The consequences of job search monitoring for the long-term unemployed: Disability instead of employment?

Abstract

We study the effect of job search monitoring (JSM) on individual labor market outcomes of the long-term unemployed. Exploiting the implementation of a JSM program targeted at jobseekers under the age of 49, we set up a regression discontinuity design that credibly identifies the program’s causal effect on unemployment, employment, and disability insurance (DI) participation and participation in other social welfare programs within a three-year period. We find that JSM increases exits from unemployment to DI without affecting transitions into employment or other social welfare programs. We further find that the effect of JSM on DI materializes before any sanction can be imposed and monitored individuals are still 10 percentage points more likely to be on DI three years after the start of monitoring. Ultimately, exploring fiscal implications reveals that the decrease in unemployment transfers as a result of JSM is entirely offset by the increase in DI transfers.