Wage subsidies for needy job-seekers and their effect on individual labour market outcomes after the German reforms

Abstract

"In Germany, since 2005 needy job-seekers without access to earnings-related and insurance-paid 'unemployment benefit I' are entitled to means-tested and tax-funded 'unemployment benefit II'. Several active labour market programmes support the integration of these needy job-seekers into the labour market. Our paper estimates the average effect of targeted wage subsidies - paid to employers for a limited period of time - on the subsequent labour market prospects of participating needy job-seekers. We apply propensity score matching to compare participants with a group of similar non-participants. The results show that wage subsidies had in fact large and significant favourable effects: 20 months after taking up a subsidised job, the share of persons in regular employment is nearly 40 percentage points higher across participants. Estimated effects on the shares not unemployed and the share no longer receiving 'unemployment benefit II' are slightly smaller." (Author's abstract, IAB-Doku) ((en))

Cite article

Bernhard, S., Gartner, H. & Stephan, G. (2008): Wage subsidies for needy job-seekers and their effect on individual labour market outcomes after the German reforms. (IAB-Discussion Paper 21/2008), Nürnberg, 27 p.