Employment effects of reduced non-wage labour costs

Report
Updated
30 January 2017
Published
30 January 2017
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Executive summary in 22 languages

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Abstract

Reducing labour taxes or offering incentives to hire new workers could motivate employers to either retain staff who might otherwise have been let go or to create new jobs. Since the onset of the financial crisis in 2008, both types of measure have been deployed in many EU Member States. This report reviews the effectiveness of measures designed to reduce the employer part of the tax wedge in an effort to stimulate positive labour market outcomes. It provides an overview of the reforms adopted since 2008 across the EU Member States to stimulate labour demand, focusing on policies aimed at reducing the cost of labour for employers. It analyses the effectiveness of shifts in employer social security contributions, employer payroll taxes and functionally equivalent employer incentives as employment-generating policy interventions. The findings show mixed evidence of positive employment effects from relevant policy reforms but suggest that measures targeted at specific groups of workers are more likely to be successful. An executive summary is available - see Related content.

See also Report Annexes 1-7

  • Full report

    Number of Pages: 
    70
    Reference No: 
    EF1648
    ISBN: 
    978-92-897-1560-7
    Catalogue: 
    TJ-01-16-965-EN-N
    DOI: 
    10.2806/074541
    Catalogue info

    Employment effects of reduced non-wage labour costs

    Reducing labour taxes or offering incentives to hire new workers could motivate employers to either retain staff who might otherwise have been let go or to create new jobs. Since the onset of the financial crisis in 2008, both types of measure have been deployed in many EU Member States.

    Available formats

    • Download full reportPDF
  • Executive summary

    Reference No: 
    EF16481
    Catalogue info

    Employment effects of reduced non-wage labour costs - Executive summary

    Authors: 
    Eurofound

    Labour taxes make up a substantial share of overall labour costs in all developed countries. Reducing taxes on labour, in particular on the employer side, could be one way of inducing employers to hire more workers or to retain staff that might otherwise have been let go. Employment subsidies for hiring new workers operate in a similar way by increasing incentives for employers to create new jobs. Both types of measure – employment incentives and reducing employer non-wage labour costs – have been deployed in many EU Member States since the onset of the crisis. They have been used either as a general labour demand-enhancing measure or else targeted at specific categories. These are often groups with limited labour market attachment such as the young, low-skilled or low-paid and the long-term unemployed. Read more in the report - see Related content.

     

    Available in 22 languages for download

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