Back and forth? The role of labour market resources and segments for work-related exits from and returns to welfare benefit receipt in Germany

Abstract

Abstract The German economy has witnessed a stable upswing in the last decade. At the same time, receipt of welfare benefits did not decline substantially. In a dualised labour market and a welfare system under an activation paradigm (Unemployment Benefit II), many (former) welfare recipients face instable and lowpaid employment opportunities. Hence, returns to benefit receipt are rather common. Using administrative data and hazard rate models, we study the determinants of stable exits from welfare to employment focussing on the labour market segment after exit. Employment-related exits are slightly more common and significantly more stable than other exits. Labour market resources are associated with quicker employment-related exits, but not always with longer self-sufficiency. The stability of exits is also related to the economic sector and the type of employment. The results indicate that in addition to encouraging leaving welfare receipt, measures promoting good and sustainable employment are needed.