• Chart of the Week
  • February 19, 2019

Looking for work first

Four job candidates waiting for an interview.

OPOLJA

Every welfare program faces a fundamental problem: how do you get benefits to those really in need? Governments can be stingy and potentially fail to help the indigent, or they can be generous and risk using limited resources on people who don’t need it.

Job-search requirements might help finesse this problem, according to a paper in the January issue of the American Economic Journal: Applied Economics.

The authors Jonneke Bolhaar, Nadine Ketel, and Bas van der Klaauw used an experiment in the Netherlands that randomly assigned welfare applicants to a mandatory four-week waiting period after registering for benefits. During the waiting period, applicants were required to look for work.

The Dutch welfare program typically allows applicants to receive benefits right away. It provides about 1,200 euros a month, with no expiration date. Once applicants start receiving benefits though, they have to accept any job offer.

The authors argued that job-search requirements reduced welfare take-up by weeding out applicants with a higher probability of finding work, as well as applicants deterred by the increased complexity and costs of applying.

 

 

Figure 5  Bolhaar, et al. (2019)

 

Each line in Figure 5 above represents the average difference in euros received each week between applicants who were required to wait for benefits and those who weren’t. (The light blue ribbons are 90 percent confidence intervals.)

Panel A shows that applicants who were required to look for work received on average thirty fewer euros in benefits each week. This could be bad news, but Panel B shows that they had about the same employment earnings as the control group in the first four weeks. And even better, their earnings were about forty euros higher after four weeks.

Applicants given the job-search requirement were no more likely to commit crimes or have adverse health outcomes. Even the most vulnerable showed no signs of declining total income. Furthermore, the authors found no evidence that job-search requirements forced applicants to take low-paying jobs.

Although their results may not generalize to welfare programs in other countries or with different designs, it suggests that requiring an initial job-search period can help welfare programs save money while targeting benefits to those who need it most.