Impact Evaluation of Wage Subsidies and Training for the Unemployed in Slovenia

Slovenia’s labour market has performed well in recent years. The unemployment rate has fallen to record lows, from a peak of 10% in 2013 to 4.3% in the third quarter of 2024, highlighting a strong recovery following the 2008 financial crisis and the COVID‑19 pandemic. In the third quarter of 2024, employment rates reached 77.4% for those aged 20‑64, 1.3 percentage points above the EU average. Nevertheless, certain challenges persist. Long-term unemployment remains an ongoing concern, with almost two in five unemployed individuals in 2023 categorised as long-term unemployed – above both the OECD and EU averages. Older workers and individuals with only primary education have significantly lower employment rates than their counterparts – disparities that are among the largest in the EU and the OECD.

In this context, active labour market policies (ALMPs) have an important role to play in connecting people with high-quality, stable jobs. Slovenia has in place a system of ALMPs that allows it to quickly respond to emerging needs to the extent possible given funding constraints. However, its spending on ALMPs has remained significantly below the OECD average, limiting the scope for them to support jobseekers. In 2022, Slovenia allocated only 0.18% of GDP to ALMPs, less than half the OECD average of 0.43%, representing a downward trend from previous years. Although declining unemployment partly explains this reduction, ALMP expenditure per unemployed person in Slovenia is among the lowest in the OECD.

Compared to other countries, the mix of ALMPs in Slovenia is disproportionately directed towards direct job creation programmes. These programmes are costly, significantly more than, for example, training. On the other hand, participation in training programmes, especially institutional training, is notably low. The low rates of ALMP spending point to the need to carefully examine their impact on participants’ subsequent labour market outcomes and identify which ones work best for whom.

Drawing on rich data linked across several administrative registers and a methodology that compares programme participants with similar non-participants, this report shows that two of Slovenia’s main ALMPs – its training and employment incentives (wage subsidy) programmes – have positive effects on the employment and other labour market outcomes of participants. Tracking outcomes up to four years after individuals enter the programmes – and at least three years after participants complete the programmes – the results show that the programmes lead to durable, persistent improvements in participants’ labour market outcomes. Furthermore, the magnitudes of the effects are either on par with or exceed those from most similar types of studies in other countries. The programmes examined also significantly improve earnings of participants relative to non-participants, contribute to decreased rates of labour market inactivity, and decrease the migration of Slovenes abroad.

The results also show that the ALMPs considered show positive employment effects for individuals regardless of age, gender, education, and other categories of personal attributes examined. However, the precise magnitude of the effects does vary for specific groups. For example, individuals over 50 experience a smaller employment boost from participation in the employment incentives programme compared to their younger peers. Similarly, individuals with only primary education receive a smaller employment boost from participating in training programmes than those with at least secondary education. Given that both jobseekers over 50 and those with only primary education are less likely to become employed, this points to the need to balance considerations relating to efficiency and equity when targeting the programmes.

The key policy recommendations emerging from this report for Slovenia include:

• Ensure stable and sufficient funding for ALMPs that are found to be effective. Expanding their reach would enable Slovenia to help more individuals enter sustained employment and have positive additional benefits, such as strongly increased earnings.

• Develop more comprehensive upskilling programmes for jobseekers with low levels of education, where the existing programmes have been shown to not be as effective as they are for more highly-educated jobseekers. This could involve more intensive training options that would be feasible for such individuals, such as modular programmes granting micro credentials.

• Better tailor the design of employment incentives (wage subsidy) parameters to make them more attractive to difficult-to‑employ individuals by redirecting them to these groups or introducing in-work, post-placement support from professional counsellors.

• Establish a fully-fledged evidence‑based approach to ALMP design and implementation, building on the data-related work and the analysis conducted in this report, the Slovene authorities could invest in further developing their capacity to regularly link administrative data for research purposes and conduct impact evaluations.

Regarding other policies, which have not been covered by the counterfactual impact evaluation:

• Improve the provision of guidance and counselling programmes for vulnerable groups, increasing the counselling frequency for jobseekers requiring intensive support.

• Streamline the types of support provided to different types of jobseekers with the help of digital tools, using statistical profiling to target and tailor services more efficiently, including through the use of increased self-service options for readily-employable jobseekers.