The Subsidy Trap: Explaining the Unsatisfactory Effectiveness of Hiring Subsidies for the Senior Unemployed

Arbeitspapier

To extend the labour market participation of seniors, numerous countries provide subsidies to incentivise their recruitment or employment. Prior research demonstrates that the effectiveness of such subsidies is rather unsatisfactory, although the reasons for this inadequacy remain unclear. Therefore, we examined negative employer perceptions triggered by eligibility for such subsidies that might explain this disappointing effectiveness. To this end, we set up a vignette experiment in which 292 genuine recruiters assessed fictitious candidates on their hireability and underlying productivity estimations. These candidates differed experimentally in their eligibility for a hiring subsidy targeted at the unemployed aged 58 or over. Our results indicate that the subsidy has a negative effect on their hiring outcomes. This adverse effect is explained by negative perceptions that counteract the financial incentive. Specifically, the subsidised candidates signal lower physical and technological skills along with an augmented difficulty in hiring and labour inspection.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 16804

Classification and Topics

• Classification: Wirtschaft ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination ; Wages, Compensation, and Labor Costs: Public Policy ; Labor Discrimination
• Subject: hiring discrimination ; senior workers ; labour market programmes ; hiring subsidy ; signalling effect ; vignettes

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dalle, Axana ; Verhofstadt, Elsy ; Baert, Stijn
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2024

Further information

• Last update: 10.03.2025, 11:45 AM CET