Low employment fees ‘no spur’ for young jobs

Low employment fees 'no spur' for young jobs
The government's attempt to boost youth employment by easing a company's tax burden when taking on young Swedes has largely failed, a review from Stockholm University has revealed.

"Big picture, this isn't so suprising. Earlier research has shown small or no effects from this type of lowering of employer fees," economics PhD candidate Johan Egebark at Stockholm University told the TT news agency on Friday. 

Egebark, who is affiliated with the Research Institute for Industrial Economics (Institutet för näringslivsforskning), worked alongside Niklas Kaunitz, PhD candidate attached to the Swedish Institute for Social Research.

In 2007, the conservative government lowered employer fees for staff aged 19 to 25 by a third. The reform applied also to youngsters who were already in employment. Estimates said the reform propelled an upswing of up to 10,000 news jobs, but the new research said that figure was probably inflated. The researchers also noted that the job creation for Swedes under 25 could have come at the expense of older job-seekers.

Foreign-born job seekers did not benefit from the reform.

"For them, there was no effect on employment levels at all," Egebark said. 

The reform cost the Swedish state 10 billion kronor ($1.5 billion) in 2008, as tax revenue from employer fees went down. Figures from the following year were harder to analyze, the researchers said. Not only did the government cut employer fees further and extend the age bracket to 26 years, but Sweden started feeling the effects of the financial crisis – making a state coffer tally difficult. 

The government, however, has said that for 2013, the reform represents a 17 billion kronor loss of tax revenue.

"That is a lot of money we are talking about," Egebark said. 

He and Kaunitz took that sum and divided it by the number of new jobs said to have been created by the reform. Each new job would then cost the Swedish tax payer one to 1.6 million kronor to create. 

The researchers further said that much of the reform benefited young people who were already in employment, or who had a good chance of finding a job regardless. 

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