Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits

46 Pages Posted: 14 Mar 2011 Last revised: 1 Feb 2023

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: March 2011

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.

Suggested Citation

Neumark, David, Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits (March 2011). NBER Working Paper No. w16866, Available at SSRN: https://ssrn.com/abstract=1784144

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