The Effects of Marginal Employment on Subsequent Labour Market Outcomes

Abstract. Unemployed workers in Austria do not lose their unemployment benefits (UI) if they work in a job where their earnings are below a certain threshold ‘marginal employment’ (ME)]. ME might improve their labour market status by signalling effort, or worsen it through reduced job‐search effort. Those who work in ME while claiming UI have less employment and lower earnings afterwards than those who do not. The penalty lessens over time but is still present after three years.