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Are Targeted Wage Subsidies Harmful? Evidence from a Wage Voucher Experiment

Gary Burtless
Industrial and Labor Relations Review
Vol. 39, No. 1 (Oct., 1985), pp. 105-114
Published by: Sage Publications, Inc.
DOI: 10.2307/2523540
Stable URL: http://www.jstor.org/stable/2523540
Page Count: 10
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Are Targeted Wage Subsidies Harmful? Evidence from a Wage Voucher Experiment
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Abstract

This paper presents the results of a controlled experiment designed to test the effectiveness of a targeted wage subsidy program. Such programs are intended to increase the employment of target group workers by offering employers reimbursement for part of those workers' wages. In the Dayton, Ohio, experiment, however, job seekers given experimental vouchers identifying them to employers as eligible for a generous wage subsidy were significantly less likely to find employment than were job seekers without vouchers. The author speculates that the vouchers had a stigmatizing effect and provided a screening device with which employers discriminated against economically disadvantaged workers.

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