Wage Subsidies for Microenterprises

Wage subsidies have long been used by Governments as part of their active labor market policies generate employment for the disadvantaged or to sustain employment during downturns. The global financial crisis has seen such policies return to prominence, with many developed using such policies to try and reduce lay-offs. Nicholas Kaldor (1936), P. Richard Layard Stephen Nickell (1980), and Lawrence Katz (1998) lay out the economic arguments for such policy, and discuss conditions under which a short-term subsidy might have longer-term effects employment for the targeted individuals.