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Fast track to the labour market or highway to hell? The effect of activation policies on quantity and quality of labour market integration

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Abstract

Activation policies such as sanctions, workfare employment and counselling and monitoring schemes have been found to speed up labour market reintegration. At the same time, it has been suspected that this quicker reintegration is paid for with worse job quality, e.g. in terms of lower wages. I contribute to this discussion by analysing the effects of a workfare (counselling and monitoring) scheme from Germany on employment probability and post-unemployment wages via regression-adjusted matching estimations. This scheme tightens behavioural requirements for unemployed workers but also offers support in terms of more intense counselling. The results point to a strongly positive effect on employment probability but no effect on wages. They are robust to changes in the matching algorithm, and placebo tests refute concerns about endogenous selection or substitution effects. These findings contrast the results from previous research on sanctions, which confirmed a negative effect on job quality. This puzzle suggests that the existence of adverse effects on job quality depends on the type of activation programme. While it may indeed be there for very intense kinds of activation, it can be avoided if the right balance between pressuring and supportive components is found.

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  • Lukas Fervers, 2016. "Fast track to the labour market or highway to hell? The effect of activation policies on quantity and quality of labour market integration," IAW Discussion Papers 125, Institut für Angewandte Wirtschaftsforschung (IAW).
  • Handle: RePEc:iaw:iawdip:125
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