Absence of conflict of interest.
Citation
Heaton, P. (2012). The effects of hiring tax credits on employment of disabled veterans. Santa Monica, CA: Rand Corporation. Occasional Paper. Retrieved from https://www.rand.org/content/dam/rand/pubs/occassional papers/2012/RAND_OP 366.pdf.
Highlights
- The study examined the impact of the 2007 Work Opportunity Tax Credit (WOTC) on the employment and earnings outcomes among veterans with disabilities.
- The authors used a nonexperimental approach and data from the American Community Survey Public Use Microdata Sample to compare the employment and earnings outcomes of veterans who were eligible for the WOTC with those of veterans who were not.
- The study found an approximately 2 percentage point increase in employment, a 0.58 hour increase in weekly hours, and a 40 percent increase in wage income among veterans with disabilities who were eligible for WOTC compared to veterans and nonveterans with other characteristics.
- The quality of causal evidence presented in this report is moderate because it relied on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the WOTC program, but other factors might also have contributed to the findings.
Intervention Examined
Work Opportunity Tax Credit
Features of the Intervention
Congress authorized the WOTC in 1996 to increase the employment opportunities of specific target populations (for example, ex-felons, Temporary Assistance for Needy Families recipients, and residents of enterprise zones or empowerment communities). Individuals within these groups who met age and use of entitlement program requirements were eligible for WOTC and employers who hired them could apply for a one-time federal tax credit of up to $2,400 per employee (available only for the first year following hiring of the individual). In 2007, the tax credit expanded to include veterans entitled to service-connected disability compensation who were discharged from active duty within 12 months or who were unemployed for a minimum of 6 months before their hire date. The value of the tax credit also increased to up to $4,800.
Features of the Study
Using data from the American Community Survey Public Use Mircodata Sample, the study used a statistical model to estimate impacts of the WOTC on employment and earnings outcomes among veterans with disabilities. In the model, the authors included data from 7.4 million individuals with different characteristics: (1) veterans with disabilities who qualified for the WOTC, (2) veterans with disabilities who did not qualify for the WOTC, (3) veterans without disabilities who qualified for the WOTC, (4) veterans without disabilities who did not qualify for the WOTC, (5) nonveterans with or without disabilities who qualified for the WOTC, and (6) nonveterans with or without disabilities who did not qualify for the WOTC. Across these groups, the authors used a statistical model that first compared the employment history of veterans with disabilities who qualified for the WOTC with veterans without disabilities (differences-in-differences analysis). Then, the analysis incorporated both disabled and nondisabled nonveterans (triple-differences analysis). Finally, the analysis incorporated individuals who both met and did not meet employment requirements that would make them eligible to receive WOTC (quadruple-differences analysis). For each of these analyses, the statistical model examined differences in employment and earnings from years before WOTC implementation (2005 and 2006) to years after implementation (2007 and 2008), among the veterans with disabilities who qualified for the WOTC in relation to the differences in these outcomes for years 2005 and 2006 and 2007 and 2008 for the other groups of individuals.
Findings
Employment
- The study found a statistically significant relationship between the WOTC and employment. There was about a 2 percentage point increase in employment among the veterans with disabilities who qualified for the WOTC compared to other groups, including disabled veterans who were not eligible for the WOTC, nondisabled veterans who were not eligible for the WOTC, nondisabled veterans who were eligible for the WOTC, disabled and nondisabled nonveterans who were eligible for the WOTC, and disabled and nondisabled nonveterans who were not eligible for the WOTC.
- The study also found a statistically significant relationships between the WOTC and the amount of hours worked. Disabled veterans who were eligible for the WOTC tended to work 0.58 hours more per week in relation to other groups, including disabled veterans who were not eligible for the WOTC, nondisabled veterans who were not eligible for the WOTC, nondisabled veterans who were eligible for the WOTC, disabled and nondisabled nonveterans who were eligible for the WOTC, and disabled and nondisabled nonveterans who were not eligible for the WOTC.
Earnings and wages
- The study found a statistically significant relationship between the WOTC and earnings. There was about a 40 percent increase in wages among veterans with disabilities who qualified for the WOTC in relation to other groups, including disabled veterans who were not eligible for the WOTC, nondisabled veterans who were not eligible for the WOTC, nondisabled veterans who were eligible for the WOTC, disabled and nondisabled nonveterans who were eligible for the WOTC, and disabled and nondisabled nonveterans who were not eligible for the WOTC.
Causal Evidence Rating
The quality of causal evidence presented in this report is moderate because it relied on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the WOTC program, but other factors might also have contributed.