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The effects of an employer subsidy on employment outcomes: A study of the work opportunity and welfare-to-work tax credits

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  • Sarah Hamersma

    (University of Florida)

Abstract

Employer subsidies such as the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WtW) are designed to encourage employment by partially reimbursing employers for wages paid to certain welfare recipients and other disadvantaged workers. In this paper, I examine the effects of these subsidies on employment, wages, and job tenure using unique administrative data from Wisconsin. My ability to precisely identify the subsidy-certified workers allows me to distinguish the effects of program participation from mere eligibility. Using propensity score matching estimation, I find some evidence of short-term improvements in labor market outcomes, but little evidence of sustained benefits. © 2008 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • Sarah Hamersma, 2008. "The effects of an employer subsidy on employment outcomes: A study of the work opportunity and welfare-to-work tax credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(3), pages 498-520.
  • Handle: RePEc:wly:jpamgt:v:27:y:2008:i:3:p:498-520
    DOI: 10.1002/pam.20354
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    References listed on IDEAS

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    Cited by:

    1. Naoki Aizawa & Serena Rhee & Soojin Kim, 2018. "Labor Market Screening and Social Insurance Program Design for the Disabled," 2018 Meeting Papers 359, Society for Economic Dynamics.
    2. Sarah Hamersma & Carolyn Heinrich & Peter Mueser, 2014. "Temporary Help Work: Earnings, Wages, and Multiple Job Holding," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 72-100, January.
    3. Kenneth A. Couch & Douglas J. Besharov & David Neumark, 2013. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(1), pages 142-171, January.
    4. Gunderson, Jill Marie & Hotchkiss, Julie L., 2007. "Job Separation Behavior of WOTC Workers: Results from a Unique Case Study," MPRA Paper 44801, University Library of Munich, Germany.
    5. Schünemann Benjamin & Lechner Michael & Wunsch Conny, 2015. "Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?," German Economic Review, De Gruyter, vol. 16(1), pages 43-64, February.
    6. Judit Krekó, 2019. "Effect of employment tax incentives: the case of disability quota in Hungary," CEU Working Papers 2019_1, Department of Economics, Central European University.
    7. Ursula Jaenichen & Gesine Stephan, 2011. "The effectiveness of targeted wage subsidies for hard-to-place workers," Applied Economics, Taylor & Francis Journals, vol. 43(10), pages 1209-1225.
    8. Deuchert, Eva & Kauer, Lukas, 2013. "Hiring subsidies for people with a disability: Helping or hindering? - Evidence from a small scale social field experiment," Economics Working Paper Series 1335, University of St. Gallen, School of Economics and Political Science.
    9. Pasquini, Alessandra & Centra, Marco & Pellegrini, Guido, 2019. "Fighting long-term unemployment: Do we have the whole picture?," Labour Economics, Elsevier, vol. 61(C).
    10. Kim, Yong-seong, 2014. "Ways to Activate Youth Employment: Focusing on Government-Funded Job Programs and Promotion of Entrepreneurship," KDI Focus 35, Korea Development Institute (KDI).
    11. Isaac Marcelin & Daniel Brink & David Oluwatosin Fadiran & Hammed Adedeji Amusa, 2019. "Subsidized labour and firms: Investment, profitability, and leverage," WIDER Working Paper Series wp-2019-50, World Institute for Development Economic Research (UNU-WIDER).
    12. Hunt, Priscillia E & Smart, Rosanna, 2020. "Investigation of Employers' Preferences for the Design of Staffing Agency Incentives to Hire Ex-Felons," IZA Discussion Papers 13520, Institute of Labor Economics (IZA).
    13. International Monetary Fund, 2015. "Kuwait: Selected Issues," IMF Staff Country Reports 2015/328, International Monetary Fund.
    14. Ammar Farooq & Adriana Kugler, 2015. "What factors contributed to changes in employment during and after the Great Recession?," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-28, December.
    15. Kim, Hyejin & Lee, Jungmin, 2019. "Can employment subsidies save jobs? Evidence from a shipbuilding city in South Korea," Labour Economics, Elsevier, vol. 61(C).
    16. Olugbenga Ajilore, 2012. "Did the Work Opportunity Tax Credit Cause Subsidized Worker Substitution?," Economic Development Quarterly, , vol. 26(3), pages 231-237, August.
    17. Yonatan Ben-Shalom & Steve Bruns & Kara Contreary & David Stapleton, "undated". "Stay-at-Work/Return-to-Work: Key Facts, Critical Information Gaps, and Current Practices and Proposals," Mathematica Policy Research Reports a56bde146b0444f2a6bb67940, Mathematica Policy Research.
    18. Sarah Hamersma & Carolyn Heinrich, 2008. "Temporary Help Service Firms' Use of Employer Tax Credits: Implications for Disadvantaged Workers' Labor Market Outcomes," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1123-1148, April.
    19. Yonatan Ben-Shalom, "undated". "Steps States Can Take to Help Workers Keep Their Jobs after Injury, Illness, or Disability," Mathematica Policy Research Reports 8443f3e24e80421b965869ddb, Mathematica Policy Research.
    20. Joel Elvery & C. Lockwood Reynolds & Shawn M. Rohlin, 2021. "Employer Wage Subsidy Caps and Part-Time Work," Working Papers 202101, Federal Reserve Bank of Cleveland.
    21. Holzer, Harry J., 2007. "Collateral Costs: The Effects of Incarceration on the Employment and Earnings of Young Workers," IZA Discussion Papers 3118, Institute of Labor Economics (IZA).
    22. Pelucha, Martin & Kveton, Viktor & Potluka, Oto, 2019. "Using mixed method approach in measuring effects of training in firms: Case study of the European Social Fund support," Evaluation and Program Planning, Elsevier, vol. 73(C), pages 146-155.
    23. Rita Almeida & Larry Orr & David Robalino, 2014. "Wage subsidies in developing countries as a tool to build human capital: design and implementation issues," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.

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