From Social Assistance to Self-Sufficiency: Low Income Work as a Stepping Stone

Abstract

Welfare reforms often focus on stimulating employment among benefit recipients, based on the theoretical mechanism that the performance of low income work will serve as a stepping stone towards financial self-sufficiency. Alternative theories, however, argue that the acceptance of low income work will reduce job search intensity and can signal low productivity, and therefore will not enable people to support themselves. Using longitudinal administrative data and discrete time linear probability models, we follow all social assistance recipients in the Netherlands from 2010 to 2015, and analyse whether, and for whom, low income work functions as a stepping stone towards sustainable self-sufficiency. We find that social assistance recipients are more likely to become self-sufficient when they are active in low income work. This stepping stone effect applies in particular to benefit recipients with limited work experience, a higher educational level, a shorter duration of welfare receipt and to those who belong to the native Dutch majority. The type of employment also matters: low income work through temporary employment agencies is found to be the most effective stepping stone towards self-sufficiency.

Do Supplementary Jobs for Welfare Recipients Increase the Chance of Welfare Exit? Evidence from Germany

“…Additionally, the dead-end of supplementary part-time jobs for women may also (partly) be driven by supply-side effects arising if women change preferences after entering part-time employment and become less interested in working full-time (Johnson & Pencavel 1984, Hotz et al 1988). The differential effect of part-time supplementary jobs for men and women is consistent with international evidence from Kyyrä et al (2013) for Denmark and from Boschman et al (2021) for the Netherlands, who found that part-time work during benefit receipt is less beneficial for women.…”

“…Second, our paper relates to the stepping stone effects literature, which analyzes whether the take-up of certain employment types enhances the chances of subsequent regular employment. More precisely, the existence of stepping stone effects has been investigated (and in most cases also confirmed) for low-wage employment 4 (Uhlendorff 2006, Knabe & Plum 2013, Mosthaf 2014, Cai et al 2018, Boschman et al 2021, for temporary agency work (Kvasnicka 2009, de Graaf-Zijl et al 2011, Gebel 2013, Jahn & Rosholm 2014, for atypical work in general (Auray & Lepage-Saucier 2021), for (subsidized) part-time jobs (Cockx et al 2013, Kyyrä et al 2013, Nightingale 2020) and for marginal employment 5 (Freier & Steiner 2008, Caliendo et al 2016, Lietzmann et al 2017.…”

Heterogeneities in the latent functions of employment: New findings from a large-scale German survey

“…Whether one has a full-time job or only a marginal Minijob does not seem to matter. This finding contributes to the ongoing debate about whether marginal employment acts as a stepping stone into the labor market or a poverty trap (Booth et al, 2002;Lietzmann et al, 2017;Boschman et al, 2021). While Minijobs provide latent functions similar to those of other forms of employment, they fail to mitigate financial strain.…”

Do supplementary jobs for welfare recipients increase the chance of welfare exit? Evidence from Germany

“…Second, our paper relates to the stepping stone effects literature, which analyzes whether the take-up of certain employment types enhances the chances of subsequent regular employment. More precisely, the existence of stepping stone effects has been investigated (and in most cases also confirmed) for low-wage employment 6 (Boschman et al, 2021;Cai et al, 2018;Knabe & Plum, 2013;Mosthaf, 2014;Mosthaf et al, 2014;Uhlendorff, 2006), for temporary agency work (de Graaf-Zijl et al, 2011;Gebel, 2013;Jahn & Rosholm, 2014;Kvasnicka, 2009), for atypical work in general (Auray & Lepage-Saucier, 2021), for (subsidized) part-time jobs (Cockx et al, 2013;Kyyrä, 2010;Kyyrä et al, 2013;Nightingale, 2020) and for marginal employment 7 (Caliendo et al, 2016;Freier & Steiner, 2008;Lietzmann et al, 2017). increased from 400 to 450 euros in 2013) where employees are exempted from taxes and social security contributions and employers pay an overall reduced rate of social security contributions.…”

“…Moreover, in contrast to the current paper, these studies do not differentiate between welfare recipients with and without a supplementary job. While the studies of Kyyrä (2010) and Boschman et al (2021) also investigate whether supplementary jobs serve as a stepping stone into employment, our study offers additional insights. We further distinguish between welfare exits into part-and full-time employment, which is particularly relevant since the risk of future welfare dependency may differ between part-and full-time jobs (without welfare).…”