Job Seeker’s Allowance (JSA) benefit sanctions and labour market outcomes in Britain, 2001-2014

The dominant view among British policy-makers is that benefit sanctions for the unemployed who are claiming the Job Seeker’s Allowance (JSA) are effective at increasing flows from unemployment into sustainable employment. This paper tests this theory using aggregate cross-sectional data for Great Britain for the period May 2001 to December 2014. Descriptive analysis found the relationship between sanctions and labour market outcomes was ambiguous, while trends in labour market outcomes were highly correlated with labour market demand. Multivariate SVAR time-series analysis, controlling for labour market demand, found evidence that changes in the threat and use of sanctions had a positive impact on flows into work in the short run but not in the long term, and had no definitive impact on ILO unemployment at all. Interrupted time-series analyses suggest we cannot reject the null hypothesis that the impact of introduction of a new JSA sanctions regime in October 2012 (with higher financial penalties associated with being sanctioned) had no impact on flows into work from JSA. In Britain, intensifying the use of sanctions and introducing harsher penalties associated with being sanctioned has been largely ineffective at increasing flows from JSA into sustainable employment. Given the negative financial and social impacts of sanctions on those affected, and the lack of evidence of a sustained positive impact on employment, the basis for the new sanctions policy is unclear