Various countries have implemented different types of youth employment subsidies over the years. Carefully targeted hiring and wage subsidies can be cost-effective ways of helping young unemployed people into jobs. For instance, Chile introduced the Youth Employment Subsidy (Subsidio al Empleo Jóven) in 2009, a hiring subsidy that targets financially vulnerable young workers. The programme was conceived against the background of high inactivity and unemployment rates among young people relative to older populations. As another example, Hungary introduced a 90 day job trial wage subsidy in 2015 as part of the Youth Guarantee programme, an EU co-funded active labour market initiative to contribute to reducing unemployment among young adults. Other countries that have implemented hiring subsidies that target young people include Australia, Austria, Belgium, Czechia, Estonia, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, New Zealand, Poland, the Slovak Republic, Slovenia, Spain, and Türkiye. Those subsidies typically aim to increase the proportion of young workers in employment and improve their future labour market outcomes. They often focus on low-income young people or those from disadvantaged backgrounds.
Youth employment subsidies – Multiple countries
Abstract
The Chilean Youth Employment Subsidy provides wage support for dependent and independent workers aged 18‑24 who belong to the most vulnerable 40% of the population based on the Social Protection Index. The total subsidy amounts to 30% of registered gross wages, up to an annually inflation-adjusted cap. The subsidy is split between workers and their employers who each claim their share independently. The Hungarian 90‑day job trial was a subsidy available to skilled young adults not in education, employment or training, who were registered with the public employment service. In the framework of the Youth Guarantee active labour market programme, the jobseekers needed to be under 25 years old, and had to obtain their last qualification in 2011 or afterwards. The 90‑day job trial subsidy covered employers’ full wage costs of a new and additional hire working at least four hours per day. Support was capped at twice the guaranteed minimum wage per month and three times the monthly limit for the whole 90 days for full-time workers.
Hiring subsidies often prove to be effective at raising the likelihood of employment of young people in the short term, as well as improving their later labour market outcomes. For example, the Chilean subsidy covered around 70 000 people in 2009, rising until 2015 before plateauing at around 300 000 until 2022. One evaluation tracks workers who received their first payment between 2012 and 2013 for 24 months or until they turn 25. The study finds that the impact of the subsidy on the probability of formal employment is around 3 percentage points on average. The authors also show significant positive effects on wages, with greater positive impacts for younger workers.
A 2023 evaluation of the Hungarian 90‑day job trial finds that participation in the job trial improved labour market outcomes after six months. Cumulatively over six months after programme completion, participants spent 13‑20 days more in employment than the control group, with earnings 61% higher than the monthly minimum wage. Positive returns remained, but had diminished, after 12 months. Since lower-educated participants saw comparable or greater effects on their employment probability and cumulative earnings, the evaluation also recommends targeting lower-educated young people in the job trial to reduce the deadweight loss of the programme.
This practice also supports the implementation of provisions IV.1 of the OECD Recommendation on Creating Better Opportunities for Young People (OECD, 2022[1]).
Further reading
[2] Centro Microdatos (2011), Evaluación de Impacto del Programa de Subsidio al Empleo Joven, https://socialprotection.org/discover/publications/evaluaci%C3%B3n-de-impacto-del-programa-de-subsidio-al-empleo-joven.
[3] CEPAL (2023), Subsidio al Empleo Jóven (2009- ), https://dds.cepal.org/bpsnc/programa?id=115.
[4] Krekó, J. et al. (2021), Can a short-term job trial programme kick-start young jobseekers’ career?, Budapest Institute for Policy Analysis, http://www.budapestinstitute.eu/uploads/YEP_wage_subsidies_study_16022021.pdf.
[1] OECD (2022), Recommendation of the Council on Creating Better Opportunities for Young People, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0474.
[5] OECD (2021), “What have countries done to support young people in the COVID-19 crisis?”, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, https://doi.org/10.1787/ac9f056c-en.
[6] SENCE (2022), Informe de resultados evaluacion de impacto, https://sence.gob.cl/sence/evaluaciones-de-impacto.
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