Under Heavy Pressure: Intense Monitoring and Accumulation of Sanctions for Young Welfare Recipients in Germany

41 Pages Posted: 1 May 2017

See all articles by Gerard J. van den Berg

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Arne Uhlendorff

IZA Institute of Labor Economics

Joachim Wolff

Institute for Employment Research (IAB)

Abstract

With the introduction of a new welfare benefit system in 2005, Germany implemented quite strict benefit sanctions for welfare recipients aged younger than 25 years. For all types of non-compliance except for missing appointments, their basic cash benefit is withdrawn for three months. A second sanction of the same type within one year implies a complete benefit cut for three months. We analyze the impact of these sanctions on job search outcomes and on transitions out of the labor force. Our analysis is based on administrative data on a large inflow sample of young male jobseekers into welfare in West Germany.We estimate separate models for people living alone and people living with their family, as sanctioned welfare recipients living with other household members can partly rely on their support and might react less by increasing search intensity and lowering reservation wages. We estimate the parameters of multivariate duration models taking selection based on unobservables into account. Our results suggest that both the first and the second sanction increase the probability of finding a job, but that these jobs go along with lower earnings due to first but not the second sanction. Moreover, first sanctions significantly increase the transition rate out of the labor force of both groups of young men, while the second sanction amplify this effect only for young men living in single households.

Keywords: social assistance, unemployment, sanctions, youth unemployment, post unemployment outcomes

JEL Classification: J64, J65, C41, C21

Suggested Citation

van den Berg, Gerard J. and Uhlendorff, Arne and Wolff, Joachim, Under Heavy Pressure: Intense Monitoring and Accumulation of Sanctions for Young Welfare Recipients in Germany. IZA Discussion Paper No. 10730. Available at SSRN: https://ssrn.com/abstract=2960539

Gerard J. Van den Berg (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Arne Uhlendorff

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Joachim Wolff

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

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