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.
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