The Employment Eect of a Dutch Social Assistance Reform for the Youth

We examine the employment eect of a large Dutch social assistance reform targeted at individuals up to 27 years of age. The Wet Investeren in Jon- geren (WIJ, Work Investment Act for Young Individuals) reform, introduced in 2009, restricted eligibility of social assistance benets and provided a worklearn oer. We provide an extensive theoretical framework in which we argue that the expected eects on employment are, except from a possible lockin eect, positive and substantial in competitive labor markets. We expect this positive eect to be smaller in non-competitive labor markets, especially when unemployment is high. We use a dierence-in-dierences methodology and a large panel data set to study the eect of the reform on the use of social assistance benets and employment. Our main nding is a large negative treatment eect on income from social assistance of 63 % for individuals 20{22 years of age and 26% for individuals 23{25 years of age, whereas we nd no eect on employment. This nding is robust across a large number of dependent variables, specications and demographic groups. This points at little to no employment eect of stricter eligibility requirements combined with active labor market policies for young individuals during economic recessions. High unemployment rates make labor demand, rather than labor supply, the constraining factor for employment to increase.