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Quality Job Programs, Unemployment and the Job Quality Mix

Benoit Julien () and Ian King ()

No 4621, MRG Discussion Paper Series from School of Economics, University of Queensland, Australia

Abstract: TWe examine the impact of Quality Jobs Programs (QJPs) on job creation, unemployment, and average job quality, in a directed search model of the labor market where firms bid for labor and can choose to create different qualities of jobs. The government has access to differential tax and subsidy structures, and unemployment benefits. QJPs are defined as job subsidy structures where higher quality jobs are subsidized more generously than lower quality ones. We find that QJPs increase the number of higher quality jobs but decrease the number of lower quality jobs commensurately — raising the average quality of jobs but leaving the unemployment rate unchanged and inducing an inefficient job quality mix. Uniform subsidies, on the other hand, increase the number of lower quality jobs while not affecting the number of higher quality jobs — thereby reducing both the average quality of jobs and the unemployment rate. If uniform subsidies are set equal to unemployment benefit levels then the job quality mix is also efficient.

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