Pathways into and out of the Labor Market After Receiving Social Benefits: Cumulative Disadvantage or Life Course Risk?

ABSTRACT

Based on Swiss register data, we conduct a cohort analysis over four years to study the paths that individuals take back into or out of the labor market after receiving benefits. To gain insight into this dynamic from a perspective of social stratification and life course theory, we analyze marginal effects from multinomial logistic regression models. Our study reveals that even in a wealthy country like Switzerland, not everyone is able to get back into the labor market and earn a self-sustaining income. Reintegration is strongly influenced by previously attained status, as measured by income and education. Controlling for income and education, some differences related to gender and citizenship remain. The strongest driver of pathways out of the labor market after claiming benefits, however, relates to life course characteristics.

KEYWORDS:

• Labor market reintegration
• social security
• life course
• stratification
• achieved status
• ascribed status

Acknowledgements

The present study was conducted in collaborative work within two projects: Inequality in Income and Wealth in Switzerland was financed by the Swiss National Science Foundations. Data-Mining with Administrative Data from the Social Security System was financed by the University of Applied Sciences Bern. Data were provided by the Federal Social Insurance Office of Switzerland with kind assistance of Michel Kolly. The authors wish to thank Ben Jann, Robert Fluder, our colleagues from the research group of the BFH-Centre for Social Security and two anonymous reviewers for their helpful comments on earlier versions of the manuscript. We finally thank Christoph Schaller for the help with the data preparation.

Notes

^1. The sequence of acronyms SAIIUI refers to the combination of SA, II, and UI.

^2. We exclude from our analysis those who received one or more social benefits in 2005, as well as those who received UI benefits or II payments in 2004.This ensures that we are dealing with first-time entries and not with people with repeated claims after short breaks.

^3. Benefit records are indeed on a monthly basis. But as administrative errors may be present, we based our analyses on an aggregation on quarters. A state was rated as valid if it was recorded at least twice in a quarter.

^4. This definition is oriented on the poverty line (SKOS 2016). While the national guidelines define poverty at the household level, we use the guideline to determine an individual’s earned wages threshold at a level sufficient for an independently financed life (i.e., one that enables financial independence from both the social security system and private support). For more details see (Hümbelin and Fritschi 2016).

^5. We also had access to information on profession from the Swiss Standard Classification of Occupations 2000 (BFS 2003). These data, however, cannot be translated into a common hierarchical stratification variable (Bergman and Joye 2001). With the data on profession, as measured by the Swiss Standard Classification, it is, however, possible to construct an index of economic sectors where individuals were last employed. For the subsequent model estimations, we use this variable of occupational sector only as a control variable.

^6. These parameters are seen as contextual variables of the specifications of social security system in Switzerland, together with the characteristic of having a job when receiving social benefits for the first time, as social assistance is more oriented toward the working poor and unemployment benefit are more oriented toward persons who recently lost their job. We investigated effects divided according to entry via unemployment insurance and social assistance with an (subsequently not shown) alternative model. Effects with respect to gender and marital status for entry via social assistance are only minimally different from those shown subsequently. These latter are strongly driven by entries through unemployment insurance, since this group is far larger than the one entering through social assistance. To consider the social security system as a whole and still account for country-specific context, we have decided to consider entries through both systems and to control for the entry system in the model estimations.

^7. These probabilities, as already mentioned, refer to so-called predictive margins. To calculate them, model predictions are generated on an individual level through the manipulation of a single predictor (e.g., for the gender-specific probabilities, the sex for all observations will be set as male or female, respectively). These model predictions will then be averaged over all the observations.

^8. The heightened risk of following a pathway out of the labor market due to a lower level of education can be compensated for to some degree by having at one time achieved a high, or even middling, status in the labor market. Hence, the effect of income position is especially strong for those individuals who have low educational attainment. Finally, the results show that a tertiary educational degree, ceteris paribus, is in general accompanied by a less than average probability of being integrated on the margins of the labor market, being dependent on social assistance or being reliant on an invalidity pension. This effect is altered only slightly by the formerly achieved income position (Hümbelin and Fritschi 2016).

Additional information

Notes on contributors

Oliver Hümbelin

Oliver Hümbelin is a Research Associate at the Centre of Social Security, University of Applied Sciences in Bern, Switzerland. His research focuses on inequality and welfare interventions. From a methodical perspective he is interested in the use of register data for social science purpose. He recently published on the use of tax data to study inequality trends, the role of tax deductions for income redistribution and on non-take up of social assistance.

Tobias Fritschi

Tobias Fritschi is a Professor in Economics at the University of Applied Sciences in Bern, Switzerland. His main fields of research are the social security system, education economics, workfare and migration analysis. He develops instruments for practitioners in social work to assess resources and potentials of their clients. He is also involved in profiling tools for the assessment of labor market integration chances, the assessment of housing situations and for the comparison of working conditions.