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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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  • Van den Berg, Gerard
  • Uhlendorff, Arne
  • Wolff, Joachim

Abstract

The reintegration of young welfare recipients into the labor market is a major policy objective in many European countries. In this context, monitoring and sanctions are commonly used policy tools. We analyze the impact of strict sanctions for young welfare recipients in Germany. The German benefit system is characterized by harsh sanctions for this group, effectively cancelling benefits for three months after detection of non-compliance with job search requirements. We analyze the impacts of these sanctions on job search outcomes and on dropping out of the labor 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 labor 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.

Suggested Citation

  • Van den Berg, Gerard & Uhlendorff, Arne & Wolff, Joachim, 2020. "The impact of sanctions for young welfare recipients on transitions to work and wages and on dropping out," CEPR Discussion Papers 15037, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15037
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    Cited by:

    1. Dahl, Espen S. & Hernaes, Øystein, 2022. "Making Activation for Young Welfare Recipients Mandatory," IZA Discussion Papers 15170, Institute of Labor Economics (IZA).
    2. Stefan Tübbicke, 2023. "How sensitive are matching estimates of active labor market policy effects to typically unobserved confounders?," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 57(1), pages 1-16, December.
    3. 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.
    4. 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.
    5. 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

    Keywords

    Social assistance; Unemployment; Sanctions; Post unemployment outcomes; Youth unemployment;
    All these keywords.

    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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