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What factors contributed to changes in employment during and after the great recession? (Farooq & Krugler 2015)

Absence of conflict of interest.

Citation

Farooq, A., & Kugler, A. D. (2015). What factors contributed to changes in employment during and after the great recession? IZA Journal of Labor Policy, 4(3), 1-28.

Highlights

  • This study examined the impact of the Work Opportunity Tax Credit (WOTC) on employment for veterans with disabilities and unemployed veterans.
  • The study used a nonexperimental design to examine the effects of the WOTC on employment, based on data from the Annual Social and Economic (ASEC) supplement of the Current Population Survey from 2003 to 2013.
  • The study showed no statistically significant relationships between the WOTC and employment for veterans with disabilities or for unemployed veterans.
  • The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that any estimated effects are attributable to the WOTC; other factors likely contributed to the outcomes. However, the study did not show any statistically significant effects.

Intervention Examined

The Work Opportunity Tax Credit

Features of the Intervention

The WOTC, established in 1996, is a set of tax credits designed to encourage employers to hire people from target groups that are typically less likely to obtain employment. Target groups include people who have received Temporary Assistance for Needy Families, veterans and 18- to 39-year-olds receiving benefits from the Supplemental Nutrition Assistance Program, ex-felons, recipients of Supplemental Security Income, and enterprise and renewal communities (distressed communities designated by the U.S. Department of Housing and Urban Development).

The target groups have changed since the WOTC was established. In 2007, the WOTC began extending tax credits through August 2011 to veterans with disabilities who were discharged from active duty within the past year as part of the U.S. Troops Readiness, Veteran’s Care, Katrina Recovery, and Iraq Accountability Act. Between 2009 and 2010, through the Recovery Act, the WOTC was expanded to include unemployed veterans discharged within the past five years who had collected unemployment benefits for four or more weeks in the past year. It was also extended to disconnected youth (ages 16 to 24) who had not worked regularly or attended school in the past six months. In 2011 and 2012, the VOW to Hire Heroes Act continued tax credits for unemployed veterans from the Recovery Act WOTC.

Features of the Study

The study involved a nonexperimental analysis using a sample of 1,285,543 people from the ASEC supplement of the Current Population Survey from 2003 to 2013. The authors used statistical regression models to compare employment rates between (1) two treatment groups that were eligible for the WOTC and (2) one comparison group that was not. One treatment group consisted of disabled veterans discharged from active duty since 2001, and the other treatment group was made up of veterans unemployed for at least four weeks during the past year and discharged from active duty since 2001. The comparison group consisted of disabled nonveterans and unemployed nonveterans. The statistical models accounted for differences across the groups in age, race, gender, and educational background.

Findings

Employment

  • The study showed no statistically significant relationships between the WOTC and employment for veterans with disabilities or for unemployed veterans.

Considerations for Interpreting the Findings

The authors did not account for preexisting differences between the groups before eligibility for the WOTC. Such preexisting differences—and not the WOTC—could be responsible for any observed differences in outcomes.

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that any estimated effects are attributable to the WOTC; other factors likely contributed to the outcomes. However, the study did not show any statistically significant effects.

Reviewed by CLEAR

April 2020

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