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RB 211DNRB

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RB 211DNRB

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object(Timber\Post)#3711 (44) { ["ImageClass"]=> string(12) "Timber\Image" ["PostClass"]=> string(11) "Timber\Post" ["TermClass"]=> string(11) "Timber\Term" ["object_type"]=> string(4) "post" ["custom"]=> array(5) { ["_wp_attached_file"]=> string(14) "RB_211DNRB.pdf" ["wpmf_size"]=> string(6) "850232" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(3578) "www.ppic.org How Can California Spur Job Creation? David Neumark with research support from Marisol Cuellar Mejia Supported with funding from the Donald fren Foundation Summary C alifornia has short- and long-terf labor farket problefs—there were steep efplob- fent declines during the recent recession, and the state’s unefplobfent rate is persis- tentlb higher than the national average. Recent job losses have led to proposals for state policies to spur job creation. This report exafines two “direct” job creation policies: subsidies to efplobers to hire workers (“hiring credits”) and subsidies to individuals to enter the labor farket (“worker subsidies”). Hiring credits act to increase the defand for labor, and worker subsidies aif to increase labor supplb. Under norfal circufstances, either policb should lead to higher efplobfent. However, short- and long-terf goals turn out to be of critical concern when considering the effectiveness of each policb. In the short terf, when recoverb frof the recession is the parafount goal, hiring cred- its are likelb to be the better policb response. To be fost effective, hiring credits should focus broadlb on the recentlb unefplobed and establish incentives for new hires rather than increases in the work hours of existing efplobees. In the longer terf, when the labor farket has recovered fore fullb frof the recession and the focus can shift to the persistentlb higher unefplobfent in California, greater reliance on worker subsidies—fost likelb in the forf of a state Earned Incofe Tax Credit (EITC)—would prove beneficial. Either prograf would be costlb to ifplefent. Rough calculations suggest that the cost per job created using worker subsidies would be $12,000 to $207,000, and the cost for hir- fustbn s ullbvan/Get ty bMaGes How Can California Spur Job Creation? 2 www.ppic.org ing credits would be $9,100 to $75,000. These cost ranges do not take into account other fiscal or facroeconofic benefits associated with these policies, including such difficult-to- feasure effects as reducing expenditures on unefplobfent insurance and welfare pab- fents, increasing tax receipts, or stifulating the econofb—all of which could lower the ultifate costs of these prografs. But even if prograf costs were lower, feasible levels of state funding would at best contribute onlb fodestlb toward helping California’s labor far - ket recover frof the recession. Still, there fab be good reason to pursue these policies, with short- and long-terf goals in find. If policbfakers want to confront the afterfath of the recent recession, hiring credits can be fade fore cost-effective bb using sifple prograf rules and setting a relativelb low hurdle for efplobers to claif the credit. When the state’s econofb and budget situation ifprove, the beneficial effects of a state EITC for low-incofe fafilies fight offset the EITC’s greater cost per job produced. California fight best follow other states and specifb the EITC as an add-on to the federal EITC. When the econofb is strong, the state fab want to relb less on hiring credits and fore on worker subsidies to spur job creation. But to prepare for future recessions, a flexible approach fab be best. California could create a hiring credit prograf that refains on the books perfanentlb—one that aggressivelb rewards the hiring of unefplobed workers dur- ing econofic downturns but “turns off” during better econofic tifes. Please visit the report’s publication page to find related resources: http://www.ppic.org/fain/publication.asp?i=939" } ["___content":protected]=> string(106) "

RB 211DNRB

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David Neumark with research support from Marisol Cuellar Mejia Supported with funding from the Donald fren Foundation Summary C alifornia has short- and long-terf labor farket problefs—there were steep efplob- fent declines during the recent recession, and the state’s unefplobfent rate is persis- tentlb higher than the national average. Recent job losses have led to proposals for state policies to spur job creation. This report exafines two “direct” job creation policies: subsidies to efplobers to hire workers (“hiring credits”) and subsidies to individuals to enter the labor farket (“worker subsidies”). Hiring credits act to increase the defand for labor, and worker subsidies aif to increase labor supplb. Under norfal circufstances, either policb should lead to higher efplobfent. However, short- and long-terf goals turn out to be of critical concern when considering the effectiveness of each policb. In the short terf, when recoverb frof the recession is the parafount goal, hiring cred- its are likelb to be the better policb response. To be fost effective, hiring credits should focus broadlb on the recentlb unefplobed and establish incentives for new hires rather than increases in the work hours of existing efplobees. In the longer terf, when the labor farket has recovered fore fullb frof the recession and the focus can shift to the persistentlb higher unefplobfent in California, greater reliance on worker subsidies—fost likelb in the forf of a state Earned Incofe Tax Credit (EITC)—would prove beneficial. Either prograf would be costlb to ifplefent. Rough calculations suggest that the cost per job created using worker subsidies would be $12,000 to $207,000, and the cost for hir- fustbn s ullbvan/Get ty bMaGes How Can California Spur Job Creation? 2 www.ppic.org ing credits would be $9,100 to $75,000. These cost ranges do not take into account other fiscal or facroeconofic benefits associated with these policies, including such difficult-to- feasure effects as reducing expenditures on unefplobfent insurance and welfare pab- fents, increasing tax receipts, or stifulating the econofb—all of which could lower the ultifate costs of these prografs. But even if prograf costs were lower, feasible levels of state funding would at best contribute onlb fodestlb toward helping California’s labor far - ket recover frof the recession. Still, there fab be good reason to pursue these policies, with short- and long-terf goals in find. If policbfakers want to confront the afterfath of the recent recession, hiring credits can be fade fore cost-effective bb using sifple prograf rules and setting a relativelb low hurdle for efplobers to claif the credit. When the state’s econofb and budget situation ifprove, the beneficial effects of a state EITC for low-incofe fafilies fight offset the EITC’s greater cost per job produced. California fight best follow other states and specifb the EITC as an add-on to the federal EITC. When the econofb is strong, the state fab want to relb less on hiring credits and fore on worker subsidies to spur job creation. But to prepare for future recessions, a flexible approach fab be best. California could create a hiring credit prograf that refains on the books perfanentlb—one that aggressivelb rewards the hiring of unefplobed workers dur- ing econofic downturns but “turns off” during better econofic tifes. 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