Hamersma study on the effects of an employer subsidy on employment outcomes published in JPAM
Jun 8, 2008
The Effects of an Employer Subsidy on Employment Outcomes: A Study of the Work Opportunity and Welfare-to-Work Tax Credits
Sarah Hamersma
Journal of Policy Analysis and Management, June 2008
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, Hamersma examines the effects of these subsidies on employment, wages, and job tenure using unique administrative data from Wisconsin. Their ability to precisely identify the subsidy-certified workers allows them to distinguish the effects of program participation from mere eligibility. Using propensity score matching estimation, Hamersma finds some evidence of short-term improvements in labor market outcomes, but little evidence of sustained benefits.