Understanding How Job Retention Schemes Reshape the Within‐Occupation Skill Profile of Employees Within Firms

ABSTRACT This study draws on employer‐employee data for Latvia to investigate how participating in a job retention scheme (JRS) impacts the within‐occupation composition of skills in participating firms. The findings of this research reveal that involvement in JRS positively affects the likelihood of employees retaining their employment with the same firm after the end of the program. This positive effect is independent of the employee's skill level. However, individuals that perform higher‐skilled tasks in the same occupation are less likely to participate in the JRS because of legal restrictions on the maximum amount of the benefit and the income replacement rate. Taken together, these findings suggest that the choice of the maximum allowance plays a crucial role in how JRSs shape the skill profile of the workforce within participating firms.