Utrecht University: Imposing a sanction on unemployment benefit recipients can have detrimental effects

Many policymakers and government agencies ask questions about the effectiveness of sanctions and warnings. In their report Sancties voor burgers: een bruikbaar instrument voor gedragsverandering? external link(Sanctions for citizens: a useful instrument for behavioural change?) commissioned by the Programma Handhaving en Gedrag external link(Law Enforcement and Behaviour Programme), Verlaat and Bijleveld studied the effects of sanctions and warnings in the context of unemployment insurance benefits. People receiving such benefits are required to undertake and register four job search activities every four weeks. In case of noncompliance with this requirement, they may receive a sanction or a warning.

The study shows that sanctions mainly improved people’s subsequent compliance with job search requirements; receiving a sanction reduced the likelihood of a new violation by 40%. However, there was no evidence that sanctions stimulated people to look for new work more intensively. Therefore, the reduction in violations was probably mainly due to people submitting their applications on-time more often. There were also indications that people with a sanction earned less income from work after some time.

Warnings as a useful alternative to sanctions

‘Think carefully about imposing sanctions because they might have less effect than you would expect,’ Timo Verlaat states. ‘Sanctions are a severe tool and affect people who often really need financial support. Moreover, sanctions can result in people taking on work under worse conditions (less stable work, less well paid) – which can increase their chances of becoming unemployed again or lead to lower incomes in the long run.’

Warnings seem to be a useful alternative to sanctions. In contrast to sanctions, warnings led people to submit more applications. Moreover, the researchers found no indications of undesired side effects of warnings.

‘If you have no sanctioning policy at all, the threatening effect disappears,’ adds Verlaat. ‘We did not investigate whether that would be effective. We do conclude, however, that it is important to think carefully about how to use sanctions. Sanctions can have a major negative impact and can be less effective than you expect. Maybe it is better to use warnings instead of sanctions, or first a warning and later a sanction. This is also the policy the Dutch unemployment insurance (UWV) has been implementing since 2018: A warning is imposed for a first-time offence, and a sanction only follows after a follow-up offence.’

In this video (in Dutch), Timo Verlaat and Erik Bijleveld summarize the findings from Sanctions for citizens: a useful tool for behavioural change? In addition, they provide more information about the ‘instrumental variables analysis’ they applied: a natural experiment that allows them to make causal statements about the effects of – in this case – imposing sanctions and warnings:

Practical recommendations

Based on their research, Verlaat and Bijleveld make some practical recommendations that may be relevant for government agencies providing unemployment benefits. With great caution, their recommendations could also be translated to other situations in which a government body provides benefits or allowances to individual citizens. Key message? Be cautious about imposing sanctions, and do not expect too much of their effects. Reflect carefully on the objectives for which you use them and be aware of the possible negative side effects.

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