Effects of Unemployment benefit sanctions among young adults with and without labour market disadvantages: A register-based target trial emulation in Finland

Abstract

To encourage transitions into employment or education, governments impose benefit sanctions on unemployed individuals who fail to comply with conditionality requirements. However, evidence on the effectiveness of such sanctions remains limited, particularly among young adults. We investigated whether sanctions are associated with transitions into employment or education and whether effects differ among individuals facing labour market disadvantages. To estimate causal effects using observational data, we applied a target trial emulation framework. We used nationwide Finnish register data on 52,890 unemployed individuals under the age of 25 in 2022. Following a target trial emulation framework, we treated sanctions as the intervention and applied coarsened exact matching with importance weights to approximate random allocation. We constructed a labour market disadvantage score by summing five indicators associated with poorer labour market attachment. Time-to-event outcomes over a 24-month follow-up were estimated using parametric survival models. Overall, 78% of young adults transitioned to employment or education within an average of 10 months. Pooled across all sanction types, sanctions were associated with a modestly higher transition hazard (HR = 1.09, 95% CI 1.05–1.14) and a 0.9-month shorter median time to employment or education. Among individuals without labour market disadvantages, sanctions were associated with a 1.7-month reduction in median time to transition (HR = 1.43, 95% CI 1.29–1.58). By contrast, among those with one or more disadvantages, hazard ratios were statistically non-significant (HR = 0.99–1.07) and differences in median time were negligible (0.1–0.2 months). Unemployment benefit sanctions can facilitate transitions to employment or education among unemployed young adults without labour market disadvantages. However, the effects of sanctions differ between those with and without such disadvantages. Policymakers may use these findings to retarget sanctions or combine them with supportive measures.