Wage subsidies targeted to jobseekers with disabilities: subsequent employment and disability retirement

Nikolay Angelov,Marcus Eliason

doi:10.1186/s40173-018-0105-9

Abstract

In many countries, a non-negligible percentage of the working-age population has impairments that also entail reduced work capacity, and disability retirement is increasing. Despite this, studies on the effects of policies aimed at enhancing the labour market inclusion among people with disabilities, such as targeted wage subsidies, are surprisingly few. In an attempt to fill this gap, we have studied how wage subsidies affect future labour market outcomes for jobseekers with disabilities, in terms of employment and disability retirement. By using inverse probability weighting applied to rich Swedish register data, we contrast participants in the wage subsidy program to observably similar non-participants during a 19-year period. We find that participation was associated with both positive and negative labour market outcomes. On the negative side, participants were less likely to have unsubsidised employment. On the positive side, leaving the labour market through the disability insurance program was somewhat less common among participants. Moreover, using a broader employment measure including subsidised jobs, the participants were found to be employed to a larger extent, which could be interpreted either as locking-in effects or as fostering labour market inclusion.

Highlights

The rising number of people on disability insurance in many countries, including Sweden, over the last decades calls for measures promoting labour market inclusion of people with disabilities (OECD 2010)
In an attempt to shed some light on this issue, we have identified all jobseekers with disabilities who participated in a wage subsidy program in 2000 and followed them during an 8-year pre-program period and a 10-year post-program period using Swedish register data
4 Results we present the estimates of the differences between the sample of participants in the wage subsidy program and the pseudo-sample of inverse probability weighted non-participants, with respect to employment and disability retirement outcomes

Summary

Introduction

The rising number of people on disability insurance in many countries, including Sweden, over the last decades calls for measures promoting labour market inclusion of people with disabilities (OECD 2010). In 2007, Sweden’s expenditures amounted to 2.2% of GDP, a figure that, among the OECD countries, was only exceeded by Norway’s 2.5% of GDP (OECD 2010) Within this group, the labour force participation rate is only 50% and the unemployment rate is more than twice that for those without disabilities (Statistics Sweden 2009). To overcome some of the difficulties that people with disabilities face and to be able to reach the goal— presented in the United Nations Standard Rules for the Equalization of Opportunities of Persons with Disabilities—that people with disabilities should have the same opportunities to participate in working life as everyone else, special measures compensating for a reduced work capacity, such as wage subsidies, might be necessary Angelov and Eliason IZA Journal of Labor Policy (2018) 7:12 people with disabilities face considerable difficulties in the labour market. To overcome some of the difficulties that people with disabilities face and to be able to reach the goal— presented in the United Nations Standard Rules for the Equalization of Opportunities of Persons with Disabilities—that people with disabilities should have the same opportunities to participate in working life as everyone else, special measures compensating for a reduced work capacity, such as wage subsidies, might be necessary

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