Temporary Help Service Firms' Use of Employer Tax Credits: Implications for Disadvantaged Workers' Labor Market Outcomes

Authors

Sarah Hamersma, University of Florida
Carolyn J. Heinrich, University of Wisconsin-MadisonFollow

Series

Upjohn Institute Working Paper No. 07-135

DOI

10.17848/wp07-135

Issue Date

February 2007

Abstract

Temporary help services (THS) firms are increasing their hiring of disadvantaged individuals and claiming more subsidies for doing so. Do these subsidies-the Work Opportunity Tax Credit (WOTC) and Welfare-to-Work Tax Credit (WtW)-create incentives that improve employment outcomes for THS workers? We examine the distinct effects of THS employment and WOTC/WtW subsidies using administrative and survey data. Results indicate that WOTC/WtW-certified THS workers have higher earnings than WOTC-eligible but uncertified THS workers. However, these workers have shorter job tenure and lower earnings than WOTC/WtW-certified workers in non-THS industries. Panel estimates suggest that these effects do not persist over time.

Subject Areas

LABOR MARKET ISSUES; Employment relationships; Temporary employment; ECONOMIC DEVELOPMENT; Regional policy and planning; Demand side programs; UNEMPLOYMENT, DISABILITY, and INCOME SUPPORT PROGRAMS; Poverty and income support; Income support programs; Low wage labor markets; WORKFORCE DEVELOPMENT; Public training programs; Welfare to work