Many OECD countries have taken steps to increase competition in areas that have been typically dominated by public monopolies in the past. The goal is to improve the production and delivery of public goods and services. Among these areas, governments have introduced market signals to make the public employment service (PES) contestable in some of its activities in order to improve its effectiveness. This has involved i) liberalisation of the rules and regulations governing private employment agencies; ii) the use of market-type mechanisms (MTMs) such as contracting-out; and iii) organisational reforms, for example separating purchasers and providers of services to jobseekers.

Separating purchasers and providers is an important requirement to make the delivery of public services contestable. For example, if the PES provides training and also purchases it on the open market, it may have the incentive to deal with only one segment of the market, making it difficult to compare its ...