It is often argued that in order to find new employment, the unemployed have to compromise and accept jobs that are inferior (e.g. paying less or requiring a lower qualification) than the jobs they held before becoming unemployed. Making such compromise to find new employment is what we call a job related concession. Our results show that while there might be some truth to this assertion—in particular with regard to accepting lower paying jobs—being generally flexible with regard to job search has comparably positive effects without requiring the unemployed to make such compromise. Therefore, we argue that enabling the unemployed to find new occupational perspectives—ideally in combination with training and qualification measures for the new occupation—should be at least as promising as requiring them to make job-related concessions.
Being unemployed has numerous and highly negative consequences. An obvious consequence is that the unemployed lack the income which employment would provide. Moreover, unemployment often negatively influences psychological well-being; the unemployed might lose self-confidence or their ability to cope with everyday live. Especially the long-term unemployed often lose their social contacts and (long-term) unemployment might have a negative impact on the unemployed persons’ health .
As unemployment also causes substantial costs for society—not only direct costs for benefits paid but also indirect costs e.g. for tax income foregone or higher health expenditure—insights about measures that might help someone to end her or his unemployment are of great importance.
To classify measures used to address unemployment, researchers often distinguish between two broad categories: demanding and enabling measures. While enabling measures aim to support the unemployed, e.g., by offering them training or job search assistance, demanding measures usually put pressure on the unemployed by requiring certain job search activities. They might do so by monitoring these activities, or by imposing sanctions like benefit cuts on unemployed persons that do not comply with these requirements.
It is such demanding measures we evaluate in our paper, namely the requirement to make job-related concessions. This means that the unemployed are required to accept employment that is in some respect inferior to the job they held before becoming unemployed. In our analyses we focus on recipients of the German Unemployment Benefit II (UB II), a means-tested and tax-financed benefit that covers recipients’ minimum living standards.
A particular feature of our research is that we are able to identify job related concessions directly as they occur during the job search process. In contrast, other research focusing on concessions in most cases relies on two different approaches. The first approach is to apply quasi-experimental methods in order to identify the effects of transitions into unfavourable employment relationships. This means that researchers compare the outcomes of persons that have made a concession sometime in the past to outcomes of a comparison group made up of persons that did not make a concession. A downside of this approach is that these studies cannot answer whether individuals that have remained unemployed would have nevertheless been willing to make a concession. This is so because these studies can identify concessions only by observing successful transitions into employment with unfavourable characteristics.
Other studies rely on survey respondents’ answers on hypothetical questions about their intended behaviour. This means that respondents are asked whether they would accept a job that has particular disadvantages (as, e.g., a higher commuting distance) or that pays less money than their earlier job. However, it has been shown that answers to hypothetical survey-questions about intended behaviour are—for several reasons —not the same as actual, observed behaviour, i.e. it is simply a different thing to state in a survey that one would work for less money than one has earned before and to actually work in such a low(er) paying job.
We use data from the German Federal Employment Agency providing detailed information on UB II-recipients and their job search processes, in particular on all jobs they have been looking for while being unemployed. This allows us to analyse at which point in time recipients start searching for a job that they were not searching for earlier. Moreover, we can identify whether this new occupation constitutes a concession, meaning that it is in some way inferior to the occupation(s) the recipient has been looking for earlier. Doing so, we distinguish four types of concessions. First, the new occupation has lower education requirements than the occupation(s) searched for earlier. Second, it has a lower status (measured by an established status scale, the ISEI ). Third, the average wage in the occupation is somewhat lower (small wage concession, at least € 350,-) than in the occupation(s) searched for earlier and fourth, the average wage is substantially lower (large wage concession, at least € 700,-).
In the second step, we analyse whether making any of these concessions will have a positive effect on finding a new job. We do so applying event history analysis, a method that allows whether and to what extent factors (e.g. accepting a less qualified or less paying job) make it more likely that a particular event (here: finding a job) will occur.
A first result of our analyses is that that although UB II recipients are required to make job-related concessions, it was unexpectedly rare for them to actually make such concessions. Even five years after starting their job search, only 11% (large wage concession) to 20% (small wage concession) had made a concession. Part of the explanation for this result is that a substantial proportion of 30% to 45% of the unemployed individuals in our data were already searching for low-qualified, low status, or low-paid employment and thus were simply unable to make a concession. However, even if we exclude these persons from our analyses, substantially less than half of all people in our sample (16% to 37%) make a concessions within five years’ time.
In contrast, while the unemployed seem hesitant to make concessions, they are not generally inflexible. Our analyses also show that almost 60% of the unemployed welfare recipients look for an alternative occupation (which might or might not imply a concession) at least once during the first five years of unemployment.
Moreover, finding a job is no rare event, either. More than two-thirds (69%) of the unemployed UB II recipients in our sample find a new job and leave unemployment within five years. However, it appears that requiring unemployed individuals to make concessions regarding their future employment has only a very limited potential for improving their chances to actually end their unemployment. Thus in our analyses, we can identify no positive effect on jobseekers’ employment chances for most types of concessions. Only concessions regarding the average wage in an occupation had a significant and positive effect. However, we could also show that searching for an alternative job in a different occupation (which does not necessarily imply a concession) has a comparable effect on the chances of finding new employment.
Thus it appears that being generally flexible regarding one’s future occupation might be as, or even more, important for employment chances than accepting lower quality employment. If however, concessions are required from welfare recipients, asking them to search for employment in (mildly) lower paid occupations might be more successful than requiring them to search for less-qualified or lower status employment. However, a more promising strategy than simply requiring the unemployed to make concessions would be to supplement demanding policy elements like concessions with enabling elements, such as investments in the human capital of the unemployed. Our results also show that enabling the unemployed to find new occupational perspectives—ideally in combination with training and qualification measures for the new occupation—is a strategy that is at least as promising as requiring the unemployed to make job-related concessions.
About the authors
Bernhard Christoph is a Researcher at the Institute for Employment Research, Germany.
Torsten Lietzmann is a Researcher at the Institute for Employment Research, Germany.