Long-Term Effects of Hiring Subsidies for Low-Educated Unemployed Youths

TL;DR

This study evaluates the long-term effects of a hiring subsidy for low-educated unemployed youths in Belgium, revealing short-term employment boosts but no net employment increase overall, with varied impacts based on education level.

Contribution

It employs regression discontinuity and difference-in-differences methods to analyze the long-term impact of hiring subsidies on youth employment in Belgium.

Findings

10 percentage point increase in private sector job-finding within a year

High school graduates gain 2.8 more quarters of employment over six years

No net employment increase due to job transitions and no benefits for dropouts

Abstract

We use regression discontinuity design and difference-in-differences methods to estimate the impact of a one-time hiring subsidy for low-educated unemployed youths in Belgium during the recovery from the Great Recession. Within a year of unemployment, the subsidy increases job-finding in the private sector by 10 percentage points. Over six years, high school graduates secure 2.8 more quarters of private employment. However, they transition from public jobs and self-employment, resulting in no net increase in overall employment, albeit with better wages. High school dropouts experience no lasting benefits. Additionally, in tight labor markets near Luxembourg's employment hub, the subsidy results in a complete deadweight loss.