The Employment Effects of Low-Wage Subsidies
Journal of Public Economics 97, 49-60. DOI: 10.1016/j.jpubeco.2012.09.007
Posted: 22 Aug 2014
Date Written: January 2013
Low-wage subsidies are often proposed as a solution to the unemployment problem among the low skilled but the empirical evidence on their effects is still scarce. This paper examines the employment effects of a Finnish payroll tax subsidy scheme, which is targeted at the employers of older, full-time, low-wage workers. The system's clear eligibility criteria open up an opportunity for a reliable estimation of the causal impacts of the subsidy scheme. Our results indicate that the subsidy system had no effect on the employment rate or wages of the eligible groups, but it increased slightly working hours among those already at work.
Keywords: H24, J23, J68
JEL Classification: Low-wage subsidies, Employment, Social security contributions
Suggested Citation: Suggested Citation