Discussion paper

DP15037 The impact of sanctions for young welfare recipients on transitions to work and wages and on dropping out

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.

£6.00
Citation

Van den Berg, G, A Uhlendorff and J Wolff (2020), ‘DP15037 The impact of sanctions for young welfare recipients on transitions to work and wages and on dropping out‘, CEPR Discussion Paper No. 15037. CEPR Press, Paris & London. https://cepr.org/publications/dp15037