10 March 2015

Sanctions help jobseekers into work?

Benefit sanctions are supposed to give jobseekers an incentive to take necessary action to get in to work. Agencies such as Citizens Advice say they can be counter-productive when actually imposed "Claimants are distracted from job-hunting as they focus on putting food on the table and keeping a roof over their head." In contrast, on 4 February 2015, Rt Hon Esther McVey MP, Minister of State for Employment told the Work and Pensions Committee "... and there is further research that, should somebody have been sanctioned, it helps them into work afterwards."

So I asked for the evidence and (unusually for the DWP) they sent it!

"The minister referred to a range of international evidence regarding the impacts on
employment following a benefit sanction. Recent studies from Denmark, Germany,
Netherlands and Switzerland show an increased employment uptake for recipients of
unemployment insurance or welfare benefits after a benefit sanction has been imposed"

See below for the research they've relied on together with some other data I thought was relevant:

Source Location Dates Typical SanctionUnemployment then/January 2015
van den Berg G, van der Klaauw B, van Ours J (2004) Punitive sanctions and the transition
rate from welfare to work. J Labor Econ 22:211–241
Holland 2003-2005 20% 1-2 months6%/7.2%
Abbring J, van den Berg G, van Ours J (2005) The effect of unemployment insurance
sanctions on the transition rate from unemployment to employment. Econ J 115:602–630
Holland 1992-1998(?) 5% 4 weeks?/7.2%
The Effect of Punitive Sanctions on the Transition rate from Welfare to Work Qureshi Denmark 2007-8 33% 3 weeks2.2%/4.6%
van der Klaauw B, van Ours J (2013) Carrot and stick: how re-employment bonuses and
benefit sanctions affect exit rates from welfare. J Appl Econometrics 28(2):275–298
Rotterdam, Holland 2000-2003 10%5.3% */7.2%
Svarer M (2011) The effect of sanctions on the exit rate from unemployment: evidence from
Denmark. Economica 78(312):751–778
Denmark 2003-2005 2-3 days or 3 weeks 15%5.7%/4.6%
The Effect of Benefit Sanctions on the Duration of Unemployment Rafael Lalive Switzerland 1997-8 3 weeks 100%4.5%/3.5%
Boockmann et al (2014) Intensifying the use of benefit sanctions: an effective tool to increase
employment? IZA Journal of Labor Policy 3:21
Germany  2006-7 10%9.5%/5%
Data source Click on the "Jobless figure for the country of interest. A * indicates incomplete data.

We could argue about the definition of"recent" but let's not other than to observe that the data for this research mostly pre-dates the general rise in unemployment during 2008.

During this period it was employers who had a hard time in the job market so lighting a fire under lazy "jobseekers" might well have persuaded them to take jobs that would otherwise have remained vacant.

At times of high unemployment it's still possible that some sanctioned jobseekers will compete very hard and get jobs that the non-sanctioned also tried for but total unemployment will be unaffected.

What would be useful is some research from a time of high unemployment, preferably from Britain and I've asked DWP if they have any However, the study in Germany at a time of 9.5% unemployment (Boockman) is close but it makes the usual mistake of  looking at higher employment of a small group subjected to a particular treatment while ignoring the displacement of their untreated competitors.

So, strictly speaking, DWP have answered the question. Things we don't know include:
  • How much evidence to the contrary is out there
  • If the DWP is aware of it
  • If there is more relevant UK evidence from a time of high unemployment


Severity of Sanctions 


This is another important factor. Most of the sanctions in the table above are less severe than current UK regime. In the UK, sanctions are for a minimum of 4 weeks and can go up to 3 years. Nominally they are 100% benefit cuts although the little advertised and restrictive hardship payments system can reduce them to to 40%. Form this is could be argued that the UK is more coercive leading to better results. There's two main objections to this logic:

  • The usual one about the futility of coercing people into non-existent jobs
  • Whether the jobseeker is close to destitution or not
To expand on the second point, some jobseekers have sufficient savings for a sanction not to be an immediate distraction from jobseeking while still unpleasant and "motivating". It's also plausible that for some claimants, it does (as mentioned above) render them "distracted from job-hunting as they focus on putting food on the table and keeping a roof over their head"

So, the research that's really needed should look at the effects of sanctions on near-destitute jobseekers. One way of detecting this is to look at the fate of sanctioned jobseekers  with very low savings. The DWP should have the savings data but so far as I know, they haven't attempted a correlation with fate.

Perhaps an FOI request for another day?

Part 2: Sanctions help jobseekers into work? (Contrary evidence)

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