A letter experiment to increase take-up of wage subsidies by employers

Background
This paper analyzes the effect of a large-scale randomized letter experiment nudging employers to take up a wage subsidy for previously older unemployed. Since long-term unemployment rates are fairly high among this group, the wage subsidy should make hiring them more attractive. However, non-take-up is high. From interviews and earlier behavioural research reasons for non-take up are unawareness and difficulty applying for the wage subsidy. To circumvent these problems, the Dutch Ministry of Social Affairs and Employment sent more than 30,000 carefully constructed letters to employers, which to the best of our knowledge is the first time this has been done. All letters contained a detailed explanation on how to apply for the subsidy. Furthermore, using nudges from behavioural economics three different versions of the letter were sent, each referring to a specific possible benefit of hiring an older unemployed person. It was tested whether companies changed their hiring behaviour after receiving a letter compared to a control group that did not receive a letter.

Results
The findings are as follows. First, we find on average no effect of the letters on take-up of the subsidy, nor on the probability of hiring an older worker. This indicates that unawareness and difficulty are not the main reasons for the high non-take-up or that sending a letter is no solution for these problems maybe because of the time laps between receiving the letter and the hiring decision. Second, there is no distinguishable effect of the three different messages. Overall, our findings suggest that nudging employers concerning their hiring behaviour is more difficult than nudging employers or individuals concerning their tax payments.