Study: Experiment to subsidise low-paying jobs expensive and ineffective job creation strategy
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An experimental programme launched by the previous government of Prime Minister Matti Vanhanen (Centre) to use government aid to help in the creation and maintenance of low-paying jobs has proven to be expensive and ineffective.
When the five-year experiment concludes at the end of next year, the government will have spent about EUR 430 million on it. Of this, about EUR 120 million will have gone to private employers - mainly retail stores. Local authorities will have received EUR 290 million.
According to a study released on Thursday, 750 jobs were maintained or created with the money in 2007. In that year, about EUR 85 million in state money was spent, which means that roughly speaking, each job cost about EUR 113,000. It would have been cheaper to give each of them state jobs.
The study was conducted by the Pellervo Economic Research Institute at the request of the Ministry of Employment and the Economy.
The result was that in the private sector, the support did not improve the employment situation much. A similar conclusion was drawn by the Labour Institute of Economic Research.
Retail stores latched onto the programme immediately. The basic monthly wage of a sales clerk in the Helsinki area is EUR 1,850, which entitles the merchant to get a low wage subsidy for all employees over 54 years of age.
Local authorities have also received considerable amounts of money from the programme. The City of Helsinki, for instance, gets about a million euros a year in subsidies. The basis of the money are the nurses, cleaners, kitchen staff and various assistants over the age of 54 who are employed by the city.
The Helsinki and Uusimaa Health Care District also benefits from the plan to the tune of about EUR 1 million a year.
The Pellervo study notes that the subsidies have had some kind of an impact on local authorities - mainly helping maintain old jobs.
On the other hand the researchers question the effectiveness of programme which “creates jobs for the public sector with publicly funded support.”
Minister of Employment Anni Sinnemäki (Green) sees some good in the programme, noting that it has correctly targeted long-term, relatively low-paid jobs. She feels that the money has not been wasted.
Mika Kuismanen, a high-ranking official at the Ministry of Finance takes a dimmer view of the programme. “A very expensive experiment”.
The government will have to decide next year if it wants to continue programme. Sinnemäki would not say on Thursday, if she wants it to continue.
Helsingin Sanomat
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| 11.12.2009 - TODAY |
 Study: Experiment to subsidise low-paying jobs expensive and ineffective job creation strategy |
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