Helping the Working Poor: Employer- vs. Employee-Based Subsidies
Stacy Dickert-Conlin () and
No 14, Center for Policy Research Policy Briefs from Center for Policy Research, Maxwell School, Syracuse University
In the United States and Europe there has been renewed interest in subsidizing firms that employ disadvantaged workers as a means of addressing poverty and other social problems. In contrast, the prevailing practice is largely to provide social welfare benefits directly to individuals. Which approach is better? We re-examine the relative merits of employee- versus employer-based labor market subsidies and conclude there are good reasons to continue to rely on the direct, employee-based approach. In practice, low-wage workers are seldom either low-skill or low-income workers. Furthermore, workers who might quality for a firm-based subsidy are reluctant to so identify themselves for fear of being stigmatized or labeled as "needy." Thus, employer-based subsidy programs have lower participation rates and correspondingly higher per capita expenditures than employee-based subsidy programs.
JEL-codes: I38 J31 (search for similar items in EconPapers)
Pages: 32 pages
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