Effects of Temporary In-Work Benefits for Welfare Recipients: Examination of the Australian Working Credit Programme

an article by Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, University of Melbourne) and Andrew Leigh (Parliament of Australia) published in Fiscal Studies Volume 33 Issue 3 (September 2012)

Abstract

We investigate the impact of ‘Working Credit’, a nationally-implemented programme which created increased incentives for welfare recipients to undertake temporary work.

Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks.

Unconditional and regression-adjusted difference-in-difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients.

Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.

JEL classifications: H24, J08, J22