Does eliminating benefit eligibility requirements improve unemployed job search and labour market outcomes?

ABSTRACT

Benefit eligibility requirements intend to incentivize the unemployed to find work more quickly. Our results, in an Australian context, suggest that those subjected to benefit eligibility requirements, despite searching at least as hard, take longer to find employment. Moreover, they spend less time in employment in the first twelve months and, if employed, have jobs with lower wages and fewer hours compared to otherwise similar unemployed without benefit eligibility requirements. Our findings are consistent with cognitive theories that emphasize that benefit eligibility requirements externalize job search motivation and increase stress, both of which reduce employment search effectiveness.

KEYWORDS:

• Benefit eligibility requirements
• job search outcomes
• trust experiments
• propensity score matching
• job search stress/motivation

Acknowledgments

* This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this article, however, are those of the authors and should not be attributed to either DSS or the Melbourne Institute. We thank the Editor and an anonymous reviewer for their comments. We thank the participants of Maastricht University’s Learning & Work poster session for their helpful comments and Dr. Daniel Grainger for proofreading our manuscript. We also thank Britta Augsburg, Didier Fouarge and especially Damian Clarke for their kind assistance with some of the Stata coding.

Disclosure of potential conflicts of interest

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed here.

Notes

¹ See Davidson and Whiteford (2012) for details.