Welfare to Work - Does it Work?

This book examines the effects of welfare to work §programs on labor supply, employment, wages and §utility of participants. A dynamic stochastic job §search model is used, where agents choose their §labor state and search effort. The model includes §four policy tools: counseling services, workfare, §subsidies to employers and income tax credits. The §main finding is that individuals preferences and §their subjective value of leisure change simulated §program effects quite significantly, as they suggest §different reasons for low employment and so require §different policy tools. When the value of leisure is §relatively low, counseling, workfare and subsidized §work increase the employment rate, while tax credits §alone do not change it. When the value of leisure is §higher all policy tools have a positive effect on §the employment rate. Moreover, counseling in this §case stimulates search and employment even when it §makes no contribution to job offer probabilities, §simply by imposing sanctions. It is also found that §counseling, workfare and subsidized work have a §negative effect on individual welfare, which is more §significant for less educated agents. This book examines the effects of welfare to work §programs on labor supply, employment, wages and §utility of participants. A dynamic stochastic job §search model is used, where agents choose their §labor state and search effort. The model includes §four policy tools: counseling services, workfare, §subsidies to employers and income tax credits. The §main finding is that individuals preferences and §their subjective value of leisure change simulated §program effects quite significantly, as they suggest §different reasons for low employment and so require §different policy tools. When the value of leisure is §relatively low, counseling, workfare and subsidized §work increase the employment rate, while tax credits §alone do not change it. When the value of leisure is §higher all policy tools have a positive effect on §the employment rate. Moreover, counseling in this §case stimulates search and employment even when it §makes no contribution to job offer probabilities, §simply by imposing sanctions. It is also found that §counseling, workfare and subsidized work have a §negative effect on individual welfare, which is more §significant for less educated agents.