Bringing the unemployed back to work in Germany: training programs or wage subsidies?

Abstract

Purpose

The purpose of this paper is to theoretically and empirically investigate the relative effects of wage subsidies and further vocational training on employment prospects.

Design/methodology/approach

The paper adopts a theoretical approach that discusses the effects of two major active labor market programs; empirical test using a large administrative data set from Germany and statistical matching techniques.

Findings

Previously subsidized individuals and trained individuals who found a job immediately afterwards have the same employment rates.

Practical implications

Firms value training on a subsidized job as much as formal training programs.

Originality/value

The paper presents a model that draws attention to the role of hiring decisions of firms and to the formation of human capital by training programs and by training on subsidized jobs; estimation of relative average treatment effects on the differentially treated, i.e. participants of two active labor market programs; and comparisons not only of all unemployed but also of unemployed persons taking‐up or keeping a job after program end.

Citation

Neubäumer, R. (2012), "Bringing the unemployed back to work in Germany: training programs or wage subsidies?", International Journal of Manpower, Vol. 33 No. 2, pp. 159-177. https://doi.org/10.1108/01437721211225417