An assessment of the effectiveness of rebates for keeping the over-60s in employment

Abstract

Traditionally, employment policies in Spain have rested to a greater extent than in other countries on the application of rebates to the Social Security contributions of specific groups. The international empirical evidence on the effectiveness of this type of programme tends to show that, in general, these programmes involve a high budgetary cost, with limited although positive effects on the groups concerned, without affecting the aggregate level of employment. With the aim of providing additional evidence on this matter, this article summarises the results of an exercise assessing a specific Social Security contribution rebates programme in force from 2006 to 2012 for the group of workers over 60. Specifically, using data from the Spanish MCVL (Social Security administrative labour records), the effect that the elimination of this rebates programme had on the probability of these workers losing their job is estimated. The results show that the elimination of the incentives gave rise to a positive and significant although limited impact on the probability of this group losing their job, which was concentrated among the low-skilled, with relatively few years of service in the firm and with lower severance costs. Overall, the evidence would indicate that the programme produced scant benefits in terms of a higher rate of employment retention for the group of workers concerned. These findings are confined to this specific programme and, therefore, they are not extensible to the range of employment rebates for different groups that have been in force in the past in Spain or are so are present, although they highlight the need for a detailed assessment of active employment policies providing for an analysis of their effectiveness