How helping disabled people find employment affects the job market

a post by Barbara Petrongolo (Queen Mary University of London, UK), Felix Koenig (Princeton University, USA) and John Van Reenan (Massachusetts Institute for Technology, USA) for the OUP blog


JobCentre Plus by Andrew_Writer. CC by 2.0  via Flickr.

Policy makers have long been concerned with helping people on disability benefits find some employment as this group has grown dramatically in recent decades. In the UK, as in several other countries, there are now many more people on disability benefits than on unemployment benefits. The chances of leaving disability benefits once someone is enrolled is low and although many disabled people cannot work at all, many others would like to have some access to the labor market, such as part-time employment.

Introducing performance rewards for public employment service staff may be a cost-effective way to help the disabled find jobs. The UK Jobcentre Plus reform introduced modern management practices into the welfare system. Similar incentive schemes have been associated with substantial productivity gains in the private sector. The reform offered caseworkers greater career rewards if they successfully placed benefit recipients into work. Jobcentre Plus was introduced at different times in different districts between 2001 and 2008, so this staggered timing enabled researchers to implement a thorough examination of the impact of the policy.

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Can helping the sick hurt the able? Incentives, information and disruption in a welfare reform
a paper by Felix Koenig (LSE and CEP), Barbara Petrongolo (QMUL and CEP), John Van Reenen (MIT and CEP) and Nitika Bagaria (CRA)

Full text (PDF 48pp)

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Retirement incentives, individual heterogeneity and labor transitions of employed and unemployed workers

an article by J. Ignacio García-Pérez and Alfonso R. Sánchez-Martín (Universidad Pablo de Olavide, Spain) and Sergi Jiménez-Martín (Universitat Pompeu Fabra, Barcelona GSE, Spain and FEDEA, Spain) published in Labour Economics Volume 20 (January 2013)

Abstract

In this paper, we analyse the sensitivity of the labour market decisions of workers close to retirement with respect to the incentives created by public regulations. We improve upon the extensive prior literature on the effect of pension incentives on retirement by jointly modelling the transitions between employment, unemployment and retirement, paying special attention to the transition from unemployment to retirement (which is particularly important in Spain and other European countries, and whose relevance is increasing as a result of the recent economic crisis).

Using administrative data, we find that, when properly defined, economic incentives have a strong impact on labour market decisions.

Unemployment regulations are shown to be particularly influential for retirement behaviour, along with the more traditional determinants linked to the pension system. Pension variables also have a major bearing on workers’ re-employment decisions. The quantitative impact of the incentives, however, is greatly affected by the existence of unobserved heterogeneity among workers. Its omission leads to sizeable biases in the assessment of the sensitivity to economic incentives.

We confirm the importance of this potential problem in the case of the change in early retirement provisions legislated in Spain in 2002 (which we analyse with a difference-in-difference approach).

JEL classification H55, J14, J26, J64

Full text (PDF 15pp)

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