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The Effects of Marginal Employment on Subsequent Labour Market Outcomes

  • Böheim, René

    ()

    (University of Linz)

  • Weber, Andrea

    ()

    (University of Mannheim)

We analyse the consequences of starting a wage subsidised job, “marginal employment”, for unemployed workers. Marginal employment is a type of wage subsidy paid to unemployed workers and they do not lose their unemployment benefits if the wage is below a certain threshold. We ask if the unemployed who start marginal jobs face better labour market outcomes than those who do not work. A priori it is not clear if those who work in marginal employment improve their labour market status, e.g. by signalling effort, or worsen it by reduced job search effort. We selected unemployed workers and investigate the effect of marginal employment on their labour market outcomes, by means of propensity score matching. Our results suggest that selection into marginal employment is “negative”, i.e. workers with characteristics we usually associate with low-productivity are more likely to select into such jobs. The unemployed who start to work in marginal employment during their unemployment spell suffer a (causal) penalty for doing so, relative to their peers who do not. The penalty, in terms of less employment, more unemployment, lower wages, lessens over time but is still present after three years.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2221.

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Length: 46 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: German Economic Review, 2011, 12 (2), 165 - 181
Handle: RePEc:iza:izadps:dp2221
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  1. Card, David & Kluve, Jochen & Weber, Andrea, 2009. "Active Labor Market Policy Evaluations: A Meta-Analysis," IZA Discussion Papers 4002, Institute for the Study of Labor (IZA).
  2. René Böheim & Andrea Weber, 2011. "The Effects of Marginal Employment on Subsequent Labour Market Outcomes," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 165-181, 05.
  3. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
  4. Julia Angerhausen & Christian Bayer & Burkhard Hehenkamp, 2006. "Strategic Unemployment," Discussion Papers in Economics 06_02, University of Dortmund, Department of Economics.
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  8. David Autor & Susan Houseman, 2009. "Do Temporary-Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'," Upjohn Working Papers and Journal Articles 05-124, W.E. Upjohn Institute for Employment Research.
  9. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2008. "From temporary help jobs to permanent employment: what can we learn from matching estimators and their sensitivity?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(3), pages 305-327.
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  12. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  13. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
  14. Michael Kvasnicka, 2009. "Does Temporary Help Work Provide a Stepping Stone to Regular Employment?," NBER Chapters, in: Studies of Labor Market Intermediation, pages 335-372 National Bureau of Economic Research, Inc.
  15. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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  18. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
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