Waiting longer before claiming, and activating youth: no point?

Abstract

Purpose The purpose of this paper is to estimate the impact of two policies (an extension of the waiting period before entitlement to unemployment insurance (UI) and an intensification of counselling) targeted at unemployed school-leavers in Belgium on unemployment duration and on the quality of work. Design/methodology/approach The length of both policies is sharply determined by two distinct age thresholds. These thresholds are exploited to estimate the impact within a regression discontinuity design using a large administrative data set of all recent labour market entrants. Findings The longer waiting period does not significantly impact job finding while the Youth Work Plan does increase the job-finding rate eight months after the onset of the programme. The accepted wage is unaffected, but both policies lower the number of working days resulting in lower earnings. This effect is especially prevalent for youth from low-income households. Research limitations/implications For both policies, participation was delineated by an age cut-off which was only four months apart. This sizeably reduced the width of the age window to detect a corresponding discontinuity in behaviour and hereby also the statistical power of the estimator. Additionally, due to confounding policies the estimated effects are local treatment effects for highly educated youth around the age cut-offs. Social implications The findings suggest that threatening with a sanction is not the right instrument to activate highly educated unemployed school-leavers. While supportive measures appear to be more effective, this may be partly a consequence of acceptance of lower quality jobs due to liquidity constraints and of caseworkers giving misleading advice that temporary jobs are stepping stones to long-term employment. Originality/value To the best of the authors’ knowledge, this is the first paper to estimate the impact of changing the waiting period in UI. The paper adds to the existing literature on the effects of counselling and UI design on employment and job quality.