Mutual Learning Programme

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1 Mutual Learning Programme DG Employment, Social Affairs and Inclusion Peer Country Comments Paper- Finland Comprehensive and individual support to LTU locally - with multi-sectoral joint service Peer Review on Approaches to integrate long-term unemployed persons Berlin (Germany) October 2016 Written by Tommi Ålander, TK-Eval September 2016

2 EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Unit A1 Contact: Emilio Castrillejo Web site: European Commission B-1049 Brussels

3 EUROPEAN COMMISSION Mutual Learning Programme DG Employment, Social Affairs and Inclusion Directorate-General for Employment, Social Affairs and Inclusion Peer Review on Approaches to integrate long-term unemployed persons Berlin (Germany) October 2016 September, 2016

4 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE The information contained in this publication does not necessarily reflect the official position of the European Commission This document has received financial support from the European Union Programme for Employment and Social Innovation "EaSI" ( ). For further information please consult: European Union, 2016 Reproduction is authorised provided the source is acknowledged.

5 Table of Contents 1 Labour market situation in the peer country Assessment of the policy measure Assessment of the success factors and transferability Questions... 8 Annex 1: Example of relevant practice... 9 Annex 2: Summary table...10 Annex 3: Long-term unemployment by sex in Finland annual average...12 Annex 4: Finnish service model (PES)...13 Annex 5: Organising the multi-sectoral joint service in Finland...14

6 1 Labour market situation in the peer country This paper has been prepared for a Peer Review within the framework of the Mutual Learning Programme. It provides information on Finland s comments on the policy example of the Host Country for the Peer Review. For information on the policy example, please refer to the Host Country Discussion Paper. The perspective of structural unemployment provides a broad overview of long-term unemployment (LTU) 1 in Finland and can be measured through the number of those difficult to employ. This group includes the long-term unemployed, repeatedly unemployed 2, those becoming unemployed after a measure 3 and those repeatedly circulating between measures. Reducing the structural unemployment has been a long standing strategic objective for the Finnish employment and economic development administration. Since the beginning of 2012, the position of those difficult to employ have become harder and the numbers have increased (see Figure 1). This has been caused by decreased demand for labour, a reduction in the availability of labour policy measures and tightened access to unemployment pension since According to the Employment Service Statistics 4, at the end of July 2016, the number of LTU amounted to 127,200, up 14,100 on the previous year. Of the LTU, 72,800 were men and 54,300 were women. LTU who had been unemployed without interruption for more than two years amounted to 58,800, which is 9,500 more than a year ago. Figure 1. Those difficult to employ (structural unemployment), 2006M M07 Source: Ministry of Employment and the Economy Employment Service Statistics 1 Long-term unemployed are those continuously registered as unemployed jobseekers for 12 months. 2 The repeatedly unemployed are those unemployed for more than 12 months in the last 16 months, excluding the aforementioned continuously long-term unemployed. 3 Those becoming unemployed after a measure are persons whose unemployment began after the end of a labour policy measure and, correspondingly, those transferring from measure to measure are persons who begin on another measure after the conclusion of the previous labour policy measure. The same person can only be included in one group of those difficult to employ at a time, because these groups are mutually exclusive and such information constitutes crosssectional information for the last working day of each month. 4 Finnish Ministry of Economic Affairs and Employment (MEAE). The translation has changed during the Previous translation was Ministry of Employment and the Economy (MEE). Data source: September,

7 According to the Eurostat statistics, where Finnish LTU is much lower than in the statistics of the Employment Service Statistics 5, the numbers of LTU has also gone up since 2012 but are still lower than in the beginning of the millennium. Finnish LTU is roughly on a par with the EU average. In addition to the growing absolute levels of LTU in Finland, it has also increased as a proportion of the active population and total unemployment (see more Annex 3). 5 This is because of different definitions for unemployed. Eurostat statistics are based on the Labour Force Survey of Statistics Finland. See more about the definitions in the footnote of Annex 3. September,

8 2 Assessment of the policy measure In this chapter 6 some aspects regarding the Finnish and German approaches, structures and measures will be compared to each other. This will be done on the basis of available information about the German approach via the host country comments paper and by using the general information on the Finnish approach and utilising the findings of some studies and evaluations. In Finland there are actually three kinds of unemployment benefits and these benefits are granted from two different sources. A person who is not an employee or a full-time entrepreneur or self-employed 7, after registration with the Employment and Economic Development office (TE office), is eligible for: 1) Basic unemployment allowance; or 2) Earnings-related unemployment allowance; or 3) Labour market subsidy. Additionally, unemployed persons, as well as others, are entitled to apply for social assistance and housing allowance. Basic unemployment allowance and labour market subsidy are claimed from Kela (The Finnish Social Insurance Institution). To qualify for the basic unemployment allowance, you must meet certain work requirement (i.e. must have been employed for at least six months during the two years preceding the unemployment). Basic unemployment allowance is paid for a maximum of 500 days. Earnings-related unemployment allowance is claimed from unemployment fund. 8 It is available to members of an unemployment fund only and can be paid for up to 500 days. 9 It can be paid if you have been an unemployment fund member long enough and if a work requirement regarding previous employment is met (i.e. employed for 26 calendar weeks). Earnings-related unemployment allowance consists of the basic unemployment allowance and an earnings-related component. The labour market subsidy is intended for unemployed persons who are not eligible for earnings-related or basic unemployment allowances. It is for a person who enters the labour market for the first time or otherwise has no recent work experience or for an unemployed person who has exhausted his/her 500-day eligibility for the basic or earnings-related unemployment allowance. The time period for receiving the labour market subsidy is not limited. Public employment services (PES) are under the responsibility of the Ministry of Economic Affairs and Employment (MEAE) in Finland. PES are financed by the Government budget and these services are provided according to the Act on Public employment and business service. The service model is based on three services lines which all include LTU (see Annex 4). The principles of the labour market policy in Finland are usually divided into proactive and reactive measures. Measures to tackle LTU tend to belong to the reactive measures. Since LTU are defined as persons who are unemployed for at least one year, LTU can be found having basic unemployment allowance, earnings-related unemployment allowance or labour market subsidy. In Finland, it was recognised several years ago that many of the LTU clients need comprehensive support to be able to employ and the PES alone cannot provide sufficient solution to this. Comprehensive support is needed for example if the client has health or social problems. Therefore the need for multi-sectoral joint service was apparent. In the beginning there were pilots of joint services of the labour administration and municipalities (pair working). Some testing was made in several projects with EU and national funding. There was also a larger experiment of joint services in Finland during the years Later on, the Labour Force Service 6 Finnish MEAE written presentation material (made by Haavisto-Vuori, Liski-Wallentowitz and Ruth) and interview of Haavisto-Vuori used in this chapter as well as web pages of MEAE and Kela. 7 A person is also considered unemployed who has been laid off full-time. A full-time student is not entitled to unemployment benefit. 8 There are several unemployment funds in Finland. 9 There are also some deviations, which may shorten the time of maximum period of 500 days. There is also a preliminary agreement by the social partners to cut off the duration of the earnings-related allowance from the current 500 days to 400 days, if the unemployed refuses to accept the job offers or activation offers. September,

9 Centre (LAFOS) model was established ( ). The model was based on voluntary agreement in local level meaning that the service was not available in all parts of Finland and it provided one-stop shops for the LTU. The new LAFOS is based on the Act on multi-sectoral joint service enhancing employability that came into force on 1 January This multi-sectoral joint service is a working-model, where experts of three authorities of the public administration evaluate together with the client his/her needs for services, draw up functional employment plan and are together responsible for the progress and follow-up of the process. The aim is to provide clients with a workable combination of PES, social-, health and rehabilitative services which support the return and enter to employment. It is important to note that this service is provided through networks and that LAFOS is not an organisation. These regional networks bring together the services of TE Office (providing PES), municipalities (social and healthcare services) and the Finnish Social Insurance Institution (vocational rehabilitation and other services). Each service is provided according to the legislation of the relevant administrative sector (see Annex 5 for organising the multi-sectoral services). LTU in this context means that person has received labour market subsidy for 300 days or more because of unemployment or person has not been in an employment relationship of in full-time employment in business or a full-time student continuously for 6 months (persons under 25 years) or 12 months (persons 25 years and older). Four phases can be recognised in this Finnish multi-sectoral joint service: 1. Guidance to the service. 2. Intensive mapping phase (max. three months) including suitable PES, health, social and other services to collect data in order to draw up the employment plan. 3. Multi-sectoral employment plan, (incl. above mentioned services) with close support and follow-up and evaluation of the process. 4. Multi-sectoral joint service is finished when the LTU no longer needs it (no time limits), meaning that the client has been guided to other services (for example the PES alone can support the client). Although German Jobcentres are organised differently than Finnish joint services the aims of these instances are quite similar to each other. Both are providing comprehensive and individual support to LTU (particularly for hard-to-place clients) locally. Both seem to include multi-professional services that are targeted to meet the individual needs of LTU and the services are provided following the one-stop shop principle. The 4-phase model of German co-operating Jobcenters is also quite similar to the Finnish one. It was mentioned in the Host Country Paper that a practical problem in this context is data protection regulation that makes the exchange of information difficult. This same problem has also been recognised in Finland and introducing socalled TYPPI client database that is available for all LAFOS multi-professionals has solved the problem. Information regarding the individual service process is filed in this common client database. This has been enabled by legislation. The legislation concerning change of information includes provisions of law concerning authorities right to obtain and disclose information. If there is no legislation on delicate information the solution is specific consent in writing by the jobseeker. In the Host Country Paper the provision of complementary social services was raised as an area in which improvement is necessary (particularly more intensive and better cooperation between Jobcentres and external actors). In the beginning of the Finnish LAFOS model implementation, provision of health care services were said to be involved rather lightly in the service selection (however used whenever needed). The Finnish Health Care Act has however changed the situation and now there is a legislative basis for conducting health examinations and counselling for the unemployed. This has led to sharpening of the processes for health care services in this context. The activation centres established by German Jobcenters are based on the networking idea where the different services are bundled. This is the case also in the Finnish LAFOS model. There are also challenges noticed in the Finnish system, which could be also September,

10 considered in the implementation of German activation centres. One of the crucial phases in the process following the mapping exercise (i.e. how smoothly clients move into services that have been identified to meet the needs of the client; the follow-up processes). Delays to this process should be avoided as far as possible. The new Finnish LAFOS has not been evaluated yet like the preceding model/phase. According to the evaluation study on the preceding phase, the service concept has proved to be functional at the local level and multi-sectoral service provision has positive results in assessing and supporting the work capabilities. One of the remarks was also that that private and third sector service providers work in a close co-operation with the PES, municipalities and Social Insurance Institution. Detected challenges of the model were related to the transition to the open labour market and the complexity of management of the multi-sectoral network. Regarding the past German experiences with the activation and integration of hard-toplace (UB2) clients, it was mentioned that so-called 1 -jobs have been widely used ALMP-measure in Germany. Impact evaluations studies in Germany have found that these have a non-positive causal effect of participation in such jobs on their employment prospects in the primary labour market and on leaving the benefit system. The feedback was also similar in Germany in subsidising the secondary labour market in the ESFfunded programme (Kommunal-Kombi) and in the wage subsidy scheme. Finnish experiences and evaluation studies 10 show also that for example subsidising intermediate labour market 11 or rehabilitative work does not really transfer these clients into the primary labour market. When comparing the so-called German 1 -jobs to the Finnish situation, it should be mentioned that in Finland for example part-time work seems to be quite uncommon compared to Germany (with the exception made by those working in intermediate labour market). In Finland, the corresponding measure is probably the so-called rehabilitative work 12, although it is not categorised as a work, but social service. However, Finnish experiences show that these measures do not form an effective route into the (open and) primary labour market and actually highlight how difficult it is to cross the threshold of employment in the primary labour market. These measures have mainly cutting off and activation effects for the LTU. The German experiences that intensified counselling with reduced caseloads and higher contact intervals have significant positive effects on the employment prospects of the target group can also be joined from the point of view of Finnish experiences. It has also been recognised in Finland that tailor-made solutions for clients produce better results. However, this is a challenging task to be handled because PES have tight resources available in combatting unemployment and LTU. It is always a question of resources (and staffing) against the possibility to provide individual support to as many clients as possible. Intensified counselling happens most like in LAFOS and ESF-projects or in some other measures where the separate funding in available. There are also some signs that networking may give good results in combatting LTU. During a municipality trial was launched in Finland and it ran parallel to LAFOS. In this trial the division of the tasks between the PES and municipalities was changed by increasing the responsibility of the municipalities in coordination of the services. Consequently, the municipalities took the responsibility of networking in these trial cases. A characteristic to this trial was that caseloads were lower than on average in PES. 13 The evaluation study 14 made on the trial shows that the development of unemployment/ltu has been more favourable in the trial cases than on the cases not involved in the trial. The evaluation links this development to the quality and holistic nature of the approach - the sectoral resources are led and 10 For example Lääperi et. al. Valtakunnallisten ESR-kehittämisohjelmien arviointi, STM Wage subsidies granted to NGOs. 12 Rehabilitative work is intended for LTU to improve their employability and life skills. Organization of rehabilitative work is based on Rehabilitative Work Act. The law provides that persons entitled activation plan and to whom rehabilitative work is organized. 13 The Municipality trial included about clients on an annual basis. 14 Arnkill et al. Kokonaisvoimavarat käyttöön työllisyyden edistämisessä. TEM, September,

11 coordinated well. It also includes the observation that the client guidance and measures provided are well developed. Similarly, the mapping phase gets a lot of emphasis. When considering the job hunting that has been made in Germany it can be noticed that this is a familiar measure also in Finland. In Finland, there has been some job hunting trials where the target group has been also these hard-to-place clients. Experiences however show that it is not working well with this target group. Instead, this kind of individual job hunting service will be used in the future only for easier-to-place clients mainly as a purchased external service and it will involve a payment by results principle for the service provider. In the Finnish system the job hunting and on-the-job coaching services are usually combined. Both are provided by same service provider. This usually provides a good chance to ensure information exchange in the process. In Germany, Jobcenters are free to decide whether coaching is provided internally or externally. In Finland, on-the-job coaching is purchased only from the external service providers and it can include also job hunting. Experiences from the Finnish on-the-job coaching do not give too many promises for successful integration of LTU in the primary labour market. According to MEAE statistics from the beginning of 2016, about half of the coached clients returned unemployed after the coaching. In addition, after the Finnish study 15 on-the-job coach services employment outcomes have been generally meagre in job coach services. The study examined job coach services in vocational rehabilitation organised by the Social Insurance Institution and the MEAE, their target groups, implementation of the service and its outcomes. Though employment outcomes were only modest, it was found in the study that the clients reported many kinds of other benefits, and the general assessments of the usefulness of the service were primarily positive. And, let us not forget that outcomes are always dependent on the specific nature of target groups like in this case. 15 Härkäpää et al. Job coach services and their needs for development. Helsinki: The Social Insurance Institution of Finland, Studies in social security and health 128, September,

12 3 Assessment of the success factors and transferability A consideration of whether the success factors are applicable and transferable to Finland is quite hard to make at the moment, because some of these new approaches taking place in Germany have already been implemented in Finland. In that sense, the comparative examination would be beneficial between the countries after the German reforms have been in place for some time. Comparative analysis would be interesting regarding the effectiveness of the measures and on the functionality of some procedures involved in combatting LTU. The idea of establishing activation centres in Germany is very similar to the Finnish Labour Force Service Centre (LAFOS). The idea is to bring actors together to intensify the individual support for those jobseekers who are furthest away from the labour market. Due to the similarities there could be a lot to learn from each other regarding the processes, for example processes after the client mapping phase and processes to ensure functional institutional co-operation. All effective ways of transferring LTU to the primary labour market are welcomed. Onthe-job coaching has been considered as a potential element (in the context of ESF programme) in Germany. Finnish experiences with this measure in integration of LTU in the primary labour market are not very good. Therefore, it will be interesting to follow the German experience in this area. The German ESF programme for the LTU provides wage subsidy for employers if they hire a member of target group. Wage subsidies are also used in Finland, but it is rarely used as a measure in the ESF context. It seems that the German wage subsidy scheme is more generous than the Finnish one particularly for the intensive support group. In addition, the German approach involves a degression rule and employers are obliged to employ the subsidised worker for at least an additional six months. These elements are not included in the Finnish scheme. It will be interesting to follow how this German scheme with the degression rule and particularly the employers obligation to employ for the extra-time will bear fruit. Will it even create demand of labour? September,

13 4 Questions It would be useful to have further information on the following issues: Considering the so-called German 1 -jobs for LTU: - It would be interesting to know more about the content of the jobs. How do these jobs compare to minimum wage level jobs? - In the new German initiatives to combat LTU, the networks for activation and counselling form an important element. Are you still going to keep 1 -jobs in your policy toolbox, even though evaluations have found it unsatisfactory? Are there any alternative measures in use or coming up? What has been done and will be done in the activation centres in order to ensure that process proceed smoothly after the mapping phase? After some time, when there will be more experiences of the new approaches, it would be interesting to hear experiences from: - German experiences regarding on-the-job coaching in supporting LTU transfer to the primary labour market. - How the degression rule and particularly the employers obligation to employ for the extra-time will bear fruit in the German Wage subsidy scheme. September,

14 Annex 1: Example of relevant practice Name of the practice: The working model of multi-sectoral joint service (LAFOS). Based on Act on multi-sectoral joint service enhancing employability. The Act came into force on 1 January 2015 ensuring and enlarging the multi-sectoral joint service (The Labour Force Service Centre, LAFOS) as a nationwide service in Finland. Year of implementation: The evolution of the multi-sectoral joint service started in The emergence of the operating model was influenced by attempt to reform the distribution of costs between central and local government in the treatment of the LTU receiving labour market subsidy. In the beginning there were pair working pilots of joint services of the labour administration and municipalities. This was followed by experiment of joint services in Finland during the years Later on, the LAFOS model was established ( ). The model was based on voluntary agreements at the local level meaning that the service was provided in one-stop shops for the LTU, but at this stage it was not available in all parts of Finland. The new LAFOS is based on the Act on multi-sectoral joint service enhancing employability that came into force on 1 January Coordinating authority: Municipalities in Finland. Objectives: Many of the LTU clients need comprehensive support to be able to employ and PES alone cannot provide sufficient solution to this. Comprehensive support is needed for example if the client has health or social problems. Therefore the need for multi-sectoral joint service was apparent. Main activities: This multi-sectoral joint service is a working-model, where experts of three authorities of the public administration evaluate together with the client his/her needs for services, draw up functional employment plan and are together responsible for the progress and follow-up of the process. The aim is to provide client a workable combination of PES, social-, health and rehabilitative services which support the client to enter labour market. It is essential to notice that this service is produced in a network and LAFOS is not an organisation. These regional networks brings together the services of TE Office (providing PES), municipalities (social and healthcare services) and the Finnish Social Insurance Institution (vocational rehabilitation and other services). Results so far: The multi-sectoral joint service now has a legislative basis and services are available nationwide. The organisation and structure of the joint service have evolved and worked well at the local level. The exchange of information is ensured via the TYPPI client database available for all LAFOS multi-professionals. The new Finnish LAFOS has not been evaluated yet like the preceding phase. According to the evaluation study on the preceding phase, the service concept has proved to be functional at the local level and multi-sectoral service provision has positive results in assessing and supporting the work capabilities. One of the remarks was also that that private and third sector service providers work in a close co-operation with the PES, municipalities and Social Insurance Institution. September,

15 Annex 2: Summary table Labour market situation in the Peer Country Long-term unemployment continues to grow in Finland, both in absolute and relative terms. About one in four of the unemployed in Finland are long-term unemployed. Consideration from the perspective of structural unemployment reveals that there is also a larger group (in addition to LTU) of people who are repeatedly unemployed and/or shifting from labour market policy measures to unemployment in Finland. Reducing the number of LTU has been a long standing strategic objective for the Finnish PES. Assessment of the policy measure The aims of Finnish joint services (LAFOS) and German Jobcentres (and particularly activation centres) are quite similar to each other. Both are characterised by comprehensive and individual support to LTU including multiprofessional services and one-stop shop principle. There are also challenges noticed in the Finnish system, which could be considered in the implementation of German activation centres. One of the crucial phases in this process is that following the mapping stage. How smoothly clients move into service that has been identified to meet the needs of the client? How these processes are ensured? A practical problem in this context is data protection regulation that makes the exchange of information difficult. In Finland so-called TYPPI client database has been introduced to solve this problem. It is available for all multi-professionals working for the client. Information regarding the individual service process is filed in this common client database. This has been enabled by legislation. The German experiences that intensified counselling with reduced caseloads and higher contact intervals have significant positive effects on the employment prospects of the target group can also be joined from the point of view of Finnish experiences. Finnish experiences regarding the job hunting for hard-to-place clients show that it is not working well with this target group. Instead, this kind of individual job hunting service will be used in the future only for easier-to-place clients mainly as a purchased external service and it will involve a payment by results principle for the service provider. Assessment of success factors and transferability A consideration of whether the success factors are applicable and transferable to Finland is quite hard to make at the moment, because some of these new approaches taking place in Germany have already been implemented in Finland. Due to similarities of German activation centres and Finnish LAFOS there could be a lot to learn from each other regarding the processes, for example processes after the client mapping phase and processes to ensure functional institutional co-operation. On-the-job coaching has been considered as very potential element (in the context of ESF programme) in Germany. Finnish experiences with this measure September,

16 in integration of LTU in the primary labour market are not very good. Therefore, it will be interesting to follow the German procedures and experiences. Questions Considering the so-called German 1 -jobs for LTU: - It would be interesting to know more about the content of the jobs. How do these jobs compare to minimum wage level jobs? - In the new German initiatives to combat LTU, the networks for activation and counselling form an important element. Are you still going to keep 1 -jobs in your policy toolbox, even though evaluations have found it unsatisfactory? Are there any alternative measures in use or coming up? What has been done and will be done in the activation centres in order to ensure that process proceed smoothly after the mapping phase? After some time, when there will be more experiences of the new approaches, it would be interesting to hear experiences from: - German experiences regarding on-the-job coaching in supporting LTU transfer to the primary labour market. - How the degression rule and particularly the employers obligation to employ for the extra-time will bear fruit in the German Wage subsidy scheme. September,

17 Annex 3: Long-term unemployment by sex in Finland annual average Thousand persons Females Males Total Percentage of active population Females Males Total Percentage of unemployment Females Males Total (Source: Eurostat.) In Finland, unemployment is monitored through two different statistics every month. The Labour force survey of Statistics Finland is based on sampling, while the Employment Service Statistics of the Ministry of Economic Affairs and Employment are compiled on the basis of the information in the TE offices customer register. The unemployment figures in the Labour force survey and the Employment Service Statistics differ from each other because the two statistics are based on different criteria concerning job-seeking activeness and labour market availability. In the Employment Service Statistics of the Ministry of Economic Affairs and Employment persons that are not in employment relationship or employed in business are listed as unemployed. Persons fully laid-off but not full-time students are also categorised as unemployed in the Employment Service Statistics. The Labour force survey of Statistics Finland has stricter definition for unemployed: A person is unemployed if he/she has actively sought employment during the preceding four weeks and is available for work within two weeks. The figures of the Labour force survey of Statistics Finland are internationally comparable and thus they are the official Finnish unemployment statistics. September,

18 Annex 4: Finnish service model (PES) The LTU structure in Finland is actually very heterogeneous. The client positioning into the service line is based on assessment done in TE Offices. For example, the client in the Employment and business service line usually has no problems with the vocation and competencies. Long term unemployed (LTU) are serviced in all three services lines. The share of LTUs is highest in the Supported employment service line. Source: Ministry of Economic Affairs and Employment in Finland. September,

19 Annex 5: Organising the multi-sectoral joint service in Finland 33 local networks, each having an agreement (contract) on cooperation Each network has a management group, which is responsible for organising the joint service locally - Term is three years (first term being ) - Municipalities choose the chairman - Each management group has a position to really influence how the multi-sectoral joint service is being implemented Each organisation directs enough personnel and allocates funds for the joint service The head of the local multi-sectoral joint service is chosen by the municipalities The Ministry of Economic Affairs and Employment has set up a cross-sectoral national steering group for the joint service Source: Ministry of Economic Affairs and Employment in Finland. Some other central Finnish Acts which influence on the LAFOS service supply (in addition to Act on multi-sectoral joint service enhancing employability): Act on Public Employment and Business Service Act on Rehabilitative work Social Welfare Act September,

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