1. The effect of wage subsidies on job retention: Evidence from South Africa during the COVID-19 pandemic
- Author:
- Timothy Köhler, Robert Hill, and Haroon Bhorat
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Wage subsidies have served as a primary labour market policy used around the world to mitigate job losses in response to the COVID-19 pandemic. In South Africa, where unemployment is among the highest globally, the Temporary Employer–Employee Relief Scheme supported millions of workers in a far-reaching and progressive manner. We make use of unique labour force panel data to estimate the causal effect of the policy on short-term job retention among formal private sector workers, who represent the majority of workers in the country, by exploiting a temporary institutional eligibility detail and estimating a difference-in-differences model. We find that the policy increased the probability of remaining employed by 16 percentage points in the short-term. This finding holds when subjected to several robustness tests. We further estimate heterogeneous and progressive effects across the wage distribution with larger effects observed for lower-wage workers, against a backdrop of regressively distributed job loss in the country. Our analysis provides evidence on the role of wage subsidies in the mitigation of job loss during crises in developing countries.
- Topic:
- Employment, Wage Subsidies, COVID-19, Labor Market, and Job Loss
- Political Geography:
- Africa and South Africa