Rethinking Work Opportunity: From Tax Cuts to Subsidized Job Placements

The Work Opportunity Tax Credit (WOTC) was created in 1996 and has been modified and extended repeatedly since. A separate but similar credit for long-term welfare recipients was consolidated with the WOTC in 2006. Recent program expansions have caused the annual cost of this credit to exceed $1 billion in recent years. WOTC is not designed to promote net job creation, and there is no evidence that it does so. The program is designed to encourage employers to increase hiring of members of certain disadvantaged groups, but studies have found that it has little effect on hiring choices or retention; it may have modest positive effects on the earnings of qualifying workers at participating firms.