The paradox effects of low wage subsidies : the effect of reciprocity norms on employment stability in subsidized employment

Abstract

"This dissertation is concerned with employment stability in financially subsidized employment (in-work benefits: German 'Kombilöhne') on three different levels of analysis. The main focus is first the evaluation of in-work benefits as an active labour market programme. The starting point is an observation that has seldom been scrutinized closely, namely that employment subsidized by in-work benefits only tends to be of short duration. Since this indicates that more income might even shorten the duration of employment, the observation is treated as a paradox, in accordance with Boudon. The dissertation analyzes the factors which might hinder stable integration into employment by means of in-work benefits. Where social action theory is concerned, this leads on to challenging the concept of rationality as financial utility maximization, a concept which is often assumed with regard to the effect of labour market programmes. As an alternative, with regard to current sociological, economic and social-psychological research, the norm of reciprocity in wages and working performance is shown to influence the actions of employees in employment. From a methodological point of view the dissertation analyzes to what extent the randomized experiment as a benchmark methodology in labour market research as well as Rubin's Causal Model (RCM) and propensity score matching are applicable to the analysis of social actions. It is then shown that, contrary to certain criticism from the social sciences, the RCM can indeed serve as an adequate research framework in sociology. From the above mentioned theoretical analysis of social action, the hypothesis is derived that the subjective and normative reasons of the subsidized employees for behaving according to the norm of reciprocity endanger the continuance of employment. The hypothesis was tested, based on a survey of in-work benefit recipients (2002/03) and using propensity score matching, and was for the most part supported by the data. In addition, numerous sensitivity checks and robustness tests were conducted to underline the validity of these results. The conclusion drawn is that both the conceptualization as well as the evaluation of active labour market policy can profit from taking into account not only financial utility maximization but also subjective and normative reasons for human behaviour." (Author's abstract, IAB-Doku) ((en))

Cite article

Krug, G. (2009): Paradoxe Wirkung von Niedriglohnzuschüssen. Zum Einfluss der Reziprozitätsnorm auf die Stabilität finanziell geförderter Beschäftigung. (IAB-Bibliothek 319), Bielefeld: Bertelsmann, 223 p. DOI:10.3278/300674w