J. Michael Orszag () (Department of Economics, Birkbeck College, University of London, London W1P 2LL, UK) Dennis Snower () (Department of Economics, Birkbeck College, University of London, London W1P 2LL, UK)
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Young people of working age tend to be particularly prone to labor market inefficiencies that keep their wages excessively high and their employment excessively low. These inefficiencies are usually magnified through unemployment benefit systems. This paper examines how these problems can be tackled through "employment vouchers," i.e. hiring subsidies or tax breaks for the unemployed. It examines how vouchers to the young unemployed should differ from those to the adult unemployed. The employment vouchers considered here reduce unemployment and impose no cost on the government, since they are financed by the induced fall in government expenditures on unemployment benefits. Among other things, we find that young workers should receive lower vouchers as displacement of the old rises and as deadweight from providing vouchers to the old increases.
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Find related papers by JEL classification: J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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