The unintended consequences of the employment stabilization subsidy for corporate human capital structure

While existing studies have extensively examined the role of government employment retention policies in the labour market, relatively little is known about how these policy tools affect employment structure. Using data from Chinese listed firms over 2009–2024 and employing the ratio of employees with a bachelor’s degree or above as a proxy for human capital structure, this paper investigates the effect of the employment stabilization subsidy on corporate human capital structure. We find that the subsidy exerts a negative impact on human capital structure. We use propensity score matching and the difference-in-differences approach to mitigate potential endogeneity concerns. Further heterogeneity analyses reveal that the negative effect is more pronounced among private firms, small firms, and firms with higher pay for high-skill workers. This paper provides new evidence on the impact of government employment retention policies in the labour market and deepens our understanding of how government intervention shapes workforce composition.