Contracting-out and governance mechanisms in the public employment service

The contracting-out of job brokerage and case management services is a major international trend in the reform of the Public Employment Service. Instead of a public agency, private providers are contracted to deliver these services for the jobseekers. Australia and the Netherlands have contracted-out (almost) all of this formerly core public service. The U.K. has introduced so-called Employment Zones, in which private providers are responsible for long-term unemployed and thus replace the public Jobcentre Plus for this target-group. Based on agency theory, the paper analyses and compares the contract management in the three cases with respect to the risk of moral hazard. Differentiating between three distinct governance mechanisms (incentives, information and control), the paper shows the requirement of an integrated approach to contract management.