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

Upjohn Institute Working Paper 07-135

Sarah Hamersma
University of Florida

Carolyn Heinrich
University of Wisconsin-Madison

February 2007

JEL Classification Codes: H2, I3, J3, J4

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.

Full text | Institute Home Page | Back to Working Papers