Benefit Sanctions: Detailed Methodology

This paper, which accompanies the National Audit Office report on benefit sanctions in the UK, provides an evaluation of the labour market impact of benefit sanctions for Work Programme claimants, a large welfare-to-work programme targeting the long-term unemployed in the UK. We use rich administrative data from the Department for Work & Pensions which include information on the benefit and employment history of claimants. We exploit the random assignment of claimants to different Work Programme providers and the variation in sanction referrals, across providers, to estimate an instrumental variables model. The model allows us to identify the impact of sanctions on benefit receipt, likelihood of employment and earnings. We find that sanctions make jobs more likely for Jobseeker’s Allowance claimants but less likely for sick and disabled claimants of Employment and Support Allowance. In addition, our results on earnings suggest that Jobseeker’s Allowance claimants are often moving to jobs with shorter hours and/or lower wages. Our analysis provides the first UK evidence, using individual level data, on the impact of benefit sanctions on the labour market outcomes of sanctioned claimants and contributes to the very limited research on the impact of benefit sanctions on the labour market outcomes of claimants with disabilities.