Back to work? The impact of education as vocational rehabilitation for work-impaired youth

Abstract

We investigate the effect of regular education as vocational rehabilitation for young work-impaired adults in Norway. On 1 January 2004, the age limit for receiving support for regular education as a rehabilitation measure was raised from 22 to 26. This led to a substantial shift in the type of vocational rehabilitation offered – from education to subsidised employment – allowing us to address the issue of whether vocational rehabilitation through more education or work practice is best suited to increase the labour market participation of work-impaired youth. We find that the change led to a short-term (2–3-year) increase in employment (0.06–0.92-month increase per year), likely due to the lock-in effect of education. In the medium run (5–6 years), the effect turns negative (0.3–0.98-month decrease per year), consistent with education being superior to subsidised employment. However, we do not detect any effect on employment in the long run (8–9 years), suggesting that these effects fade out over time.