Private Sector Wage Subsidies
Public employment programs often fail to transition unemployed individuals into open-market jobs because tasks performed in public work schemes do not generate real private-sector work experience or employer connections.
Picture this
Instead of paying a job seeker to perform community service tasks, the government pays a private business owner half of the job seeker's wage for six months. This acts like a temporary half-off coupon for employers, giving them a low-risk way to test and hire new staff in real commercial settings.
What the evidence says
Private sector wage subsidies were utilized for 8%–12% of treatment group members (vs 4%–6% control) and yielded positive post-program exit effects in Storstrøm (completion coefficient 0.97) compared to public sector temporary jobs.
- Who
- N = 4,513 unemployed UI recipients (human, Denmark: Storstrøm and Southern Jutland counties).
- How
- Randomized Controlled Trial evaluating 6-month temporary private sector subsidy jobs within duration hazard models.
What to do
Prioritize temporary private-sector wage subsidies over public-sector temporary jobs when structuring active labor market placement programs.
From the source
"These involve temporary employment in a private firm at the negotiated wage, where the employment agency pays a subsidy to the firm of around half the wage. These jobs typically have a duration of 6 months."
Experimental Evidence on the Nature of the Danish Employment Miracle