The Employment and Earnings Impacts of the Targeted Jobs Tax Credit
Upjohn Institute Working Paper 91-07
Kevin M. Hollenbeck and Richard J. Willke
February 1991
Abstract
The Targeted Jobs Tax Credit (TJTC) is intended to stimulate the employment of
individuals who are members of certain groups of the labor force by providing a wage subsidy
(in the form of a tax credit) to employers of recently-hired eligible workers. This intervention
into the labor market has direct and indirect earnings and employment consequences for both
eligible and ineligible individuals. The paper evaluates the impacts of TJTC by using a
treatment and comparison group methodology. Corrections for nonrandom selection are
undertaken. The primary sources of data are state quarterly wage record data from the
Unemployment Insurance system and the Employment Service Automated Reporting System
(ESARS).
The results indicate that the availability and usage of TJTC enhances outcomes for
nonwhite male youth (both eligible and ineligible), but is stigmatizing for eligible individuals
from other race/sex groups, who appear to be slightly worse off because of the program than
their ineligible counterparts. Obtaining a voucher increases employment and wages, but it
appears as if selection effects are responsible. Importantly, the improved outcomes are not
accompanied by displacement effects. Finally, being certified results in increased wages, but
higher turnover and lower total employment.
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