Impact of welfare sanctions on the quality of subsequent employment: Wages, incomes, and employment stability

This study provides the first comprehensive analysis of sanction effects on post-welfare employment quality in Europe using the outcome variables daily wage, yearly income, and covering job stability with the durations of three employment states: employed, unemployed, and supplementary benefit receipt. Applying PSM, we estimate the treatment effects (ATT) of UB-II-sanctions in Germany based on a rich administrative data set. Novelties of this study are the analysis of postwelfare sanction effects also for employed welfare recipients ("Aufstocker") and for indirectly affected employable household members. Our analyses reveal highly significant and strongly negative effects of benefit sanctions on the quality of post-welfare employment in the short and long run. In terms of income and employment stability we find a catch-up process which is by far not strong enough to compensate the loss within two years. For employed welfare recipients the negative effects on income and job stability even exceed the effects for unemployed. Particularly striking are the remarkably strong and highly significant negative effects on indirectly affected unemployed household members.