The Impact of Sanctions for Young Welfare Recipients on Transitions to Work and Wages and on Dropping Out

61 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020

See all articles by Gerard J. Van den Berg

Gerard J. Van den Berg

University of Bristol

Arne Uhlendorff

IZA Institute of Labor Economics

Joachim Wolff

Institute for Employment Research (IAB)

Date Written: July 2020

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.

Keywords: post unemployment outcomes, sanctions, Social Assistance, unemployment, youth unemployment

JEL Classification: C41, J64, J65

Suggested Citation

Van den Berg, Gerard J. and Uhlendorff, Arne and Wolff, Joachim, The Impact of Sanctions for Young Welfare Recipients on Transitions to Work and Wages and on Dropping Out (July 2020). CEPR Discussion Paper No. DP15037, Available at SSRN: https://ssrn.com/abstract=3661380

Gerard J. Van den Berg (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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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