Effects of Temporary In-Work Benefits for Welfare Recipients: Examination of the Australian Working Credit Programme

Authors


  • Submitted December 2009.

  • This paper was originally prepared as a report for the Department of Employment and Workplace Relations (DEWR), which is now known as the Department of Education, Employment and Workplace Relations (DEEWR). The authors are grateful to departmental officials for valuable comments and suggestions on earlier drafts. Naturally, the department should not be assumed to agree with the contents of this report, responsibility for which lies with the authors. Thanks to Mark van Zijll de Jong for excellent research assistance in preparing the original report and to Susanne Schmidt for assistance in preparing the paper for journal submission.

Abstract

We investigate the impact of ‘Working Credit’, a nationally-implemented programme which created increased incentives for welfare recipients to undertake temporary work. Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks. Unconditional and regression-adjusted difference-in-difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients. Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.

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