Varieties of Employment Subsidy Design: Theory and Evidence from Across Europe

Employment subsidy programs have experienced considerable expansion across Europe in recent decades. To date, most studies analyzing this policy shift have assumed that these programs are largely equivalent in terms of their designs, effects, and explanations. In contrast, this article argues that employment subsidies are best understood as versatile multi-purpose tools that can be used as means to rather different distributional ends. Using Multiple Correspondence Analysis to explore novel data from hundreds of employment subsidy programs across Europe, this article develops a new typology based on two overarching trade-offs. The typology highlights that employment subsidies may be designed to counteract as well as to sustain insider/outsider divides in the labor market, and that they may be designed to tackle either structural or cyclical labor market problems. In a first empirical evaluation of the typology, programs with different designs are found to vary systematically in terms of distributional outcomes and starting conditions.

Labour policies may contain Turks' disenchantment

Subject Piecemeal measures to boost employment, job security and incomes. Significance The administration is concerned to keep citizens content with the state of the economy ahead of elections in 2019. Its policies may have a positive impact on employment and the satisfaction of the workforce (particularly subcontracted workers) in 2018. Impacts Short of a crisis and recession, economic discontent is unlikely to become so deep or widespread as to cause large-scale social upheavals. Steps to make labour markets more flexible and reform the severance-pay system and civil service may remain shelved at least until 2020. The cost of employment subsidies to the public purse could become significant, particularly if increased or made permanent.

Turkish unemployment will stagnate without fast growth

Significance In conjunction with other ad-hoc government measures, employment subsidies could assist economic activity in 2017 (global conditions and political developments permitting), at the expense of some deterioration in public finances. Even so, unemployment is likely to average around 11% this year. Impacts Not enough jobs will be created ahead of the constitutional referendum on April 16 to affect the result. Given the level of unemployment, integrating Syrian refugees into the labour force will remain politically sensitive. Lack of opportunity will keep many women out of the workforce, reinforcing traditional gender roles and conservative social norms. Authorities’ calls on business to act in ways not necessarily in its interest could be seen as an additional risk of doing business.