Hiring subsidies for people with a disability: Helping or hindering? - Evidence from a small scale social field experiment

Many countries provide hiring subsidies aimed at promoting the employment of people with disabilities. The effectiveness of these subsidy schemes remains unclear. The subsidy lowers wages and may thus increase employment, but may also signal lower quality of the applicant (who has to disclose a disability), which deter employers from hiring. This paper evaluates the effectiveness of employer incentives provided by the Swiss Disability Insurance using a small scale social field experiment. Participants write application letters, where it is randomly decided whether the application discloses the subsidy to the potential employer or not. The effectiveness of the hiring subsidy is measured by call-back rates for interviews. The study is conducted in two waves. The first wave focuses on graduates from sheltered Vocational Education & Training Programs. The second wave is implemented in a sample of clients from employment consulting services. Our results reveal that the subsidy is ineffective or even counterproductive in a group of adolescents who are at the end of their vocational training program, but may increase call-back rates in a group of clients of job coaching services.