Tuesday, November 10, 2009

Nudging Job Creation

"One policy in particular has helped keep a lid on unemployment. Schemes that subsidize the wages of employees working fewer hours than normal were introduced or expanded in 22 of the 29 countries surveyed by the OECD."

"Economics focus/Pay for delay," The Economist, November 7, 2009.

Wage subsidies seem to work as economies slide, helping employers retain employees has they face lower sales, a credit crunch and not enough cash.

"Countries without these arrangements, such as America, Britain and Spain, have tended to suffer bigger rises in unemployment."

In the longer run, the benefits of wage subsidies may turn into problems if non-viable jobs are prolonged.

What about as economies recovery, however slowly? Couldn't wage subsidies be used to encourage the creation of jobs, especially for targeted populations? Now we need to come up with policies that support the centrality of work during a jobless recovery.

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