Unemployed workers in Austria are allowed to top up unemployment benefits with a certain amount of earnings from employment
without any benefit reduction. We do not find evidence that entering such "marginal employment" during unemployment acts as
a stepping stone to regular employment. On the contrary, it tends to prolong the unemployment spell and hence reduces the
time spent in regular employment within a three-year period. Moreover, marginal employment during the unemployment spell leads
to lower earnings. It inhibits the return to regular employment probably due to a high implicit tax rate on additional income.
Keywords:Marginal employment; Unemployment; Unemployment insurance; Labour market policy evaluation
Research group:Labour Market, Income and Social Security