The Win-Win Plan (High School Graduates)
Introduction
The Win-Win plan was a policy implemented in 2010 with the goal of reducing unemployment among workers throughout Belgium. Recognizing that there was a differential impact of the 2008 financial crisis across different age groups, the government provided a wage subsidy of €1,000 euros a month to any firm that hired an eligible worker (who was a high school graduate) under the age of 26. This subsidy would last for 2 years for hiring that occurred in 2010 and 1 year for hiring that occurred in 2011. For those at or above the age of 26, the subsidy was equal to €750 a month for the first year and, for hiring that occurred in 2010, €500 a month for the second year. Albanese et al. (2024) utilizes this cutoff to investigate the impact of the generosity of the Win-Win plan.
Pays for Itself
Net Cost
The net cost is comprised of 3 parts: (1) the direct cost of the subsidy, (2) reduced spending on unemployment for recipient workers, and (3) increased receipt of income taxes (including payroll taxes) from labor income and unemployment benefits as a result of increased employment.
For high school graduates, the average tax contributions and subsidies were €6,670 and €3,657 respectively, while the cost of the average unemployment benefits decreased by €69. The estimated net cost was then -€3,087.
Willingness to Pay
The estimated willingness to pay includes three components: (1) the WTP of the recipient firms, (2) the WTP for the recipient workers who are hired due to the program, and (3) the WTP for the externalities on wages of existing workers of recipient firms. The paper sets component (3) to zero given the absence of identified effects on wages for existing workers.
The paper estimates the total WTP for high school graduates to be €5,396.
MVPF Summary
The estimated MVPF of the incremental generosity of the Win-Win plan for high school graduates was infinite given a negative net cost and positive willingness to pay. However, the estimates are imprecise and the paper cannot rule out a negative MVPF (as the result of a negative WTP).
The paper separately estimates the MVPF for high school dropouts: [LINK HERE]
References
Albanese, Andrea, Bart Cockx, Muriel Dejemeppe (2024). “Long-term effects of hiring subsidies for low-educated unemployed youths”. Journal of Public Economics, 235:105137. DOI: https://doi.org/10.1016/j.jpubeco.2024.105137
Policy Features
- Category
- Social Insurance
- Sub-Category
- Firm Taxes/Subsidies
- Beneficiary Type(s)
- Adults, Firms
- Country of Implementation
- Belgium
- Year of Implementation
- 2010
- Empirical Method
- Regression Discontinuity
- Research Type
- Primary
- Peer Reviewed
- Yes
- MVPF Publication Link
- doi.org/10.1016/j.jpubeco.2024.105137