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

Gerard van den Berg, Arne Uhlendorff and Joachim Wolff ()
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Joachim Wolff: Institute for Employment Research (IAB), Nuremberg

No 10730, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 For all types of non-compliance except for missing appointments, their basic cash benefit is withdrawn for three months.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: youth unemployment; sanctions; unemployment; social assistance; post unemployment outcomes (search for similar items in EconPapers)
JEL-codes: C21 C41 J64 J65 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2017-04
New Economics Papers: this item is included in nep-eur and nep-lab
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Citations: View citations in EconPapers (2)

Published - revised version published as 'The impact of sanctions for young welfare recipients on transitions to work and wages and on dropping out" in: Economica, 2022, 89 (535), 1-28

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Related works:
Working Paper: Under heavy pressure Intense monitoring and accumulation of sanctions for young welfare recipients in Germany (2016)
Working Paper: Under heavy pressure: intense monitoring and accumulation of sanctions for young welfare recipients in Germany (2015)
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