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Working for 200 Euro? The Unintended Effects of Traineeship Reform on Youth Labor Market Outcomes
Author(s) -
Tomić Iva,
Zilic Ivan
Publication year - 2020
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/labr.12176
Subject(s) - remuneration , labour economics , pooling , unemployment , youth unemployment , economics , wage , difference in differences , work (physics) , unintended consequences , demographic economics , political science , economic growth , mechanical engineering , finance , artificial intelligence , computer science , law , engineering , econometrics
This paper evaluates the effects of an active labor market policy (ALMP) reform, the so‐called SOR measure (vocational training for work without commencing employment), on youth labor market outcomes in the newest EU member state—Croatia. In 2012, SOR was redesigned to ease the first labor market entry and promote on‐the‐job training, enabling a young person without relevant work experience to get a one‐year contract and a net monthly remuneration of 210 euro, while after 2014, the measure also became a part of the European Youth Guarantee . Pooling Croatian Labor Force Surveys from 2007 to 2016 and using the difference‐in‐difference strategy, we estimate the causal intent‐to‐treat effect of the program reform on labor market outcomes. The main results indicate that the reform has had, at best, neutral effects on employment and unemployment, while there is evidence that a portion of young individuals was propelled into inactivity. Though expected, adverse effect on wages—both at the mean and at higher percentiles of the wage distribution—is driven mostly by wages received by women and university graduates.