ERIC Number: ED400450
Record Type: RIE
Publication Date: 1995-Jan
Wage-Rate Subsidies for Dislocated Workers. Upjohn Institute Staff Working Paper 95-31.
Davidson, Carl; Woodbury, Stephen A.
An array of innovative policies has been suggested to address more effectively the needs of dislocated workers. A model has been proposed to simulate the impacts of a wage-rate subsidy (or salary supplement) program in which a dislocated worker who becomes reemployed would receive a payment equal to one-half the difference between the wage previously earned and the wage currently earned. The simulations are based on a model that provides estimates of the impacts of a wage subsidy by incorporating empirical results from the reemployment bonus experiments that were conducted in the mid-to-late 1980s. The model includes several groups of workers other than dislocated workers and, therefore, provides estimates of the degree to which these other workers might be crowded out of jobs by the wage subsidy program. The results suggest that a wage-rate subsidy paid for 2 years after reemployment would shorten the unemployment spells of dislocated workers by nearly 2 weeks and would increase employment of dislocated workers by about 900-1,000 per 100,000 in the labor force. However, the simulations also raise the possibility that the gains for dislocated workers could come at the expense of other groups of workers; that is, other groups of workers could experience small increases in unemployment duration and decreases in employment levels that almost fully offset the gains for dislocated workers. Three factors may mitigate these crowding-out results: crowding out is widely dispersed over various groups of nondislocated workers, the structural changes that result in dislocation of some workers (and drive the need for wage subsidy) benefit nondislocated workers, and the crowding-out results are sensitive to one assumption. A comparison of the wage-rate subsidy program with a reemployment bonus shows that the two can be structured so as to give identical results. (Contains 37 references.) (Author/KC)
Publication Type: Reports - Research; Speeches/Meeting Papers
Education Level: N/A
Authoring Institution: Upjohn (W.E.) Inst. for Employment Research, Kalamazoo, MI.
Note: Earlier versions of paper were presented at the Advisory Council on Unemployment Compensation Research Conference (Portland, ME, August 1994); and the Canadian Employment Research Forum Workshop on Displaced Workers and Public Policy Responses (Montreal, Quebec, Canada, December 1994).