Work requirements, benefit sanctions and information frictions

2018-08-15

2019-01-31

Employment, earnings, benefit receipt 12 months after start of intervention

Labor market outcomes (cumulated over 12 months) are obtained from administrative records from Statistics Denmark.

Recipients of welfare benefits in Denmark are required to work at least 225 hours within a 12-months period or face the risk of a permanent benefit reduction. If the welfare recipient does not comply with the work requirement, a benefit sanction is imposed that reduces the individual's benefit level by approx. 500 to 1,000DKK per month depending on the individual's personal situation. The criteria must be fulfilled at each point in time.

Our experiment builds on the fact that the individual welfare recipient faces a substantial degree of uncertainty regarding their personal risk of receiving a benefit sanction, respectively the likelihood of being released from an existing sanction. The information intervention targets two groups of individuals from the stock of welfare recipients. First, the at-risk group has been officially notified that they are subject to the requirement and that they stand to incur a benefit reduction if they do not work additional hours. Second, the sanctioned group contains all benefit recipients who already receive benefits at a reduced level. They have to collect additional working hours in order to be released from the sanction and to receive the full amount of benefits again.

We divide both groups of welfare recipients into three treatment arms:

First, the control group receives no additional information beyond the official notification letters (which is sent out once the individual receives welfare benefits for six months).

Second, individuals in the message treatment receive up to six additional monthly reminders. The at-risk group is reminded that they still stand to incur a reduction, while the sanctioned group is informed that they currently only receive a reduced amount of welfare benefits. Independently of the target group, the messages contain general information about the requirement of working 225 hours per year and provides some examples on how to fulfill the criteria. It emphasizes the risk of receiving reduced welfare benefits and the importance to keep an overview of one's collected working hours. It does not provide personalized information, on how many hours the specific individual has to work in order to avoid or remove the sanction.

Third, the tool treatment additionally provides personalized information about the collected working hours and the deadline for rule compliance. This allows the individual to infer what is exactly required to comply with the criteria to receive the full level of welfare benefits. As in the message treatment, individuals receive monthly reminders containing the same information, but the message also includes a link to an online tool that provides personalized information about the collected working hours and the deadline for compliance. For the at-risk group, the tool displays the next potential reduction date and graphically illustrates how many hours the individual has already worked within the 12-month window prior to the reduction date. For those who are already sanctioned the tool illustrates the number of hours worked, since the imposition of the sanction. Finally, the tool also provides more detailed general information about the 225-hours rule, which is accessible by pressing information buttons on the tool-webpage.

randomization done in office by a computer

Individual benefit recipients

No

approx. 60000 individuals (about 45000 are at risk and about 15000 are already sanctioned)

approx. 60000 individuals (about 45000 are at risk and about 15000 are already sanctioned)

1/3 of the population in each treatment arm (control group, message treatment, tool treatment)