Health Barriers Limit Job Prospects for Most German Basic Income Support Recipients

This blog is based on an article in the Journal of Social Policy by Cordula Zabel. Click here to access the article.

Health restrictions are widespread among recipients of basic income support for jobseekers in Germany. Yet labour market policy has followed a work-first approach, which does not seem well-adapted to the situation of benefit recipients affected by health impairments. It would be important to more strongly acknowledge the relevance of health impairments for benefit recipients and to adapt labour market policy accordingly. Greater investments in rehabilitation and subsidized employment could be helpful.

Compared to other countries such as Sweden, Denmark, the Netherlands and Great Britain, the proportion of non-employed people in Germany receiving incapacity pensions is quite low, as demonstrated in a study by Konle-Seidl and co-authors. This is caused by strict eligibility restrictions for incapacity pensions. Instead, a high proportion (63%) of recipients of basic income support for jobseekers in Germany report health restrictions that reduce their employment capabilities, as demonstrated in the main article. Reforms in other countries aiming to restrict eligibility for disability pensions could result in a situation such as in Germany with high proportions of people with health impairments among recipients of benefits for jobseekers.

The article analyses data from the panel study ‘Labour Market and Social Security’ (PASS), linked to administrative data on employment and benefit spells. Competing risk hazard models for entering socially insured employment and minijobs are estimated. In the models estimating effects of jobcentre counselling, an ordered probit model for counselling frequency is estimated as a third parallel process, while controlling for selectivity of counselling take-up.

The article finds that basic income support recipients with health impairments have lower entry rates into socially insured employment than benefit recipients without health impairments. This finding is confirmed using various different specifications for health impairments. For instance, benefit recipients with a legally recognized disability or other severe health impairment generally have lower entry rates into socially insured employment than those without health impairments. Differentiating by type of health impairment, lower entry rates into insured employment are especially found for benefit recipients with mental disorders, hearing or visual health impairments, or musculoskeletal impairments. Finally, people’s own assessment of their working capability appears to be a good predictor of their actual subsequent employment entry rates. Those who report that they cannot work at all for health reasons have by far the lowest entry rates into socially insured employment, followed by those with restrictions concerning work hours and finally those with restrictions concerning tasks.

While health impairments thus reduce entry rates into socially insured employment, entries into uninsured minijobs are much less affected. Minijobs are jobs that pay no more than currently 538 Euro a month, and due to minimum wage regulations accordingly have very short hours. Employees in minijobs do not make contributions to health, unemployment, or nursing care insurance and only electively to pension insurance.

Findings are that a legally recognized disability or other serious health impairment does not reduce minijob entry rates for basic income support recipients. In that they do not generate social insurance entitlements, minijobs can be considered lower-quality jobs. Thus, it can be seen as problematic that such lower-quality jobs appear to be open to benefit recipients with health impairments, while obstacles for entering better-quality socially insured jobs are greater. Following EU strategies, social policy in Germany aims to encourage social participation via employment. However, the quality of employment can be decisive for attaining this goal.

The article further shows that while higher-frequency jobcentre counselling has positive short-term employment effects for benefit recipients without health impairments, there are no such effects for those with health impairments. Future research could look into longer-term effects of jobcentre counselling for benefit recipients with health impairments. A longer-term perspective may be needed when planning strategies for benefit recipients with health impairments.

Altogether, the article showed that the majority of recipients of basic income support for jobseekers report work restrictions for health reasons. German labour market policy’s emphasis on quick employment integration does not appear fitting for this group. While lower-quality minijobs are accessible for benefit recipients with health impairments, entry rates into socially insured jobs are significantly lower than for those without health impairments. Yet, access to better quality employment is decisive for enabling societal participation. A policy approach adapted more to supporting jobseekers with health impairments would be beneficial. For instance, this could include greater investments in rehabilitation and job subsidies for socially insured employment to facilitate access for benefit recipients with health impairments.

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About the author

Cordula Zabel is a researcher at the Institute for Employment Research in Nuremberg, Germany.