Activation of welfare recipients

Abstract

"This dissertation analyzes the impact of activation on job search strategies and the situation of welfare recipients in Germany. It consists of four microeconometric ex-post evaluation studies, using cross-sectional data from winter 2005/06 with rich information on more than 15,000 unemployed welfare recipients from January 2005. Methodologies used are statistical matching and regression discontinuity models. Results on benefit sanctions show that sanctions increase the probability to find regular employment. There are no effects, however, on job search intensity or reservation wages. Results on individual action plans (IAP) show that IAP mainly exert compulsion on the unemployed and less support. IAP increase search intensity and slightly reduce reservation wages but do not lead to increased re-employment probabilities, rather to lock-in effects due to obligatory work measures. Results on the effect of activation without compulsory elements (monitoring and sanctions) on reservation wages show that reservation wages of older unemployed strongly increase. Results on mental health show that compulsory elements of activation are not generally detrimental for mental health. We find, however, that older unemployed in East Germany are in better mental health as soon as they have the option to receive welfare without monitoring and sanctions. In sum, the dissertation shows that activation can change the job search strategy of unemployed welfare recipients, especially job search intensity, since reservation wages lie at the bottom of the wage distribution. The results on sanctions imply that activation can also reduce the non-monetary expectations of unemployed towards a new job, or lead to intensified counseling. As a consequence, activation can lead to an increase in the frequency of job offers and/or job search efficiency, and, ultimately, re-employment rates. Changes in job search strategies do not translate into job search success in all cases. Then, activation might negatively affect mental health and thereby raise exits into health and disability benefit receipt." (Text excerpt, IAB-Doku) ((en))

Cite article

Schneider, J. (2010): Activation of welfare recipients. Impacts of selected policies on reservation wages, search effort, re-employment and health. Berlin, 158 p.