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The Impact of Sanctions for Young Welfare Recipients on Transitions to Work and Wages, and on Dropping Out

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  • Gerard J. van den Berg
  • Arne Uhlendorff
  • Joachim Wolff

Abstract

The reintegration of young welfare recipients into the labour market is a major policy objective in many European countries. In this context, monitoring and sanctions are commonly used policy tools. We analyse the impact of strict sanctions for young welfare recipients whose institutional setting features sanctions for non‐compliance with job‐search requirements that effectively cancel benefits for a period of 3 months after detection. We consider effects on job‐search outcomes and on dropping out of the labour force, using administrative data on a large inflow sample. We estimate multivariate duration models taking selection on unobservables into account. Our results indicate an increased job entry rate at the expense of an increased withdrawal from the labour force and lower entry wages. Combining quantitative with qualitative evidence reveals that the latter side‐effects of sanctions can have dramatic consequences for the quality of life of the youths involved.

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  • Gerard J. van den Berg & Arne Uhlendorff & Joachim Wolff, 2022. "The Impact of Sanctions for Young Welfare Recipients on Transitions to Work and Wages, and on Dropping Out," Economica, London School of Economics and Political Science, vol. 89(353), pages 1-28, January.
    • Handle: RePEc:bla:econom:v:89:y:2022:i:353:p:1-28
    DOI: 10.1111/ecca.12392
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    Cited by:

    1. Collewet, Marion & Fairley, Kim & Kessels, Roselinde & Knoef, Marike & van Vliet, Olaf, 2024. "The design of welfare: unraveling taxpayers' preferences," OSF Preprints 4am7e, Center for Open Science.
    2. Tübbicke, Stefan, 2023. "How sensitive are matching estimates of active labor market policy effects to typically unobserved confounders?," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 57, pages 1-26.
    3. Holger Schäfer, 2022. "Bürgergeld statt Hartz IV [Citizen’s Income (“Bürgergeld”) or Social Welfare (“Hartz IV”)?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(2), pages 82-85, February.
    4. Julia Schmidtke, 2023. "Linking information on unemployment benefit sanctions from different datasets about welfare receipt: proceedings and research potential," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 57(1), pages 1-19, December.
    5. Dahl, Espen S. & Hernaes, Øystein, 2022. "Making Activation for Young Welfare Recipients Mandatory," IZA Discussion Papers 15170, Institute of Labor Economics (IZA).
    6. Espen S. Dahl & Øystein Hernaes, 2023. "Making activation for young welfare recipients mandatory," LABOUR, CEIS, vol. 37(1), pages 96-121, March.

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    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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