Expanding a wage subsidy during lockdown
Expanding a wage subsidy during lockdown
Employment subsidies have been used worldwide to create jobs when employment prospects of a particular group are low. During a pandemic, this same policy tool can be used to help firms retain workers. In the wake of the 2008 economic crisis, a wage subsidy was introduced in Mexico to encourage manufacturing firms to retain workers. Firms that retained workers were granted subsidies instead of letting workers go during the crisis. The evidence suggests that wage subsidies reduce job destruction in manufacturing industries.