The Quest for Welfare State Sustainability: Managing Youth Unemployment by Social Impact Bonds?

Abstract

Worldwide welfare states are looking for new ways to provide social welfare. One of the ways to provide social welfare is the Social Impact Bonds (SIBs). In addition, youth unemployment in the Netherland is on the rise in the aftermath of the financial crisis of 2008. This research is based on document analysis, especially policy documents of the G4 (four big municipalities in the Netherland) and qualitative interviews of policymakers, administrators and parties involved in the Rotterdam SIB researching the possibilities of the Rotterdam SIB to offer an alternative means to address youth unemployment. Looking into policy perspective social investment and social innovation, the Rotterdam SIB is compared to conventional Dutch youth unemployment policies. Conventional youth unemployment policies try to establish cooperation with third parties, they tackle youth unemployment by creating back to school trajectories, helping young people find a job, or helping them to be active in society. The SIB is established as a result of a network of public, private and nonprofit parties, and tackles youth unemployment by enhancing entrepreneurial skills. The Rotterdam SIB is established as a performance-based subsidy, based on the track record of the service provider. If agreed upon outcomes are achieved the municipality of Rotterdam repays the investors and agreed upon return. The Rotterdam SIB shows characteristics of both social investment and social innovation, but is more an innovative endeavor. The Rotterdam SIB provides an alternative means for tackling youth unemployment since private investors provide operating capital, (interim) outcomes are carefully measured, and government only repays investors when agreed upon results are achieved.