Welfare Spending and Employment Subsidies

Abstract

Employment subsides are generally classified as active labour policy instruments (OECD [6]). They are not a new instrument as they have been often deployed in past decades, above all to alleviate the employment problems of the marginal fringes of the labour force by increasing their chances of being hired. Although not new, employment subsidies deserve further attention for two reasons. The first is related to events in Italy, namely that one of the more important measures included in the government's recent «fiscal package» is a substantial incentive to companies to hire additional labour. The second is more general and essentially concerns recent literature that considers employment subsidies either as a viable alternative to other welfare measures for the weak social groups or else as a valid corrective for wage differential rigidities.