The European Central Bank published Working Paper No 3154 analysing how euro area consumers report they would adjust labour market participation, hours worked and job search after unanticipated windfall gains. Using a randomised survey experiment embedded in the ECB’s Consumer Expectations Survey, the authors find that labour supply falls only when the gains are substantial, while smaller gains typical of one-off transfers or bonuses show minimal to no disincentive effects. Across hypothetical lottery prizes from EUR 5,000 to EUR 100,000, gains of EUR 25,000 or less have no statistically significant effects on the probability of working or on hours worked. Prizes between EUR 50,000 and EUR 100,000 reduce the probability of working by around 1.5 to 3.5 percentage points and cut hours by roughly about one hour per week for prizes above EUR 50,000, with stronger responses among women and individuals nearing retirement. For non-employed respondents, job search intensity declines by about 1 percentage point per EUR 10,000 of windfall gain, with the largest effects observed for older individuals receiving EUR 100,000. The paper notes that the findings reflect the authors’ views and not necessarily those of the ECB.
European Central Bank 2025-11-18
European Central Bank working paper finds only windfall gains above EUR 50,000 materially reduce labour supply and job search
The European Central Bank's Working Paper No 3154 examines euro area consumers' labour market responses to unexpected windfall gains. The study finds that substantial gains, particularly between EUR 50,000 and EUR 100,000, reduce labour supply, notably affecting women and those nearing retirement. Smaller gains show minimal impact on work probability or hours, while job search intensity decreases among non-employed individuals with larger windfalls.