IZA DP No. 3772: Wage Subsidies for Needy Job-Seekers and Their Effect on Individual Labour Market Outcomes after the German Reforms
Our paper estimates the average effect of wage subsidies – paid to employers for a limited period of time – on the labour market prospects of needy job-seekers without access to insurance-paid 'unemployment benefit I'. The results show that wage subsidies had 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. On the whole, groups with particular placement difficulties benefit comparatively more from subsidisation.