Switching from an inclining to a zero-level unemployment benefit profile: Good for work incentives?

Abstract

This paper evaluates the impact on the transition to work of a policy reform in Belgium that restricted the access to a specific unemployment insurance scheme for young labor market entrants. This scheme entitles youths with no or little labor market experience to unemployment benefits after a waiting period of one year. As of 2015, the Belgian government unexpectedly scrapped benefit eligibility for youths who start the waiting period at the age of 24 or older. The reform implied a change from an inclining to a flat rate (zero-level) benefit profile. We use a difference-indifferences approach to identify the causal impact of this reform on fresh university graduates. Our main finding is that this reform only increases the transition to very short-lived jobs.

How Effective are Hiring Subsidies to Reduce Long-Term Unemployment Among Prime-Aged Jobseekers? Evidence from Belgium

“…However, this employment is not long-lasting or does not seem to be a stepping stone to other, more persistent employment, probably because temp work is not skill enhancing, and may even stigmatize workers (Autor and Houseman 2010;Givord and Wilner 2015). This is in line with the findings of Cockx and Van Belle (2019) and Cockx et al (2020), who report that in Belgium temp work does not cause long-lasting employment for unemployed youth.…”

The effect of declining unemployment benefits on transitions to employment

“…In practice, their main implication is that the benefit floor is increased over timeimplying a (slightly) smaller reduction in the long-term benefit than reported in the simulations of this section for at least some cohorts. For more details see https://www.ksz-bcss.fgov.be/fr/dwh/variabledetail/office-national-de-lemploi/Variables/categoriedindemnisation-du-chomeur.html?filter=institution&institution=66597&sources=&themes= 6 Given the absence of information on working history in the data used in this analysis (see Section 4), the simulations reported focus on the first 24 months during which working history matters less than in successive months. The simulation refers to a claimant with 3 years of working history who, under the reform, sees its benefit reach its long-term level at 20 months.…”

“…To illustrate the range of cases that can arise, panels A through D in Figure 1 report the UB before and after the reform for selected levels of gross wages. 6 For low levels of wages, the benefit schedule is flat both before and after the reform as exemplified by the case of a gross wage of 1600 Euro per month reported in in Panel A of Figure 1. This is because the benefit floor is binding from the start (both before and after the reform) and is the same as the post-reform long-term benefit.…”

Numéro 171 - juin 2022

“…Dans cet article, nous avons résumé les résultats des recherches qui ont évalué dans quelle mesure ces objectifs gouvernementaux ont été atteints (Cockx et al, 2019(Cockx et al, , 2020(Cockx et al, , 2022…”

“…Ce numéro de Regards économiques résume les résultats d'une recherche scientifique qui nous a permis d'évaluer de manière rigoureuse si la réforme des allocations d'insertion de 2015 a incité davantage de jeunes à réussir leurs études et à décrocher un emploi (Cockx et al, 2019(Cockx et al, , 2020(Cockx et al, et 2021. Ces résultats sont également intéressants pour le débat actuel sur les mesures les plus efficaces pour lutter contre les pénuries sur le marché du travail.…”