APPLYING FOR ENTITLEMENTS - EMPLOYERS AND THE TARGETED JOBS TAX CREDIT

The Targeted Jobs Tax Credit (TJTC) is probably the most outstanding example of a generous entitlement program with a very low participation rate. Only about 10 percent of eligible youth hired are claimed as a tax credit by their employers. The causes of the low participation rates are analyzed by estimating a Poisson model of the number of TJTC‐eligibles hired and certified during 1980, 1981, and 1982. Information costs, both fixed and variable, are found to be key barriers to TJTC participation. The cost‐effectiveness of TJTC is low because of the stigma attached and the very high recruitment costs of hiring additional TJTC‐eligibles. Because employers find it relatively cheap to certify after the fact eligible new employees who would have been hired anyway, this passive mode of participating in TJTC predominates. Copyright © 1991 Association for Public Policy Analysis and Management