Jobs Tax Credit Research Articles

The Employment Effects of State Hiring Credits

State and federal policymakers grappling with the aftermath of the Great Recession sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. Virtually no evidence is available, however, on the effects of these kinds of counter-recessionary hiring credits, with the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This article provides evidence on the effects of state hiring credits on job growth. Some specific types of hiring credits—including those targeting the unemployed, those that allow states to recapture credits when job creation goals are not met, and refundable hiring credits—appear to have succeeded in boosting job growth, particularly during the Great Recession period and perhaps also during recessions in general. At the same time, some evidence suggests that these credits can generate much more hiring than net employment growth, consistent with the credits encouraging churning of employees that raises the cost of producing jobs through hiring credits.

The Employment Effects of State Hiring Credits

State and federal policymakers grappling with the aftermath of the Great Recession 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 effects of state hiring credits on job growth. 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 – most notably including those targeting the unemployed, those that allow states to recapture credits when job creation goals are not met, and refundable hiring credits – appear to have succeeded in boosting job growth, more so during the Great Recession period or perhaps recessions generally. 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.

The New Jobs Tax Credit: A Tested Way to Fight High Unemployment

The New Jobs Tax Credit: A Tested Way to Fight High Unemployment

Comment on Edlin and Phelps: A Better Employer Wage Subsidy

According to Tim Bartik of the Upjohn Institute, a revival of the New Jobs Tax Credit would be a more cost-effective and politically feasible method of stimulating job creation, compared to the broader employer tax credits advocated by Edlin and Phelps.

Comment and Discussion

Comment and Discussion Lawrence Mishel General Discussion References AFL-CIO. 2004. "The Bush Record on Shipping Jobs Overseas." AFL-CIO Issue Brief. Washington (August). Agrawal, Vivek, and Diana Farrell. 2003. "Who Wins in Offshoring." McKinsey Quarterly, Special Edition: 36-41. Bloom, Harold, Saul Schwartz, Susanna Lui-Gurr, and Suk-Won Lee. 1999. Testing a Re-employment Incentive for Displaced Workers. Ottawa: Social Research and Demonstration Corporation. Bishop John H., and Suk Kang. 1991. "Applying for Entitlements: Employers and the Targeted Jobs Tax Credit." Journal of Public Policy Analysis and Management 10 (1): 24-45. Brainard, Lael. 1991. "Protecting Losers: Optimal Diversification, Insurance, and Trade Policy." Working Paper 3773. Cambridge, Mass.: National Bureau of Economic Research. Brainard, Lael, and Robert E. Litan. 2004. "'Offshoring' Service Jobs: Bane or Boon and What to Do?" Brookings Policy Brief 132 (April). Burtless, Gary, and Robert Litan. 2001. Globaphobia Revisited: Open Trade and Its Critics. Brookings. Committee for Economic Development. 2001. From Protest to Progress: Addressing Labor and Environmental Conditions through Freer Trade. Washington: Library of Congress. Congressional Budget Office. 2004. Family Income of Unemployment Insurance Recipients (March). Davidson, Carl, and Stephen A. Woodbury. 1995. "Wage-Rate Subsidies for Dislocated Workers." Upjohn Institute Staff Working Paper 95-31. Kalamazoo, Mich: W. E. Upjohn Institute for Employment Research (January). Department of Labor, Employment and Training Administration. "Trade Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance (ATAA) Services and Benefits." www.doleta.gov/tradeact/benefits.cfm [January 12, 2006]. Dickert-Conlin, Stacy, and Douglas Holtz-Eakin. 1999. "Employee-Based versus Employer-Based Subsidies to Low-Wage Workers: A Public Finance Perspective." [End Page 454] JCPR Working Paper 79. Joint Center for Poverty Research, Northwestern University/ University of Chicago. Dickert, Stacy, Scott Hauser, and John Karl Scholz. 1995. "The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation." In Tax Policy and the Economy, vol. 9, edited by James M. Poterba. MIT Press. Eissa, Nada, and Hilary Hoynes. 1998. "The Earned Income Tax Credit and the Labor Supply of Married Couples." Working Paper W6856. Cambridge, Mass.: National Bureau of Economic Research. Eissa, Nada, and Jeffrey B. Liebman. 1996. "Labor Supply Response to the Earned Income Tax Credit." Quarterly Journal of Economics 111 (2): 605-37. Greenspan, Alan. 2004. Transcript from Federal Document Clearing House, as distributed by Bloomberg news service, of the question and answer session of the testimony of Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System, before the Joint Economic Committee, April 21. Groshen, Erica L., and Simon Potter. 2003. "Has Structural Change Contributed to a Jobless Recovery?" Current Issues in Economics and Finance 9 (8). Federal Reserve Bank of New York. Katz, Lawrence. 1996. "Wage Subsidies for the Disadvantaged." Working Paper 5679. Cambridge, Mass.: National Bureau of Economic Research (July). Kletzer, Lori G., and Robert E. Litan. 2001. "A Prescription for Worker Anxiety." Brookings Policy Brief 73 (March). Kletzer, Lori G., and Howard Rosen. 2005. "Easing the Adjustment Burden on U.S. Workers." In The United States and the World Economy: Foreign Policy for the Next Decade, edited by C. F. Bergsten. Washington: Institute for International Economics. Levy, Frank, and Richard J. Murnane. 2004. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton University Press. Liebman, Jeffrey B. 1993. "The Impact of the Earned Income Tax Credit on Incentives and Income Distribution." In Tax Policy and the Economy, vol. 12, edited by James M. Poterba. MIT Press. Meyers, Bruce, and Dan Rosenbaum. 1997. "Welfare, the EITC, and the Labor Supply of Single Mothers." Working Paper. Northwestern University (November). Mishel, Lawrence, Jared Bernstein, and Sylvia Allegretto. 2005. The State of Working America, 2004/2005. Ithaca, N.Y.: ILR Press (imprint of Cornell University Press). Organization for Economic Cooperation and Development (OECD). 1994. The OECD Jobs Study: Facts, Analysis, Strategies. Paris. O'Leary, Christopher J., and Randall W. Eberts. 2004. "Personal Reemployment Accounts: Simulations for Planning Implementation." Occasional Paper 2004-08. W. E. Upjohn Institute for Employment Research, U.S. Department of Labor ETA (May). Perloff, Jeffrey M., and Michael L. Wachter. 1979. "The New Jobs Tax Credit: An Evaluation of the 1977-78 Wage Subsidy Program." American Economic Review 69...

Do State Economic Development Incentives Create Jobs? An Analysis of State Employment Tax Credits

Employment tax credits have become one of the primary tools of state economic development policy. A recurring question is whether these credits create jobs that would not have been created in their absence. This paper provides estimates of the employment impact of such credits by comparing the employment change in eligible firms that participate in employment tax credit programs with eligible firms that do not participate in such programs. Results from a switching regression model indicate that firms taking Georgia's Jobs Tax Credit created 23 to 28 percent more jobs than eligible firms not taking the credit between 1993 and 1995. The cost per job is $2280 to $2680 over the 1993 to 1995 period. While the maximum number of jobs potentially attributable to the program is small, the cost per job is also low especially when compared with firm-specific incentive packages.

The hidden welfare state: tax expenditures and social policy in the United States

Analyzes the welfare state created by such programmes as tax deductions for home mortgage interest and employer-provided retirement pensions, the Earned Income Tax Credit and the Targeted Jobs Tax Credit. The text examines the distinctive characteristics of these policies, aiming to help the reader to understand the historical links between the hidden welfare state and US tax policy, accentuating the importance of Congress and political parties. It also focuses on the reasons why individuals, businesses and public officials support tax expenditures.

The impact of targeted jobs tax credit on employment opportunities for persons with disabilities

This article addresses the critical impact of the TJTC program on employment opportunities for persons with significant disabilities. The primary intent of TJTC has been to provide employment incentives for the private sector to provide job opportunities for specific groups that are structurally unemployed and result in: (1) a reduction in structural unemployment; (2) employment opportunities to the disadvantaged; (3) employers to seek out and hire the disadvantaged; (4) cost effective outcomes for taxpayers and society; (5) improved income, training, and retention for the TJTC employee. This written testimony to the committee on ways and means, House of Representatives, highlights: • The vital importance ofTJTC on employment opportunity for persons with disabilities; • Research and experience that indicate that intent of TJTC have been meet or exceeded for the TJTC disabled target groups; and • Cost effective recommendations to make TJTC even more effective for persons with disabilities and employers in the future.

TJTC and the Promise and Reality of Redistributive Vouchering and Tax Credit Policy

The Targeted Jobs Tax Credit (TJTC) is a representative redistributive incentive. Initially, proponents saw TJTC as an elegant program, efficiently promoting labor market behavior that would solve the employment problems of many disadvantaged job seekers. However, interest groups distorted the credit into a windfall for businesses that hire large numbers of low wage workers. The policy theories incorporated into TJTC, which emphasized continual program reform and minimized program management by public administrators, provided a setting conducive to interest group distortion. Because few representatives of the disadvantaged participated in the oversight process, special interests undermined TJTC being reformed through empirical evaluation. This experience indicates that without major changes in the policy process, narrowly targeted rzdistributive policies should be avoided.

Does the Targeted Jobs Tax Credit Create Jobs at Subsidized Firms?

This paper uses the results of a survey of more than 3500 private employers to determine whether use of the Targeted Jobs Tax Credit (TJTC) alters the level of a f Irm's employment and/or whom the f Inn hires. We estimate that each subsidized hire generates between .13 and .3 new jobs at a participating f Irm. Use of the program also appears to induce employers to hire more young workers (age 25 and under). Our results suggest, however, that at least 70% of the tax credits granted employers are payments for workers who would have been hired even without the subsidy. Such payments represent mere transfers to employers.

Applying for Entitlements: Employers and the Targeted Jobs Tax Credit

The Targeted Jobs Tax Credit (TJTC) is probably the most outstanding example of a generous entitlement program with a very low participation rate. Only about 10 percent of eligible youth hired are claimed as a tax credit by their employers. The causes of the low participation rates are analyzed by estimating a Poisson model of the number of TJTC-eligibles hired and certified during 1980, 1981, and 1982. Information costs, both fixed and variable, are found to be key barriers to TJTC participation. The cost-effectiveness of TJTC is low because of the stigma attached and the very high recruitment costs of hiring additional TJTC-eligibles. Because employers find it relatively cheap to certify after the fact eligible new employees who would have been hired anyway, this passive mode of participating in TJTC predominates.

Toward More Valid Evaluations of Training Programs Serving the Disadvantaged

The author challenges the widespread assumption that the wage effects of federal training programs are reliable and unbiased estimates of productivity effects and social benefits. Evidence is presented that the reputations of government training programs are unreliable and that employers stigmatize those eligible for Targeted Jobs Tax Credit and Comprehensive Employment and Training Act on-the-job training contracts. Graduates of classroom training programs which are known to be funded by the Job Training Partnership Act are likely to be similarly stigmatized. TJTC eligibles are seriously underpaid by employers and job training partnership act graduates may experience a similar fate. Consequently, the true effect of JTPA on the productivity of disadvantaged workers may be considerably larger than its effect on wages. The author describes alternative methods of obtaining estimates of productivity effects of training programs.

A multi-state analysis of the targeted jobs tax credit programme

(1989). A multi-state analysis of the targeted jobs tax credit programme. Applied Economics: Vol. 21, No. 1, pp. 85-94.

HELPING PEOPLE WITH LABOR MARKET PROBLEMS: AN OVERVIEW OF KEY POLICIES

Those in need of employment and training programs face a variety of difficulties. Accordingly, the federal response to labor market problems has encompassed a wide range of initiatives. These include preparing people for work (through skills training, the Job Corps, work experience programs); improving the functioning of the labor market (through matching workers with jobs, establishing a minimum wage, and the Targeted Jobs Tax Credit program); and preventing discrimination. Unresolved issues in these areas are examined. They include who should be targeted for federal assistance, which levels of government can best operate programs, how public versus private efforts should be balanced, how limited resources should be distributed, and how the welfare versus work question should be resolved.

Ex-Offender Employment, Recidivism, and Manpower Policy: CETA, TJTC, and Future Initiatives

Over the past several decades, there have been many programs to reduce the continuing high level of ex-offender unemployment. These policies were often part of broader federal efforts to improve the labor market position of the disadvantaged. However, these traditional labor market policies have had disappointing outcomes, leading to dissatisfaction and skepticism about programs to alleviate ex-offender unemployment. This article reviews federal ex-offender employment initiatives with particular attention to the Targeted Jobs Tax Credit (TJTC), a program providing employers with tax deductions for hiring ex-offenders. Our analysis indicates that this credit (like other employment programs for ex-offenders) has had marginal impact at best. We suggest reasons why this is so, focusing on the specific problems of employing ex-offenders, and the general weaknesses of targeted employment strategies that rely on tax incentives. We conclude with some speculations about possible new directions for ex-offender employment programs.

Evidence on the Minimal Management Principle of Program Design: Implementation of the Targeted Jobs Tax Credit

Implementation problems in the Targeted Jobs Tax Credit (TJTC) challenge the conclusion, drawn from the study of policy implementation, that programs using a market mechanism are more easily and effectively implemented than programs with heavily managed, public delivery systems. TJTC sought to expand employment opportunities for targeted individuals through a tax credit voucher system but it experienced several of the implementation problems observed in programs using public delivery systems. Implementers were unable to influence the employer response to the tax credit, lower-level bureaucrats failed to implement the instructions of their superiors, and third-party vendors absorbed program monies and successfully pressured implementers to facilitate vendor activities.

THE PRIVATE SECTOR IN PUBLIC EMPLOYMENT AND TRAINING PROGRAMS

Assimilating disadvantaged workers in labor markets has been the focus of national policy initiatives for at least two decades. In recent years, public policies have been formulated which will not only provide incentives for the private sector to employ the disadvantaged, but also afford the private sector a larger responsibility in formulating and implementing targeted employment programs. The Job Training Partnership Act (JTPA) and Target Jobs Tax Credit (TJTC) are two major examples. This paper initially reviews the public and private employment and training efforts between 1962 and 1982. Considerable attention is given to summarizing and evaluating the performance of these efforts, especially in light of recent program initiatives by the Reagan Administration.

The Revenue Act of 1978: tax reform legislation continues

The Revenue Act of 1978 contains several changes in the federal tax laws that affect the business aspects of dental practice as well as the dentist as a individual taxpayer. The dentist as a business person should be aware of the provisions affecting the investment credit, simplified pensions plans, the corporate tax rates, the jobs tax credit, and subchapter S corporations. The dentist as an individual taxpayer should be aware of the new individual tax rates, the general tax credit, changes in the itemized deductions, and the capital gains tax. In addition, all dentists must be aware of the changes in the social security laws. The provisions of the Revenue Act of 1978 presented do not represent every new provision, only those that most directly affect the dentist. Several other provisions of the act must not be overlooked in tax planning or tax preparation. With the changes in the tax laws in mind, the dentist, working with an attornye, accountant, or business advisor, could plan the advantageous ways to expand the practice, purchase new equipment, or shorten the time of tax return preparation.