Wage Subsidy Scheme Research Articles

Temporary wage subsidies and post-COVID re-employment in Morocco: a regression discontinuity approach

ABSTRACT This paper aims to evaluate the causal effect of a temporary wage subsidy scheme implemented in Morocco during the COVID-19 crisis. It exploits a discontinuity in the eligibility condition of this subsidy, which is the number of days reported before job loss, to identify its causal effect on beneficiaries’ unemployment duration and re-employment probability by using the regression discontinuity method based on administrative data from the National Social Security Fund (CNSS). Our findings indicate that this subsidy has reduced the duration of unemployment and improved the probability of re-employment of beneficiary employees. However, they also show that these positive effects seem to have been less pronounced among those most excluded from the labour market, namely women and young people.

Parental Employment at the Onset of the Pandemic: Effects of Lockdowns and Government Policies

The COVID-19 pandemic had disproportionate impacts on women’s employment, especially for mothers with school-age and younger children.However, the impacts likely varied depending on the type of policy response adopted by various governments. New Zealand presents a unique policy setting in which one of the strictest lockdown restrictions was combined with a generous wage subsidy scheme to secure employment. We utilize tax records to compare employment patterns of parents from the pandemic period (treatment group) to similar parents from a recent pre-pandemic period (control group). For mothers whose youngest child is aged between one and 12, we find a 1-2-percentage point decline in the likelihood of being employed in the first six months of the pandemic; for fathers, we hardly see any significant changes in employment. Additionally, the decline in mothers’ employment rates is mainly driven by those not employed in the month before the lockdown. We also find similar employment patterns for future parents who had no children during the evaluation period. This indicates that the adverse labour market impacts are not uniquely experienced by mothers, but by women in general.

Exploring Disability Disadvantage in Hiring: A Factorial Survey among Norwegian Employers

The role of disability in producing disadvantage in employers’ hiring assessments was explored in a factorial survey, where a random sample of Norwegian employers ( n = 1341) evaluated fictional job-seeker profiles. The results revealed that including an impairment description in a job-seeker profile significantly decreased the likelihood that employers would want to hire a candidate. The degree of disadvantage varied with the type of impairment. Being eligible for a wage subsidy scheme improved employers’ assessments of candidates while including information about other types of support measures did not. Furthermore, when an impairment description was introduced into a job-seeker profile, other crucial characteristics of the job seeker lost some or all of their impact on employers’ assessment scores. These findings are interpreted as disability becoming a ‘master status’ when employers make hiring assessments.

COVID, crisis, and unordinary order: A critical analysis of Australia’s JobKeeper wage subsidy scheme as an exceptional measure

Carl Schmitt’s famous articulation of the relation between sovereignty and the exception emphasises not simply the basis for a suspension of the law in a state of emergency, but the role of the sovereign in deciding upon the existence of the ‘normal situation’, the ‘everyday frame of life’ which the law requires to function. Our pandemic times have included extreme biopolitical measures deployed to manage the health crisis, but also unprecedented political responses to regularise or stabilise the economic order. One example is Australia’s historic JobKeeper wage subsidy scheme. As law, it was given life by an executive power predicated on nationhood and enlivened by crisis. As policy, it was intended to help businesses retain workers through targeted, proportionate support. In reality, it also provided significant protections and even windfalls to corporations and their investors, leading to critiques of the scheme as corporate welfare. However, rather than highlighting deficiencies of the JobKeeper programme, these outcomes underscore its ultimate function. This article analyses the relationship between norm, exception, and order in the context of Australia’s flagship economic-policy response to the pandemic. First, by analysing the mutually constitutive relationship between norm and exception, employing the theories of Carl Schmitt and Giorgio Agamben. Second, by critically examining the legislative basis for JobKeeper, its political narrative and practical outcomes. Third, by demonstrating that the scheme, though an extraordinary departure from policy, can be understood as fundamentally a different and exceptional method to secure and reproduce our neoliberal corporate order in a state of exception.

The politics of job retention schemes in Britain: The Coronavirus Job Retention Scheme and the Temporary Short Time Working Compensation Scheme

The UK Government's introduction of the Coronavirus Job Retention Scheme (CJRS) in March 2020 was pitched as unprecedented. Yet, during the 1970s and 1980s, UK governments also operated wage subsidy job retention schemes. Indeed, despite their professed liberal market orientation, Thatcher's radical right Conservative governments presided over the expansive Temporary Short Time Working Compensation Scheme (TSTWCS) between 1979 and 1984. Drawing upon the work of Gallas (2016) , we contend this embrace of wage subsidy schemes by Conservative governments almost 40 years apart emanate from a class politics focused on securing the subordination of labour. In our analysis, the TSTWCS is understood as a mechanism to dampen disquiet with the early Thatcher Government's project to restore employer dominance. And the CJRS is a mechanism to preserve the labour market relations of domination and exploitation successfully embedded by the Conservatives in the 1980s.

Age, industry, and unemployment risk during a pandemic lockdown

This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor market search and matching frictions, and multiple industries of employment. We calibrate the model to data from New Zealand, where the health effects of the pandemic were especially mild. In this context, we model lockdowns as supply shocks, ignoring the demand shocks associated with health concerns about the virus. We then study the impact of a large-scale wage subsidy scheme implemented during the lockdown. The policy prevents job losses equivalent to 6.5% of steady state employment. Moreover, we find significant heterogeneity in its impact. The subsidy saves 17.2% of jobs for workers under the age of 30, but just 2.6% of jobs for those over 50. Nevertheless, our welfare analysis of fiscal alternatives shows that the young prefer increases in unemployment transfers as this enables greater consumption smoothing across employment states.

Responses to Covid-19 from Kiwi hospitallers

Responses to Covid-19 from Kiwi hospitallers

European Union Competition Law Developments in the Aviation Sector: July to December 2020

The second half of 2020 has seen the aviation industry, and the world in general, continue to grapple with the seismic impact of the ongoing COVID-19 pandemic. This article summarizes the main developments over the past six months and provides the reader with greater detail of each of these developments. The European Commission (the ‘Commission’) has adopted a new Temporary Framework to enable Member States to grant further support and aid measures in response to the COVID-19 outbreak. Under the Temporary Framework, and subject to adherence to the criteria set out therein, Member States are able to take measures which are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State. Given the on-going pandemic, and the resultant travel restrictions to control the spread of the virus, it is not surprising that a very significant number of State Aid measures have been enacted by Member States to support entities active in the aviation sector. While the majority of these measures have been directed towards aiding airlines, which have been hit particularly hard by the general fall in demand for air-passenger services and the travel restrictions, measures have also targeted for example ground handlers, airport operators and manufacturers of aviation parts. Similarly, the form of support offered has varied and included, for example, direct grants, loan guarantees, subsidized loans, tax and/or charges deferral schemes and wage subsidy schemes. The increased number of State Aid notifications to beneficiaries in the aviation sector has led to a similar increase in the number of legal challenges lodged at the EU Courts. Ryanair has been particularly active in challenging State Aid measures which it argues are illegal, and has signalled an intention to lodge further challenges still. Ryanair has taken particular umbrage with what it perceives as attempts by Member States to prop up their own national champions (e.g., operating the aid scheme by reference to the country in which the beneficiary holds an operating licence) at the expense of other competitors active in the Member State who have equally suffered as a result of the pandemic. aviation, airline, regulation, competition and anti-trust

Continuing the precedent: Financially disadvantaging young people in "unprecedented" COVID-19 times.

The COVID‐19 pandemic is both a health and an economic crisis. Economically, lockdowns across Australia have devastated business and industry, creating immediate spikes in under‐ and unemployment. These impacts intersect with the precarious labour market of casualised and "gig" economy work, where young workers constitute an established and substantial group. While negatively impacting upon many young people’s lives, in recent decades precarious employment has also been normalised for young people as they are encouraged to understand themselves as self‐reliant and entrepreneurial in their working lives. Yet, these workers have been largely abandoned in the government’s economic response to COVID‐19. The economic impact and government response to the pandemic substantially disadvantage young people. This article analyses the impact of new government initiatives: the "JobKeeper" wage subsidy scheme, "JobSeeker" payments and early access to superannuation, "JobMaker" economic recovery plan and the redesign of university fees. These initiatives compound preexisting youth policy of low welfare levels, youth wages and high university fees to economically burden young people. Contrasting the repeated expression of anything pandemic related as "unprecedented", we argue that the economic abandonment of young people in the immediate COVID‐19 crisis continues a decades‐long precedent in Australia of economically disadvantaging young people.

Hospitality business longevity under COVID-19: The impact of COVID-19 on New Zealand’s hospitality industry

The aim of this paper is to explore the impact of the COVID-19 pandemic on the New Zealand hospitality industry, within the context of business longevity theory using an on-line qualitative survey of 11 senior industry executives representing 105 restaurant, café and take-away outlets. The findings reveal that despite financial loss, COVID-19 provided an opportunity to engage in strategic innovation through two basic approaches; one mediated by technology, the other by direct personal contact. This internal innovation, flexibility and responsiveness is consistent with the RBV theory of the firm and the inertia and change perspective of organizational Population Ecology theory. The practical implications relate to business longevity and the financial impact across the industry, however, COVID-19 also provided an opportunity for strategic innovation through technology and direct personal customer contact. Innovations were mediated by two government COVID-19 related initiatives - the wage subsidy scheme, and government business loans. The social implications are significant and include a renewed sense of ‘self’ reflecting the need for business survival. Renewal has invigorated participants to differentiate the hospitality industry and its contribution to the national economy from that of tourism. That renewal and vibrancy provides the perfect scenario for the wider sociocultural embrace of a return to normal life and regular business in Aotearoa New Zealand. The limitations of this study include the focus on restaurants, cafes and take-aways - a wider hospitality industry study would provide a more industry representative perspective. The study is also focused on New Zealand as a unique case study; this would not necessarily be representative of the global industry. The qualitative approach and small sample is a strength in terms of depth of analysis, but could be supplemented through a wider quantitative study.

Age, Industry, and Unemployment Risk During a Pandemic Lockdown

This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor market search and matching frictions, and multiple industries of employment. We calibrate the model to data from New Zealand, where the health effects of the pandemic were especially mild. In this context, we model lockdowns as supply shocks, ignoring the demand shocks associated with health concerns about the virus. We then study the impact of a large-scale wage subsidy scheme implemented during the lockdown. The policy prevents job losses equivalent to 6.5% of steady state employment. Moreover, we find significant heterogeneity in its impact. The subsidy saves 17.2% of jobs for workers under the age of 30, but just 2.6% of jobs for those over 50. Nevertheless, our welfare analysis of fiscal alternatives shows that the young prefer increases in unemployment transfers as this enables greater consumption smoothing across employment states.

In the eye of the storm…again! Social policy responses to COVID‐19 in Southern Europe

AbstractThis paper aims to describe and discuss the significance of the social policy measures implemented in Southern European countries—Greece, Italy, Portugal and Spain—in response to the first wave of COVID‐19. Our analysis covers interventions from 1 March to June 30, 2020. Despite significant differences in how the COVID‐19 pandemic spread—with Italy and Spain experiencing much higher rates of infection and lethality—Southern European economies are among the most hard‐hit—and are likely to find themselves in the eye of the storm, once more. The paper shows that despite differences in how countries have countered the spread of COVID‐19, there are important commonalities in the actions governments took to counteract the economic impact of the pandemic. Foremost efforts were directed at wage subsidy schemes to contain mass job destruction, additional temporary benefits to compensate self‐employed and other non‐standard workers for the loss of earnings; the expansion of unemployment insurance; and finally, the introduction and/or strengthening of schemes to provide support to families with care responsibilities. The scale of the social policy and employment protection response has nevertheless been constrained by the fiscal position of each individual country in the post‐Euro crisis context. We argue that, in the long run, the response capacity of these governments and the social and economic consequences of this crisis will need to be contextualised against the backdrop of the deep and prolonged impact of austerity‐driven measures on public budgets, production and welfare regimes over the last decade.

Employers and the Implementation of Active Labor Market Policies

Active labor market policies (ALMPs) are an important instrument for governments in dealing with the new challenges of globalization, flexibilization, and individualization of labor markets. Politics and research has focused on the supply-side of the labor market, that is, regulating the rights and obligations of the target groups of ALMPs (mainly unemployed and inactive persons). The role and behavior of employers is under-researched and under-theorized in the vast literature on ALMPs and industrial relations. In this article, we analyze ALMPs from the employers’ perspective by examining the determinants of firms’ participation in providing wage subsidy jobs for the unemployed. First, we examine the historical background to the introduction and development of wage subsidy schemes as an important ALMP instrument in Denmark. Second, we derive theoretical arguments and hypotheses about employers’ participation in ALMPs from selected theories. Third, we use data from a survey of Danish firms conducted in 2013 to characterize the firms that are engaged in implementing wage subsidy jobs and hypotheses are tested using a binary logistical regression to establish why firms voluntarily engage in reintegrating unemployed back into the labor market. We find that the firms which are most likely to participate in the wage subsidy scheme are characterized by many unskilled workers, a higher coverage of collective agreements, a deteriorating economic situation, a Danish ownership structure, and are especially found in the public sector. This shows that the preference formation of firms is more complex than scholars often assume.

Revisiting wage subsidies: How pro-poor is a South African wage subsidy likely to be?

Wage subsidies have been used in both developed and developing countries to raise employment. After a decade of deliberation, the South African Government recently announced the introduction of a wage subsidy scheme. Given the intrinsic link between unemployment and poverty in South Africa, the belief is that a wage subsidy programme sufficient in scope will also make inroads into poverty. However, the way in which jobs are distributed among poor and non-poor jobseekers is crucial. Our general equilibrium microsimulation model confirms the expectation that a higher wage elasticity of labour demand is associated with larger reductions in poverty. We also find that a greater proportion of new jobs accrue to poor jobseekers when the elasticity is high. While youth-targeting does not improve the poverty-reducing effect of the policy, sectors such as textiles, accommodation, and construction services with their pro-poor employment profiles are good candidates for targeting.

Avoiding adverse employment effects from electricity taxation in Norway: What does it cost?

Welfare analyses of energy taxes typically show that systems with uniform rates perform better than differentiated systems. However, most western countries include some exemptions for their energy-intensive export industries and thereby avoid this potential welfare gain. Böhringer and Rutherford (1997) find that uniform taxation of carbon emissions in combination with a wage subsidy preserves jobs in these industries at a lower welfare cost compared with a differentiated system. The wage subsidy scheme generates a substantial welfare gain per job saved. This study, however, finds that welfare costs are substantial when less accurate policy measures, represented by production-dependent subsidies, protect jobs in Norwegian electricity-intensive industries. The welfare cost per job preserved by this subsidy scheme amounts to approximately 60% of the wage cost per job, suggesting that these jobs are expensive to preserve. A uniform electricity tax combined with production-dependent subsidies preserves jobs at a lower welfare cost compared with the current differentiated electricity tax system.

Evidences on Household Labour Supply: When Labour Demand is Not Perfectly Elastic

The simulations of tax-benefit reforms with labour supply models often implicitly assume perfectly elastic labour demand, an assumption that may lead to unrealistic results. In this study we attempt to address this limitation and show how the interaction between labour supply and labour demand would affect the outcome of a certain reform. We introduce a 'wage subsidy scheme,' as it is commonly proved to produce labor incentives and find that, when labour demand is not considered as perfectly elastic, the simulated labor supply results to be lower for women compared to the perfectly elastic scenario but higher for their male partners. We explain this disparate behavior through the differences in cross wage elasticities the selected couples exhibit and the way labour preferences are shared between partners. These empirical findings provide a new understanding of behavioral micro-simulation models and their ability to evaluate tax-transfer reforms.

Marginal wage subsidies: a rent‐extracting instrument for employment creation

PurposeThis paper aims to examine the effects of marginal and general wage subsidies on employment and income distribution.Design/methodology/approachThe paper constructs a theoretical, partial‐equilibrium model of an economy in which a large number of competitive firms produce a homogeneous output good. Involuntary unemployment arises from a too high and rigid wage. By conducting comparative static analyses, the paper evaluates the impact of general and marginal wage subsidies on employment and incomes.FindingsThe paper shows that a marginal wage subsidy is a fiscally more efficient instrument for employment creation than a general wage subsidy because it resembles a combination of a general wage subsidy with a profit tax. These favorable effects persist even if between‐firm displacement effects are taken into account.Research limitations/implicationsIn line with most of the literature on marginal employment subsidies, attention is restricted to a partial‐equilibrium analysis in which the wage is assumed to be fixed. This helps to sharpen the focus on between‐firm competition, but is perhaps implausible when analyzing a general‐equilibrium setting. The inclusion of endogenous wage setting is bound to provide an interesting area for future research.Practical implicationsIf politicians want to implement a wage subsidy scheme that has to be self‐financing, marginal wage subsidies are an effective policy instrument for employment creation. Its downside is an inefficient allocation of labor among firms, because some firms become larger than is necessary.Originality/valueThe paper provides a novel approach to model the between‐firm displacement effects of marginal wage subsidies and derives policy conclusions.

Disentangling Treatment Effects of Active Labor Market Policies: The Role of Labor Force Status Sequences

This paper estimates treatment effects of two active labor market policies – a training program and a wage subsidy scheme – on participants' employment probabilities. The analysis is based on unique data from the 18th wave of the Polish Labor Force Survey containing detailed and extensive individual labor force status histories. We discuss two variants of an exact covariate matching procedure adapted to the specific nature of the data. Our study confirms and reinforces a point raised in recent research [Heckman, J.J., Smith, J.A. The Pre-programme Earnings Dip and the Determinants of Participation in a Social Programme: Implications for Simple Programme Evaluation Strategies. The Economic Journal 1999; 109; 313-348., Heckman, J.J., Smith, J.A. The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program. Journal of Labor Economics 2004; 22; 243-298.], that pre-treatment labor force status dynamics play a decisive role in determining program participation. We implement a conditional difference-in-differences estimator of treatment effects based on these individual trinomial sequences of pre-treatment labor market status. The estimator employs a “moving window” technique that nicely controls for changes in the macroeconomic environment over time. Our findings suggest that training raises individual employment probability, while wage subsidies display negative treatment effects for participants in the Polish case.

Inferring Employer Search Behaviour from Wage Subsidy Participation

We introduce a novel way to infer employer search behaviour, through deadweight loss incidence in wage subsidy schemes. Using a data set on British firms participating in such schemes we can distinguish between intensive and extensive employer search. These data also allow us to separate the negative economies of scale effect from the positive monitoring effect of firm size on intensive search costs. Our findings further indicate that ‘hours worked’ and ‘supervisory tasks’ increase extensive search costs. Since intensive and extensive search behaviour affect the job find probability of the (long-term) unemployed, our conclusions have significant labour market policy relevance.

A Low Wage Subsidy Scheme Against Unemployment of Low-Skilled Workers

The reduction of the high mass unemployment is on top of the political agenda in various countries. Especially low-skilled workers with low wages suffer from this mass unemployment. Therefore, we propose a basic income scheme/low wage subsidy scheme for low-skilled workers to help them find a new job or to keep their endangered job. Based on microsimulation calculations we estimate the fiscal, labour supply and distributional effects of different reform scenarios. Furthermore, we show that employment enhancing scenarios can be financed in a revenue-neutral way under certain conditions.