Employment Service:

More Jobseekers Should Be Referred to Private Employment Agencies

HRD-86-61: Published: Mar 31, 1986. Publicly Released: Mar 31, 1986.

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William J. Gainer
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Pursuant to a congressional request, GAO reviewed the implementation of the Employment Service Act to determine whether additional actions might be taken to better ensure that private employment agency resources are appropriately utilized to reduce unemployment.

GAO found that: (1) Department of Labor and state employment services have made little effort to use private employment agency resources; (2) 20 states have policies and practices explicitly prohibiting referrals to private agencies, even when jobseekers are not charged fees, because there is concern that increased referrals to private agencies could lead to displacement of employment service offices and staff; and (3) since there are no Labor regulations requiring states to make such referrals, state employment agencies continue to decline referrals to private agencies. GAO also found that: (1) when two welfare programs referred jobseekers to private employment agencies, the agencies increased placements and reduced the time taken to find jobs; (2) private agency placements were at least as cost-effective as placements under state employment services; (3) private agencies are a useful supplement to state employment services because they have additional job openings and, unlike state employment services, are not paid unless they place jobseekers successfully for a specified time; (4) reduced unemployment insurance and welfare outlays can be expected from increased placement of employment service jobseekers; and (5) including private agency jobs in state employment service listings might beneficially broaden the employment services' job opening base and help them serve a more useful clearinghouse function.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress does not plan to address this matter again on an individual basis, but will do so only in the context of legislation dealing with broader reform issues related to the Employment Service's role, structure, and effectiveness.

    Matter: Congress may want to amend the Employment Service Act to specifically require that state employment services solicit private employment agency job openings and refer jobseekers to them so long as the jobseekers are not charged fees. Pending consideration of the amendments to the Employment Service Act, Congress may also want to consider, as an interim measure, the language in Labor's annual appropriations act providing that grants to state employment services are conditional on their soliciting and making such referrals to private agency job openings.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Labor did not concur that regulations mandating state action are appropriate. Labor issued a field memorandum encouraging, rather than requiring, solicitation and referral of jobseekers to private employment agencies. The report recommended that, if Labor did not develop regulations, Congress should consider legislation, which it will not do other than in the context of broader reform.

    Recommendation: The Secretary of Labor should develop regulations and guidelines that require state employment services to solicit job openings from private employment agencies and refer jobseekers to them so long as the jobseekers are not charged fees.

    Agency Affected: Department of Labor

  2. Status: Closed - Implemented

    Comments: Labor convened a series of public meetings to solicit recommendations for the Secretary on this subject and analyzed those recommendations. Based on this review, Labor proposed legislation for desolving the entire Employment Service program to the states. It thus believes that no further federal action on this matter is appropriate.

    Recommendation: The Secretary of Labor should evaluate, in consultation with affected parties, additional approaches for increasing the use of private employment agency resources to place employment service jobseekers.

    Agency Affected: Department of Labor


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