Employer wage subsidies and wages in Germany: empirical evidence from individual data

Journal for Labour Market Research

Table 5 Fiscal cost-benefit analysis of subsidized work for the  3.5  year period since taking up the job (mean values)

	Full sample	Only firms hiring subsidized and unsubsidized workers
	West	East	West	East
	Men	Women	Men	Women	Men	Women	Men	Women
Duration of the subsidy in days	124	127	151	173	117	118	142	162
Daily rate of subsidization	20	20	16	17	20	19	16	17
A)  Amount of the subsidy	2,512	2,536	2,631	3,124	2,360	2,258	2,463	2,906
Daily unemployment benefit/assistance	20	16	18	14	19	16	18	15
Additional days in employment	70	63	115	130	73	157	88	112
B)  Savings in unemployment benefits/assistance	1,381	995	2,107	1,810	1,380	2,514	1,595	1,627
Additional wage per day  (1c)	3	2	4	3	3	8	4	3
Additional earnings over  3.5  years	3,923	2,199	4,951	4,175	3,873	10,352	5,234	4,012
C1)  Additional social sec. contributions/taxes	1,962	1,099	2,476	2,087	1,936	5,176	2,617	2,006
Additional wage difference per day  (2c)	3	2	4	3	2	7	4	3
Additional income difference	4,084	2,993	4,687	3,480	3,034	8,604	4,910	4,438
C2)  Additional social sec. contributions/taxes	2,042	1,496	2,344	1,740	1,517	4,302	2,455	2,219
\( B+C1-A = \) Fiscal net effect in Euro based on  1c)	830	−442	1,951	773	956	5,432	1,749	727
\( B+C2-A = \) Fiscal net effect in Euro based on  2c)	911	−45	1,819	426	537	4,558	1,587	940

Note: The analysis is based on the results from Tables 2 and 4. Daily subsidy rates are estimated from cost accounting at the local level. Savings in unemployment benefit and unemployment assistance are computed from individual daily rates received at the beginning of the unemployment spell. Social security contributions (employee and employer) and taxes are estimated to account for on average 50% of additional incomes. The fiscal net effect is given by: Savings in unemployment benefits and assistance \( + \) additional social security contribution and taxes – amount of the subsidy.