Disutility of Leisure and Wage Discipline Effect
RCTReview
Mandatory job search assistance imposes compulsory meetings and reporting, which reduces the non-pecuniary value of leisure during unemployment and systematically alters worker reservation wage expectations.
Picture this
Imagine a resort club where membership used to allow relaxing all day for free. If the club manager introduces mandatory daily chore shifts for members, staying in the club becomes much less attractive. As a result, members become willing to accept job offers with slightly lower pay or benefits just to leave the club sooner and avoid the mandatory daily chores.
What the evidence says
Mandatory participation eliminates non-market leisure time value ($h = 0.013$, equivalent to ~2% of UI benefit levels or >1% of worker productivity), disciplining worker outside options and lowering equilibrium wages by 0.03%, which encourages firms to expand overall vacancy postings by 2.4%.
- Who was studied
- N = 40,403 Danish benefit recipients evaluated using indirect inference structural parameter estimation.
- How
- Structural utility parameter estimation quantifying non-market leisure time value ($h$) versus search cost reductions ($\gamma_1$ vs $\gamma_0$) under mandatory caseworker monitoring.
What to do
Account for non-monetary leisure loss costs imposed by mandatory activation compliance when estimating worker reservation wage changes and wage bargaining outcomes.
From the source
"The activation program consists of meetings with caseworkers and a job search assistance program which are both time-consuming for participants. We assume that this eliminates the value of non-market time, h."
816b5187-9076-4043-aba7-184043b2e524-Estimating Equilibrium Effects of Job Search Assistance.pdf