Subsidizing Domestic Services to Create (Formal) Low-Skilled Jobs: Effectiveness and Unintended Impact on Work Disability
European countries have increasingly adopted wage subsidies for the sector of domestic services to create (formal) employment opportunities for low-skilled workers. Yet, empirical evidence on their effectiveness is scarce. Using Belgian administrative data and a difference-in-differences approach, we estimate the effects of subsidizing domestic services on employment and work disability. We find that domestic service subsidies are effective in increasing (formal) employment in the targeted sectors, and show evidence that this occurs both through the creation of new jobs and the formalisation of previously undeclared activities. We also find that the program increases work disability in the targeted sectors and provide evidence that this occurs due to subsidized workers experiencing a health deterioration after working in domestic services.