is the core business of the LMS, followed by the implementation of labour market policies to reduce the mismatch between labour supply and demand.

The analysis of labour supply and demand developments in Austria illustrates the need for a reform of labour market institutions. Since the 1980s labour turnover increased due to a rise in frictional unemployment. Unemployment rose, however, above all as a result of a longer duration of unemployment. The gap between unemployment and job vacancy levels widened, especially during the 1990s, as did the skill and occupational structure of unemployed and vacancies registered with the LMS. This development suggests an increasing mismatch between the clients of the LMS on the side of both labour demand and supply.

The transition from an industrial society, which was characterised by mass production of industrial goods (the 1960s and 1970s) to a post-industrial society marked by the industrialisation of services (since the 1980s), gave rise to the need for more specialised matching procedures and institutions. Although deregulation of the PES introduced more customer orientation into job matching, it was half-hearted and did not embrace the potential for collaboration with private placement services in order to decrease public sector costs while at the same time improving job matching.