During and after the labor restructuring program it is important to carry out a cost-benefit analysis of the various elements of the labor program so it is possible to decide which approach is the most suitable and beneficial to the situation at hand and to make midcourse corrections as needed in the design and implementation of the program. Although critical to success, monitoring and evaluation activities are often a neglected aspect of the labor restructuring process. Capacity in this area needs to be built and systems put in place to evaluate the individual elements and the program as a whole.
Governments often invest too little in monitoring and evaluation even though there are several potential benefits:
Governments commonly fail to monitor labor programs effectively
For these reasons, monitoring and evaluation activities are important and explicit efforts are required to include the activities in the early stages of program design and after implementation to evaluate the net impact of the program.
Monitoring and evaluation tools can be incorporated in all four phases of the PPI process, as table 1.4 illustrates. Among the tools are:
| Activity | Initial assessment (Phase 1) |
Design clarification (Phase 2) |
Performance monitoring (Phase 3) |
Impact monitoring and evaluation (Phase 4) |
|---|---|---|---|---|
| Orientation | Relevance and feasibility | Clarification and improvement | Justification and fine-tuning | Justification, accountability, and review |
| Focus of work | Program context and goals | All elements; specific objectives | Delivery and outputs | Outcomes |
| Timing | Before implementation | Before and during implementation | During implementation | After implementation |
| Typical issues |
|
|
|
|
| Typical tools |
|
|
|
|
Source: Adapted from Owen and Rogers 1999.
Monitoring and evaluation early in the design of the program are critical in helping governments compare alternative options for severance and redeployment and in determining the cost and financing needs. Evaluation has to take into account the financial and economic returns of both the various components of the labor program and the program as a whole and the outcomes of the program itself in terms of effects on workers and on the enterprise. Periodic monitoring is important in keeping track of the program and learning from experience.
A cost-benefit analysis has two main dimensions: financial returns and economic returns. From a public finance perspective, the financial returns of a labor program will be central to decisionmakers. This is particularly the case where the enterprise takes a loss and completing the labor restructuring will bring an improvement in public finances by reducing government transfers and subsidies and increasing tax payments from PPI firms. Provided that no rehiring takes place, labor programs can be cost-effective with a payback period ranging from two to six years. Labor programs thus appear to offer good rates of financial return that few public investment projects would be able to match.
However, economic returns also need to be calculated and taken into account for several reasons:
The economic rate of return from a labor program can be defined as the net increase in marginal productivity of surplus staff redeployed to another productive activity elsewhere in the economy, and the marginal gain from avoided labor-related costs; available evidence shows that it can be high. Returns are particularly high if there are other opportunities for employment and if redundant workers are likely to find jobs in the labor market.
Module 7 examines in greater detail the approach, methodology, and findings on both financial and economic returns in labor programs. It also provides the necessary tools to carry out cost-benefit analyses of labor programs.
Most evaluations of work force restructuring programs reveal very fast payback periods.
Evaluating the impact of the labor restructuring program on workers is another aspect of evaluation. Such evaluations typically cover (a) the impact on employment because job losses are important "headline" figures in the media and elsewhere and understanding what happens to jobs is important economically and politically; (b) the impact on wages and benefits; (c) the broader impact on workers' welfare in terms of their socioeconomic profile; and (d) the follow-up situation of workers, including duration of unemployment and types of jobs found. Item (d) is particularly relevant in the evaluation of redeployment and training schemes, where common objectives are to reduce the period of unemployment and to prevent displaced employees from entering a pool of long-term unemployed workers. An equally important question for evaluation is the impact of labor restructuring on enterprise efficiency, including improvements in labor productivity, and on financial and operational performance.
These effects are often assessed through ex post worker and firm surveys. Such surveys are being carried out in a number of countries (for example, Brazil, India, and Vietnam). Module 7 highlights the main types of data that are usually collected in the surveys and the methodology for carrying out such assessments.
A central requirement of any evaluation is that it separate the effects that would have happened anyway from those that resulted from the specific intervention. Before and after comparisons alone are not sufficient. If earnings rise after training, for example, that may not result from the training but from changes in the macroeconomy, local changes in labor demand, or such worker-specific attributes as lifecycle earnings changes.
Evaluation therefore requires a counterfactual alternative, which is normally provided by a control or comparison group of workers who did not participate in the severance or redeployment program. Counterfactual analysis can use either of the following groups:
Selecting appropriate evaluation techniques and counterfactuals is particularly important when examining the impact of redeployment programs. Policymakers need to know whether the resources they are spending are being efficiently used and whether programs are having the intended effect. Such analysis also helps make informed decisions on whether to expand, better target, or scale down programs. A range of evaluation techniques is available and module 7 discusses these in detail.
Economic analysis provides a perspective that financial analysis alone cannot provide.
Monitoring differs from evaluation in that it is principally a management function aimed primarily at keeping track of implementation and making periodic assessments of the performance of the program (see box 1.17).
In potentially large-scale labor restructuring programs involving great numbers of workers and significant financial resources, it is important to monitor the implementation of the program to ensure that funds are being properly used to help workers and that all workers are being helped. At a minimum this requires the development of a system that tracks the numbers of workers leaving the enterprise and expenditures on severance and redeployment at the enterprise level and for the PPI program as a whole.
Periodic assessments or monitoring the performance of the various aspects of the labor program– for example, severance payments and redeployment support–also help policymakers and practitioners learn from experience and undertake mid-course corrections as needed. The potential benefits of such assessments are large: one study in Tanzania found that the information from monitoring studies could have saved government up to US$7 million during the course of retrenchment of around 5,000 state enterprise workers.
Monitoring of redeployment programs can be particularly valuable in that it can help identify weaknesses in the implementation of the program (for example, late disbursement of funds, lack of information on redeployment services) and readjust programs to deliver more appropriate training, counseling, and redeployment services to workers.
Monitoring is the continuous assessment of program implementation in relation to agreed schedules and the use of program outputs by beneficiaries.
Evaluation is the periodic assessment of the relevance, performance, efficiency, and impact of the program in relation to stated goals.
