A systematic review of academic policy evaluations establishes that the marginal gain of recent increases of these tax expenditures is almost nul. In the paper, we calculate at what point the actual cost of creating jobs through these programs is higher than a direct job creation. Moreover, we show that this policy tends to substitute low-quality and low-productivity jobs to more productive ones, lowering the incentive to invest in skill formation. Finally, we underline that the wealthiest households are the main beneficiaries of these policies, thus reinforcing mechanisms of dualisation already in place in France.
In a second part, the paper analyses the opportunity cost of such a policy, compared to an alternative use of public funds with comparable goals. We posit as alternative scenario the replacement of part of these tax expenditures by public funding of direct (public or privately delivered) jobs. Direct public financing could allow adding social conditionality: the created jobs must be “quality” jobs and address specific social needs (childcare etc.). We use public economic modeling to discuss the conditions under which such a policy reaches at least comparable employment performances and positive economic and social externalities.
