Combining Part-time Work and Social Benefits: Empirical Evidence from Finland

Abstract

We use detailed, population-wide data from Finland to provide evidence of the impact of earnings disregard policies on part-time work during unemployment spells, and describe the longer-run trends in combining part-time work and social benefits. We find that part-time or temporary work while receiving unemployment benefits is strongly concentrated at service and social and health care sectors, and women participate in part-time work much more commonly than men (25% vs. 12% of benefit recipients). The share of part-time workers among unemployment benefit recipients increased sharply from 10% to 18% over a few years after the implementation of earnings disregards in unemployment benefits and housing allowances. The earnings disregards allowed individuals to earn up to 300 euros per month without reductions in their benefits. Using variation in the impact of the reforms on incentives between individuals eligible to different types of benefits, we estimate a 17–28% increase in participation in part-time work rate due to the implementation of earnings disregards. However, we find no evidence of economically significant positive or negative effects of increased participation in part-time work on transitions to full-time employment.