Precarious welfare‐to‐work transitions in a segmented labour market: Evidence from the Netherlands

Abstract

AbstractPromoting outflow from the welfare system has been one of the main objectives of activation‐focused welfare reforms implemented across Europe over the past decades, with the underlying assumption that labour market attachment is the route to self‐sufficiency. This article assesses this assumption by investigating the extent to which the propensities and determinants of welfare persistence and cycling are differential for native and second‐generation young adults located in the opposite ends of labour market structure. Using panel administrative data from the Statistics Netherlands (CBS), it follows the welfare‐to‐work transitions of Dutch native and second‐generation young adults in the Netherlands during a 6‐year observation period (2010–2015). Simultaneous effects of labour market segmentation and ethnic penalty are modelled using a first‐order Markov transition model that accounts for endogeneities from initial conditions and unobserved heterogeneity. The results suggest that welfare exit is not a good predictor of self‐sufficiency in the Dutch context, and there are differential prospects for achieving and sustaining self‐sufficiency among Dutch native and second‐generation young adults. A considerable degree of welfare persistence in the medium term and welfare cycling in the long term are found among individuals who had fallen out of self‐sufficiency. Such patterns of precarious welfare‐to‐work transitions are particularly common among non‐Dutch workers employed in the secondary labour market.