Canceling integration services for young people does not work – Ghent University

Most young people who do not find work after the study, are entitled to unemployment benefits, the so-called unemployment benefits, one year after graduating. integration benefit† Upon her arrival bought The Michel government in 2015 entitled to this benefit of for two groups: (i) young people older than 25 years and (ii) young people who have not yet reached the age of 21 and without a secondary education. The purpose was to encourage young people to apply harder for a job and not to drop out of school early. Researchers from Ghent University and UCLouvain investigated whether this measure achieved this goal.

Results

  1. Striking: the researchers find no effect for the low-skilled† For young people without a youth education, the reform completely misses its goal: the abolition of the right to unemployment benefits has no statistically significant effect on the target group on employment opportunities, on obtaining diplomas or on dropping out of school.
  2. Highly qualified people affected by the reform work faster but not sustainably. Specifically: Between the third and sixth month after registering as a jobseeker, the transition to very short-term temporary employment increased, but no signs were found that the reform promoted the transition to permanent employment.
  3. The prospect of losing the right to unemployment benefits admittedly encouraged young people in higher education to finish their studies faster and not drop out early, but that was not really the intention. It is also doubtful whether this is the best way to improve study performance in higher education. After all, these positive effects only affect a small group, they risk making young people more financially dependent on their parents and drive some young people into poverty. However, due to lack of data, the researchers were not able to investigate these negative effects.

explanations

Financial incentives do not work for everyone. After graduating, young people are in any case not entitled to unemployment benefits for one year. This is a strong financial incentive that encourages many young people to apply for jobs intensively. But after a year, the moment some young people lose the right to the integration benefit, the young people who it makes them look after more are no longer unemployed; unemployed are only those for whom these incentives work poorly. It is young people who do not have the right skills for the labor market, who do not look ahead sufficiently when they have to make decisions, or who show hesitation. Research shows that these problems are particularly relevant for young people with a low level of education. This also explains why there are only effects on the survey results for the highly educated and not for the low educated.

Political consequences

This research shows that financial incentives are no longer effective over time. Training and guidance are possible alternatives. This requires more research. Economists can learn from insights from psychologists.

About the research

The researchers used administrative population data from VDAB and FOREM and from the education departments of the Flemish- and French-speaking community. To measure the effects, the development of results for age groups who lost the right to benefits in 2015 was compared with other age groups who did not lose this right. This difference-in-differences method makes it possible to measure the causal effects of the reform. Effects were examined on transition to (potentially temporary) work 6, 12 and 18 months after job-seeking registration, and on termination and early termination of studies. The effects of the abolition of the right to unemployment benefits for those over 25 were examined only for highly educated people, while the abolition of this right for young people under 21 only for young people without a youth education.

This study was funded by the National Bank of Belgium. The authors of this study are Professors Bart Cockx (UGent), Koen Declercq (UCLouvain – Saint-Louis Bruxelles), Muriel Dejemeppe (UCLouvain), Bruno Van der Linden (UCLouvain).

Info

The full Dutch summary of this research has been published as one Gent financial insight† An abridged summary will be published at the end of June in About.Work.

Prof. dr. Bart Cockx
Department of Economics
0491 93 14 08
bart.cockx@ugent.be

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