Innovation in Planning Hungarian Labor Market Programs

This paper summarizes the important features of the Hungarian ALPs (active labor market programs) and reports on the system to assess the effectiveness of ALPs which is now being implemented in Hungary. The system being introduced in Hungary is an example of entrepreneurial government in the sense of Osborne and Gaebler (1992). The paper lists performance indicators (PI) used for each program, and explains how they are used with administrative and follow-up data. The system of PI is designed to monitor performance while allowing decentralized decision making and avoiding adverse incentives. The system is designed to promote superior performance through positive incentives, and to help identify and correct poor performance through technical assistance and/or sanctions. The paper shows how the PI allow a standardized assessment of program performance across the 20 administrative districts in Hungary. An example is also given which shows how demographic data on clients and indicators of regional unemployment are used to adjust national standards for local conditions. Finally, the paper explains how information from the performance assessment is used in the annual planning and budget allocation process for Employment Fund programs