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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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    1. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
    2. Timothy J. Bartik, 2001. "Jobs for the Poor: Can Labor Demand Policies Help?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number tjb2001, November.
    3. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    4. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
    5. John H. Bishop & Suk Kang, 1991. "Applying for entitlements: Employers and the targeted jobs tax credit," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(1), pages 24-45.
    6. Blundell, Richard & Meghir, Costas, 2002. "Active labour market policy vs employment tax credits: lessons from recent UK reforms," Working Paper Series 2002:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. Benjamin Schünemann & Michael Lechner & Conny Wunsch, 2015. "Do Long-Term Unemployed Workers Benefit from Targeted Wage Subsidies?," German Economic Review, Verein für Socialpolitik, vol. 16(1), pages 43-64, February.
    4. 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.
    5. International Monetary Fund, 2015. "Kuwait; Selected Issues," IMF Staff Country Reports 15/328, International Monetary Fund.
    6. Sarah Hamersma & Carolyn Heinrich, 2008. "Temporary Help Service Firms' Use of Employer Tax Credits: Implications for Disadvantaged Workers' Labor Market Outcomes," Southern Economic Journal, Southern Economic Association, vol. 74(4), pages 1123-1148, April.
    7. 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.
    8. 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.
    9. 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.
    10. Holzer, Harry J., 2007. "Collateral Costs: The Effects of Incarceration on the Employment and Earnings of Young Workers," IZA Discussion Papers 3118, Institute for the Study of Labor (IZA).
    11. 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.
    12. 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.

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