Helping the Working Poor: Employer- vs. Employee-Based Subsidies

Syracuse University Center for Policy Research Public Finance Policy Brief No. 14/1999

32 Pages Posted: 28 Apr 2011

Date Written: August 1, 1998

Abstract

In the United States and Europe there has been renewed interest in subsidizing firms that employ disadvantaged workers as a means of addressing poverty and other social problems. In contrast, the prevailing practice is largely to provide social welfare benefits directly to individuals. Which approach is better? We re-examine the relative merits of employee- versus employer-based labor market subsidies and conclude there are good reasons to continue to rely on the direct, employee-based approach. In practice, low-wage workers are seldom either low-skill or low-income workers. Furthermore, workers who might quality for a firm-based subsidy are reluctant to so identify themselves for fear of being stigmatized or labeled as "needy." Thus, employer-based subsidy programs have lower participation rates and correspondingly higher per capita expenditures than employee-based subsidy programs.

JEL Classification: I38, J31

Suggested Citation

Dickert-Conlin, Stacy and Holtz-Eakin, Douglas, Helping the Working Poor: Employer- vs. Employee-Based Subsidies (August 1, 1998). Syracuse University Center for Policy Research Public Finance Policy Brief No. 14/1999, Available at SSRN: https://ssrn.com/abstract=1824382 or http://dx.doi.org/10.2139/ssrn.1824382

Stacy Dickert-Conlin (Contact Author)

Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
United States

Douglas Holtz-Eakin

Independent ( email )

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