Residents of a small Austrian town are being promised work for 3 years in the world's first universal jobs guarantee experiment

  • Austria unveiled the world's first universal jobs guarantee experiment in October.
  • The first wave of participants just signed their work contracts. They've been guaranteed a job for at least three years.
  • The program aims to reduce unemployment in the small town of Marienthal, which never fully recovered from massive layoffs almost a century ago. 
  • Visit Business Insider's homepage for more stories.

The coronavirus pandemic has devastated even the wealthiest economies. From February to May, around 38 million people filed for unemployment insurance in the 20 of the world's richest countries. Most of these nations expanded their unemployment benefits as a result.

But one country took an additional, uncharted step: In October, Austria unveiled the world's first universal jobs guarantee experiment.

For the next three years, residents of Marienthal, a tiny town in Lower Austria, are guaranteed paid work, even if they can't find a job on their own. All participants will receive at least a living wage: In Austria, that amount differs based on occupation, industry, and experience, but can't fall below 1,500 Euro (around $1,800) per month.

The pilot program comes with one major caveat, however: Participants must have been out of work for more than nine months already.

Sixty-two people have been selected to join so far. On average, participants are around 44 years old. Just over half are male. Around one-third are migrants or the child of migrants. Less than half have received more than the legally required level of education, and less than one-third have a disability or preexisting health condition.

In October, the first wave of 31 participants started a two-month training course to prepare them for the job market. The next wave of 31 participants will begin their training course in February. During this time, participants have access to one-on-one coaching sessions, as well as support from social workers, occupational physicians, and psychologists. 

As of December, the first wave of participants have officially signed their work contracts. Most of them are employed directly by Lower Austria's public employment service in fields like gardening, home renovation, and carpentry.

The roles come with a chance to exercise their skills or creativity: If the neighborhood could use a new bench, for instance, participants can offer to build one.

Only three participants so far have joined the private sector. For the first three months, their wages will be fully financed by Lower Austria's public employment service. The service will then cover two-thirds of their wages for nine months thereafter, with the rest of the money coming from their employer.

"To be part of this project feels like a dream come true," Jennifer, a 43-year-old participant who has been jobless since 2011, said in a statement. "Lacking work, you can't think positively — with work, you can. That's most important to me. If that's right, everything else falls into place."

A connection between unemployment and well-being?

A universal jobs guarantee isn't a new idea. It dates back to the 16th century, when the English government raised funds to put jobless citizens to work during a period of widespread unemployment. Back then, able-bodied people who refused to work could be put in jail.

The modern concept is more charitable: It suggests that anyone who wants to work has a right to do so. The idea has been championed by Martin Luther King Jr., President Franklin Delano Roosevelt, and, more recently, Senators Bernie Sanders, Cory Booker, and Kirsten Gillibrand.

In the case of the Marienthal pilot, the ultimate goal is twofold: to reduce unemployment and improve participants' overall wellbeing. In addition to tracking participants' income, skills, and labor market status, the program will examine their physical and mental health, social status, civic engagement, and sense of a higher purpose.

"It was important to us that it's voluntary and that it's actually meaningful work," Maximilian Kasy, a co-designer of the pilot study, told Business Insider. "It's much more than just income. If it's done right, it provides social inclusion, meaning, a rhythm to the day, and so on."

In theory, job guarantees may also stimulate economic growth, since governments won't have to pay as much in unemployment and other social benefits.

The Marienthal pilot, for instance, will cost the government 7.4 million Euro (around $8.8 million) for three years — or 29,800 Euro (around $35,600) per person each year. Since yearly unemployment benefits in Austria typically cost 30,000 Euro (around $35,800) per person, the government could break even or possibly save money in the long run.

The program's new jobs are also expected to generate around 383,000 Euro (around $457,000) in revenue. 

Marienthal's past unemployment experiment

Marienthal is no stranger to unemployment experiments: In the 1930s, researchers from the Austrian Research Unit for Economic Psychology studied the town's 1,500 residents after their main employer, a large textile factory, shut down. By the time the researchers arrived, all but 80 residents were unemployed. 

The researchers integrated themselves into the community for several months, participating in gymnastics lessons, pattern design courses, and medical consultations. Not only did they discover a correlation between unemployment and poverty, but they also found that unemployed residents developed an apathy toward social life. 

"They found very surprising results for the day, because the general expectation was that when people are free of work, they will have much more spare time to get creative, maybe to get even socially involved, politically involved," Lukas Lehner, the study's other co-designer, said. "But exactly the opposite happened. They fell into lethargy and even the social life that had existed before, while people were easily employed, eroded."

For some modern-day residents, that feeling of isolation persists.

"I did not want to leave the house," Jennifer, the trial participant, said of her time being unemployed. "I didn't want to let others know that I am not doing well."

Lehner said the pilot could restore "the social purpose of the community."

Some participants, for instance, are renovating the old textile factory as part of their work. One participant is working in facility management at the local school. Another is providing childcare services at the nearby kindergarten.

Winning over the critics

Like many nations, Austria's unemployment rate has spiked as a result of the pandemic, rising from 8.1% in February to 12.7% in April. But not all economic experts are convinced that jobs guarantee programs will help.

Critics argue that the programs could entice too many workers to flee the private sector in favor of a guaranteed living wage. Others fear that jobs guarantee programs won't roll over into full-time employment or present opportunities for upward career mobility.

There's already some evidence to suggest that: A 2007-2008 program that helped secure jobs for formerly incarcerated people in the US didn't lead to much long-term employment. By the program's second year, only about one-fifth of participants were employed in the formal labor market.

But research also suggests that employment subsidies may have more positive effects during a period of economic crisis.

Kasy said the pandemic may have already started to convince the public that government should play a larger role in connecting unemployed people to meaningful work. 

"There's a shift from a standard perception of, 'Oh it's people's own fault if they're unemployed or poor," Kasy said. "Once it becomes so widespread in a general recession or pandemic, then the sense of who's responsible really shifts and opens a political space to discuss ways to actually address it."

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