Employer Wage Subsidy Caps and Part-Time Work
Joel Elvery (),
Curtis Reynolds () and
Shawn M. Rohlin
No 2021-01, Working Papers from Federal Reserve Bank of Cleveland
Hiring credits and employer wage subsidies are tools that policymakers have available to attempt to improve labor market conditions for workers. This study explores how capped-wage subsidies affect firms’ labor market decisions, in particular, their reliance on part-time and low-skill workers. We focus on the federal Empowerment Zone program, which offers firms in targeted areas a 20 percent wage subsidy (capped at $3,000 per year) for each employee who also resides in the Empowerment Zone. Results using different methods of identification suggest that firms respond to capped-wage subsidies by expanding their use of part-time workers, particularly where the subsidy cap is likely to bind. We also provide evidence of a shift toward lower-skill workers.
Keywords: wage subsidies; hiring credits; part-time work (search for similar items in EconPapers)
JEL-codes: H25 J23 J48 (search for similar items in EconPapers)
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