Activation programs, benefit take-up, and labor market attachment

Abstract

PERSSON, Anna. 2013. Activation Programs, Benefit Take-up, and Labor Market Attachment. Department of Economics. Economic Studies 138. 143 pp. Uppsala. ISBN 978-91-85519-45-3. ISSN 0283-7668.

Essay I: with Ulrika Vikman. Previous literature show that activation requirements for welfare participants reduce welfare participation, but the dynamics behind these results have not been fully examined. In this paper we use a rich set of register data covering the entire working age population in a Swedish municipality to study how the introduction of mandatory activation programs aimed at unemployed welfare participants affect the probability of entering and exiting welfare. Our results indicate that the reduction in the number of welfare participants is mainly due to an increase in welfare exits. The effect is larger for unmarried individuals without children and for young individuals. Among the young we also find a reduction in welfare entries. It thus seems that individuals with fewer family responsibilities are more responsive to the reform.

Essay II: We study the impact of a set of labor market programs directed to unemployed welfare participants on criminal behavior. To isolate the causal effect we exploit the sequential implementation of activation programs in municipalities and city districts in Stockholm county. We find that criminal activity increased as a result of the programs. The size and significance levels of the estimates should be interpreted with caution, but we can conclude that the reform did at least not have a mitigating effect on crime. We find no evidence that the effect is larger for financially motivated crime.

Essay III: Given the trend towards more active policies on reducing the take-up of welfare benefits, the consequences of leaving welfare constitutes an important issue. This paper studies disposable income and poverty among welfare leavers in Sweden during 19 years (1990 2008). Using a rich set of register data we can accurately measure disposable income and labor market outcomes. We find that there are large significant differences in post-welfare financial situation among those working full time and those who work only a little or not i at all. Leavers neither working nor receiving benefits from social insurance are likely to be financially dependent on family members, and are more likely than others to be in poverty. We conclude that leaving welfare is not always associated with becoming financially better off, post-welfare well-being depend heavily on labor market outcomes.

Essay IV: with Matz Dahlberg and Linna Martén. In 1999, the Swedish government announced one of the largest reforms of the national defense in modern times, which led to closure and significant downsizing of several military bases, as well as large reductions in the workforce. Previous studies have found that workers that have been displaced from their previous employers experience significant earnings declines, even in the long run. In this paper we study the labor market effects of the involuntary job losses following the drastic changes of the Swedish security policy. Using population wide register data we estimate how labor income and unemployment benefit take up changed among those employed at the affected military bases, relative to workers at unaffected military units. We find a decrease in labor earnings, primarily among civil servants. We find no effect on neither unemployment nor employment, indicating that the drop in earnings is likely to be driven by lower re-employment wages.