Experience from Finland shows that no displacement costs were observed because subsidized jobs had to be new, and only one-third of the wage was being subsidized (Kangasharju 2007). Finally, it is important to keep in mind that long term programs can be seen as a redistribution device (Brown et al. 2011), but that the odds of generating a lot of perverse incentives in the process are quite high.

In sum, short-term subsidized work programs can be used more efficiently than long-term programs to facilitate inclusion in the labor market. Wage subsidies in infrastructure works can be designed to limit perverse incentives but the design requires a serious diagnostic of the local labor market characteristics.

# _The training challenge_

Experience shows that the long term payoffs of employment subsidies can be achieved only if subsidized employment programs are combined with training and counseling. Therefore, the design of these programs should be given as much attention as the design of the subsidized employment programs. Specific training should be considered only if there is market demand for these qualifications or if there is a need to buy time in a labor market restructuring transition. Often general training supporting labor market flexibility will be sufficient and more efficient in increasing productivity than specialized training. Data from Ireland confirms that general training raises productivity, but the same cannot be said about specialized training (Estache et al. 2000).

In theory, workers are more likely to acquire general training when markets are competitive and the turnover is high (Wasmer 2006). However, subsidized jobs for low-skilled workers may reduce incentives to become skilled – an effect amplified by the fact that taxes used to pay for subsidies may result in an additional tax burden for skilled workers (Oskamp and Snower 2006). There is also no reason to provide training specific to the infrastructure sector if the subsidized job is temporary and the objective of the training is to facilitate inclusion into the general labor market, and not in the infrastructure sector.

# _The challenge of managing expectations_

The study shows that infrastructure investments could provide a relatively quick short term response to MENA’s unemployment challenge. As such, it is part of the solution, but infrastructure alone will not resolve the problem. Infrastructure and construction jobs represent less than 20% of the jobs in most countries of the region. Even a dramatic increase in labor intensive infrastructure investments and maintenance would not be able to address the very large unemployment rate of the region. Countries should press on with reforms that improve the business environment, and especially, business regulations and governance. The importance of a sound regulatory environment and good governance for inclusive growth has been underscored in numerous studies. This particular one focused on estimating the employment impact of infrastructure investment in MENA. In the future, more work needs to be done to assess the impact of infrastructure investment on different types of labor, e.g. skilled vs. unskilled, young vs. old and domestic vs. migrant workers. The latter is particularly important because if unskilled positions are largely filled with migrant workers, the job creation effects of infrastructure investment may result in increased immigration, not lower unemployment.

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