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The Employment Effects of State Hiring Credits During and After the Great Recession

  • David Neumark
  • Diego Grijalva

State and federal policymakers grappling with the aftermath of the Great Recession have sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. However, there is virtually no evidence on the effects of these kinds of counter-recessionary hiring credits - the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This paper provides evidence on the effect on job growth of hiring credits adopted by states during the Great Recession. For many of the types of hiring credits we examine we do not find positive effects on job growth. However, some specific types of hiring credits - including those targeting the unemployed and those that allow states to recapture credits when job creation goals are not met - appear to have succeeded in boosting job growth. At the same time, some credits appear to generate hiring without increasing employment or to generate much more hiring than net employment growth, consistent with these credits leading to churning of employees that raises the costs of producing jobs via hiring credits.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18928.

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Date of creation: Mar 2013
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Handle: RePEc:nbr:nberwo:18928
Note: EFG LS PE
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  1. Timothy J. Bartik & George Erickcek, 2010. "The Employment and Fiscal Effects of Michigan's MEGA Tax Credit Program," Upjohn Working Papers and Journal Articles 10-164, W.E. Upjohn Institute for Employment Research.
  2. 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, 01.
  3. Daniel J. Wilson, 2012. "Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 251-82, August.
  4. Rothstein, Jesse, 2011. "Unemployment Insurance and Job Search in the Great Recession," Institute for Research on Labor and Employment, Working Paper Series qt5611t356, Institute of Industrial Relations, UC Berkeley.
  5. Michael W. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," NBER Working Papers 15979, National Bureau of Economic Research, Inc.
  6. Kevin Hollenbeck & Richard J. Willke, 1991. "The Employment and Earnings Impacts of the Targeted Jobs Tax Credit," Upjohn Working Papers and Journal Articles 91-07, W.E. Upjohn Institute for Employment Research.
  7. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
  8. Perloff, Jeffrey M & Wachter, Michael L, 1979. "The New Jobs Tax Credit: An Evaluation of the 1977-78 Wage Subsidy Program," American Economic Review, American Economic Association, vol. 69(2), pages 173-79, May.
  9. Gary Burtless, 1985. "Are targeted wage subsidies harmful? Evidence from a wage voucher experiment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(1), pages 105-114, October.
  10. Enrique Martínez-García & Janet Koech, 2010. "A historical look at the labor market during recessions," Economic Letter, Federal Reserve Bank of Dallas, vol. 5(jan).
  11. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, March.
  12. Robert S. Chirinko & Daniel J. Wilson, 2010. "Job creation tax credits and job growth: whether, when, and where?," Working Paper Series 2010-25, Federal Reserve Bank of San Francisco.
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