Structural Unemployment in Luxembourg

This paper combines both micro and macro approaches to identify the drivers of (un)employment and inactivity in Luxembourg. The young, low-skilled, and non-EU migrants are found to be the most vulnerable groups in the labor market. In addition to skills mismatches, work disincentives embedded in the tax-benefit system constitute a factor explaining structural unemployment. High unemployment of young and low-skilled workers reflects substantial unemployment traps, while disincentives for second earners (respectively the generosity of the pension system) contribute to lower labor market participation of women (respectively seniors). Further reduction of structural unemployment requires better integration of vulnerable groups into the labor market and improved targeting of benefits to make work more rewarding.

Work incentives in the Social Security Disability benefit formula

We examine the connection between taxes paid and benefits accrued under the Social Security Disability Insurance (SSDI) program on both the intensive and extensive margins. We perform these calculations for stylized workers given the existing benefit structure and disability hazard rates. On the intensive margin, we examine the effect of an additional dollar of earnings on the marginal payroll taxes contributed and future benefits earned. We find that the present discounted value of disability benefits received from an additional dollar of earnings, net of the SSDI payroll tax, generally declines with age, becoming negative around age 40 and reaching almost zero at age 63. On the extensive margin, we determine the effect of working an additional year on the additional payroll taxes and future benefits as a percentage of income. The return to working an additional year at an income level just large enough to earn Social Security credits for the year is large and positive through age 60. However, the return to working an additional full year is substantially smaller and becomes negative at approximately age 57. Thus, older workers face strong incentives to earn enough to obtain creditable coverage through age 60, but they face disincentives for additional earnings. In addition, workers aged 61 and older face work disincentives at any level of earnings. We repeat this analysis for stylized workers at different levels of earnings and find that, while the program transfers resources from high earners to low earners, the workers experience similar patterns in the returns to working.

Predictors of Successful Closure in the State-Federal Vocational Rehabilitation System: Findings from a Sample of Persons with Disability and Substance Use Disorders

Numerous studies have focused on the predictors of successful closure of state-federal vocational rehabilitation (VR) applicants. However, there appears to be only one study focused solely on the predictors of employment with persons who were deemed eligible for services based on their alcohol or drug abuse diagnosis. This retrospective study examined the predictors of employment among this population. A sample of 940 persons with a primary or secondary diagnosis of alcohol or drug abuse and a closure status of 26 or 28 was randomly selected from the 2005 Rehabilitation Service Administration (RSA) 911 data. A combination of consumer characteristics, VR service variables, and work disincentives predicted employment. Knowledge of these predictors suggests ways for counselors to better serve consumers via accurate assessment, appropriate planning, and efficient case coordination.