Assessing the Effects of the Wage Subsidy Program on Private Education Outcomes in Saudi Arabia

Abstract

ABSTRACT

To combat unemployment and support education, Saudi Arabia introduced a wage-subsidy program for teachers in 2012. The Teachers’ Wage Subsidy Program (TWSP) provided a 50 percent wage subsidy for up to five years available to all private schools that hire new teachers. Higher wages are predicted to improve student performance through two channels: attracting better teachers into the market and incentivizing more effort. This paper evaluates the impact of the wage subsidy on the academic performance of high-school students on standardized exams between 2015 and 2018. The take-up rate of subsidized teachers amongst private schools was nearly complete at 93%, but schools differed in terms of their subsidized faculty ratio. Therefore, I compare student outcomes in schools with a high ratio of subsidized faculty to schools with a low ratio of subsidized faculty.

By 2017, approximately 1.1 million students were enrolled in private schools in Saudi Arabia, so the results should provide valuable insights into this understudied market. The fact that the subsidy targeted unemployed workers raises the prospect that selection may lead to lower-quality teachers entering the labor market. The thesis attempts to speak to the selection story and suggests future work on the topic.