Working Paper: NBER ID: w16866
Authors: David Neumark
Abstract: The continuing adverse labor market effects of the Great Recession have intensified interest in policy efforts to spur job creation. In periods when labor demand and supply are in balance, either hiring credits or worker subsidies can be used to boost employment - hiring credits by reducing labor costs for employers, and worker subsidies by raising the economic returns to work. Historically, both types of policies have been used in pursuit of distributional goals as well, with hiring credits targeting employment of disadvantaged workers, and worker subsidies targeting low-income families. Hiring credits targeting the disadvantaged have generally been regarded as ineffective at both creating jobs and increasing incomes of low-income families, whereas worker subsidies have been viewed as more successful at both. However, in the context of the Great Recession - and severe recessions more generally - hiring credits may be particularly effective at spurring job creation, but only if they are designed quite differently from past hiring credits targeting the disadvantaged. Moreover, establishing a national hiring credit that kicks in during and after recessions may be an effective countercyclical measure - a useful addition to the "automatic stabilizers" already in place, and one that specifically targets job creation.
Keywords: No keywords provided
JEL Codes: J08; J2; J78
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hiring credits (J33) | Increased employment (J68) |
| Hiring credits designed to avoid targeting disadvantaged groups (J79) | Mitigation of stigma effects (E71) |
| Hiring credits (J33) | Job creation outcomes (J68) |
| Hiring credits (J33) | Countercyclical measure (E32) |
| Deficient labor demand (J23) | Traditional worker subsidies yield minimal employment increases (J68) |
| Hiring credits designed to incentivize net new hiring (J68) | Maximized effectiveness of hiring credits (J68) |
| Poorly designed hiring credits (H81) | Minimal or no job creation effects (J68) |