Young adults climbing a staircase of job applications, boosted by a hiring subsidy.

Unlock Your Potential: Do Youth Employment Subsidies Really Work?

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Elliot Brynn in Business & Economy December 2025 • 4 min read.

"A deep dive into the effectiveness of hiring subsidies for low-educated youths and how they can pave the way for future success in a competitive job market."


In today's economy, young people often face significant challenges in finding stable and rewarding employment. The 2008 Great Recession and subsequent European sovereign debt crisis amplified these difficulties, leading to increased youth unemployment rates. To combat this, governments have implemented various policies, including hiring subsidies aimed at encouraging employers to hire young, low-educated individuals.

Hiring subsidies are designed to reduce the cost of labor for employers, making it more attractive to hire young people who may lack extensive experience or advanced education. These subsidies can take various forms, such as direct payments to employers or reductions in payroll taxes. The goal is to provide a temporary boost to employment, helping young individuals gain valuable work experience and establish themselves in the labor market.

But do these subsidies actually work? The effectiveness of hiring subsidies is a complex question, influenced by factors such as the design of the subsidy, the state of the local economy, and the characteristics of the target population. This article explores the findings of a recent study on the long-term effects of a hiring subsidy program in Belgium, offering insights into what works, what doesn't, and how these programs can be improved to better serve young job seekers.

Hiring Subsidies: A Helping Hand or a Temporary Fix?

Young adults climbing a staircase of job applications, boosted by a hiring subsidy.

A recent study investigated the impact of a one-time hiring subsidy program for low-educated unemployed youths in Belgium during the recovery from the Great Recession. The program, known as the Win-Win Plan, offered financial incentives to firms that hired young individuals with limited education. The study used regression discontinuity design and difference-in-differences methods to assess the program's effectiveness.

The initial results were promising. Within the first year of unemployment, the subsidy increased job-finding rates in the private sector by 10 percentage points. This suggests that the subsidy was successful in encouraging employers to hire young, low-educated individuals in the short term. However, the long-term effects were more nuanced and varied depending on the individual's level of education.

  • High School Graduates: Over six years, high school graduates secured 2.8 more quarters of private employment. However, many transitioned from public jobs and self-employment, resulting in no net increase in overall employment, though they did experience better wages.
  • High School Dropouts: This group experienced no lasting benefits from the subsidy. The initial boost in employment faded over time, leaving them no better off in the long run.
  • Tight Labor Markets: In areas with tight labor markets, particularly near Luxembourg's employment hub, the subsidy resulted in a complete deadweight loss, meaning it had no positive impact on employment.
These findings highlight the importance of considering the specific context and target population when designing and implementing hiring subsidy programs. While the subsidy provided a short-term boost to employment, its long-term effects were limited and unevenly distributed.

Maximizing the Impact: Strategies for Effective Hiring Subsidies

The study's findings suggest that hiring subsidies can be a useful tool for promoting youth employment, but only if they are carefully designed and targeted. To maximize their impact, policymakers should consider the following strategies: Focus on Long-Term Skills Development, Address Labor Market Tightness, Target Specific Populations, and Monitor and Evaluate Programs. By implementing these strategies, governments can ensure that hiring subsidies are an effective tool for promoting youth employment and fostering long-term career success.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1016/j.jpubeco.2024.105137,

Title: Long-Term Effects Of Hiring Subsidies For Low-Educated Unemployed Youths

Subject: econ.gn q-fin.ec

Authors: Andrea Albanese, Bart Cockx, Muriel Dejemeppe

Published: 12-06-2024

Everything You Need To Know

1

What are hiring subsidies, and how do they aim to help young people?

Hiring subsidies are financial incentives governments provide to employers to reduce the cost of labor. The goal is to encourage them to hire young, low-educated individuals who may lack experience. These subsidies, which can be direct payments or payroll tax reductions, are intended to provide a short-term boost to employment, helping young people gain work experience and enter the labor market.

2

Did the Win-Win Plan in Belgium really work, and what did the study reveal about its impact on youth employment?

The Win-Win Plan, a hiring subsidy program in Belgium, initially increased job-finding rates in the private sector by 10 percentage points within the first year. However, the long-term effects varied. High school graduates experienced increased private employment and better wages, while high school dropouts saw no lasting benefits. In areas with tight labor markets, the subsidy had no positive impact, indicating a complete deadweight loss.

3

How did the outcomes of the Win-Win Plan differ between high school graduates and dropouts?

High school graduates benefited more from the Win-Win Plan. They secured 2.8 more quarters of private employment over six years and experienced better wages. However, their overall employment didn't increase as much due to transitions from public jobs and self-employment. High school dropouts, on the other hand, did not experience any lasting employment benefits from the subsidy, with the initial boost fading over time.

4

What are the key factors that influence the effectiveness of hiring subsidies, according to the findings?

The effectiveness of hiring subsidies is complex and depends on several factors. The design of the subsidy, the state of the local economy, and the characteristics of the target population all play a crucial role. For example, in tight labor markets, the subsidy may not be effective, as seen in the case of areas near Luxembourg's employment hub. The level of education among the target population also affects the long-term outcomes.

5

What strategies can policymakers use to make hiring subsidies more effective in promoting long-term career success for young people?

To maximize the impact of hiring subsidies, policymakers should focus on strategies like long-term skills development, addressing labor market tightness, targeting specific populations, and continuous program monitoring and evaluation. These strategies include tailoring programs to specific groups and adjusting them to the local economic conditions to ensure that subsidies are an effective tool for promoting youth employment and fostering long-term career success, not just short-term gains.

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