<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Many European countries have implemented policies to revive their domestic service sectors. A common goal of these reforms has been to create employment for disadvantaged groups on the domestic labor market. I evaluate a Swedish policy where domestic service firms receive a 50% tax deduction on labor costs. Detailed data from tax records identify all formal workers and owners of firms that receive deductions. I describe the composition of workers and owners in these firms with respect to three groups targeted by Swedish policymakers: refugees, people with low education, and people who enter the workforce from long-term unemployment. I find that the shares of refugees and long-term unemployed in the subsidized sector barely exceed the shares in the full private labor force, and fall far below the shares in industrial sectors with a predominance of elementary jobs. The share of people with low education is higher than in the full private sector and on par with other low-skilled sectors. I conclude that the tax subsidy largely failed to improve employment opportunities among the target groups. An extended analysis suggests that labor immigration from other EU countries may be a partial explanation for this. EU immigrants operate half of all subsidized firms in Sweden's largest cities and nearly exclusively employ other EU immigrants.</p></abstract>

Many European countries have implemented policies to revive their domestic service sectors. A common goal of these reforms has been to create employment for disadvantaged groups on the domestic labor market. I evaluate a Swedish policy where domestic service firms receive a 50% tax deduction on labor costs. Detailed data from tax records identify all formal workers and owners of firms that receive deductions. I describe the composition of workers and owners in these firms with respect to three groups targeted by Swedish policymakers: refugees, people with low education, and people who enter the workforce from long-term unemployment. I find that the shares of refugees and long-term unemployed in the subsidized sector barely exceed the shares in the full private labor force, and fall far below the shares in industrial sectors with a predominance of elementary jobs. The share of people with low education is higher than in the full private sector and on par with other low-skilled sectors. I conclude that the tax subsidy largely failed to improve employment opportunities among the target groups. An extended analysis suggests that labor immigration from other EU countries may be a partial explanation for this. EU immigrants operate half of all subsidized firms in Sweden's largest cities and nearly exclusively employ other EU immigrants.

Who cleans my house if the government pays? Refugees, low-educated workers, and long-term unemployed in tax-subsidized domestic service firms

Stockholm University and Nottingham University

IZA Journal of Labor Policy

This work is licensed under the Creative Commons Attribution 4.0 International License.

Many European countries have implemented policies to revive their domestic service sectors. A common goal of these reforms has been to create employment for...

Who cleans my house if the government pays? Refugees, low-educated workers, and long-term unemployed in tax-subsidized domestic service firms

Published Online: May 13, 2021

Page range: -

Accepted: Feb 07, 2021

DOI: https://doi.org/10.2478/izajolp-2021-0001

Keywords
Domestic Services, Tax Deduction, Employment, Refugee Immigrants

© 2021 Johanna Rickne, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Who cleans my house if the government pays? Refugees, low-educated workers, and long-term unemployed in tax-subsidized domestic service firms

Published Online: May 13, 2021

Page range: -

Accepted: Feb 07, 2021

DOI: https://doi.org/10.2478/izajolp-2021-0001

KeywordsDomestic Services, Tax Deduction, Employment, Refugee Immigrants

© 2021 Johanna Rickne, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Domestic Services, Tax Deduction, Employment, Refugee Immigrants