Can subsidized employment tackle long-term unemployment? Experimental evidence from North Macedonia

This study experimentally assesses the effects of temporary wage subsidies on employment in North Macedonia. The target group consists of vulnerable unemployed individuals participating in an employment program that provides employers with a subsidy covering half of the wage payments during the first year of employment, as well as training expenses. Applicants are initially matched to job openings and then randomly selected for job interviews with employers, who decide whether to hire them under the program’s conditions. Using administrative records, we find that being selected for an interview results in a 14-percentage-point increase in the probability of being employed in the formal economy 3.5 years after the start of the program, and an 85% increase in employment duration. • Wage subsidies raise employment by 14 p.p. after 3.5 years among long-term unemployed. • Subsidized employment leads to an 85% increase in employment duration. • Positive effects are strongest for women and individuals without formal work experience. • Program costs fully recovered through increased earnings within two years.