Page 47 - IDEA Study 3 2018 Low skilled

skilled face participation tax rates as high as 50%. Consequently, half of their potential income is forgone in taxes paid or benefits lost if they started to work. (Re)integration of the low-skilled into the labor market requires decreasing their participation tax rates, which could be achieved by decreasing the social security contribution rates of employees or employers (or both). Such a decrease could be further tailored to specific groups of disadvantaged individuals. Another solution (that proved effective in other economies) would be an increase in the work incentives of the low-skilled via some form of working tax credit (negative income tax for low-income individuals). Additional incentives provided to employers to offer the low-skilled long-term contracts and invest into their skills via on-the-job training could help increase their job stability and improve their career prospects. Active labor market policies to help the unemployed find a job should be evidence-based and always tailored to the specific subgroups of the low-skilled. The policies should also be accompanied by complementary measures that facilitate the entry to the labor market, such as providing the low-skilled who possess relevant skills with motivation and assistance to start their own business, increasing the flexibility of the low-skilled and their chances to find a job by subsidies that increase their mobility, or helping the low-skilled to solve their financial problems to facilitate their entry into the labor market. Although increasing employers’ incentives to hire the low-skilled on long-term contracts via job subsidies or lowering employers’ social insurance contributions should help at least some low-skilled to find and keep their jobs, it is first unlikely to improve the long-term career prospects of the low-skilled and, second, unlikely to help some groups of the low- skilled at all. Active labor market policies other than public works are often ineffective in situations in which the low-skilled are not at all attractive to employers due to the lack of any relevant skills. Therefore, the only way to increase the chances of some of the unemployed low-skilled to find a long-term job is through skill upgrading. Whether the upskilling is provided via public or non-profit adult and lifelong learning institutions or supported by subsidies to increase employers’ incentives to invest in their employees’ skills via on-the-job training depends on the characteristics and needs of the different types of the low-skilled. 45