The Welfare Implications of Job Retention Schemes

IMF Working Papers, January 30, 2026

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Authors: John C Bluedorn, Dr. Jorge Mondragon, Ippei Shibata, Marina Mendes Tavares
Published: January 30, 2026
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229037884.001

Examines welfare implications of job retention schemes in which governments subsidize employers to preserve jobs during downturns.
Uses EU microdata from 2003 to 2018.
Builds a search-and-matching model with occupational choice, calibrated to the United Kingdom during the global financial and sovereign debt crises.
Simulations find a retention policy scheme aimed at reducing unemployment by nearly 1 percentage point would have been both welfare-enhancing and cost-effective.

Job retention schemes are associated with lower job separation rates.
The reduction in job separations is especially pronounced among lower-productivity workers.

Framework: search-and-matching model with occupational choice.
Calibration target: United Kingdom during the global financial and sovereign debt crises.

Targeted policy: retention scheme aimed at reducing unemployment by nearly 1 percentage point.
Average welfare increase: 0.06 percent in consumption-equivalent terms.
Distributional outcome: low-income workers benefit more than twice as much as the median worker by avoiding costly job switches and unemployment spells.

IMF Working Paper — John C Bluedorn; Dr. Jorge Mondragon; Ippei Shibata; Marina Mendes Tavares; January 30, 2026.