Wage Subsidies can Encourage Women's Formal Employment in Zambia
Despite the challenges of running budget deficits and the negative effects that a wage subsidy may have on government revenues, a wage subsidy can result in positive effects in the economy if it is carefully implemented and introduced directly in the formal sector. The benefits of the subsidy outweigh the cost on welfare grounds. In particular, the subsidy promotes female empowerment as more women have access to formal work, offering better income and other entitlements than informal work. Given the constrained fiscal position of Zambia, policymakers may choose to mobilise funds from external sources or transfer a certain amount earned from payroll taxes towards employing women in the formal sector. Policymakers should consider implementing the wage subsidy in female labour intensive sectors, such as the wholesale and transport, accommodation, financial and education sectors. Implementing the subsidy in sectors that already employ a large number of female workers will increase the success of the program.