How targeted is targeted tax relief? : evidence from the unemployment insurance youth hires program

Targeted employment subsidy programs are commonly employed by governments. This study examines one such initiative that rebated unemployment insurance premiums for net new insurable employment for youth aged 18 to 24. Using microdata from two datasets to estimate the labour market impacts of this program, in each we find statistically and economically significant impacts of various measures of employment for the targeted age group relative to older age groups. Neither dataset exhibits a concurrent change in unemployment; rather a reduction in those not in the labor force is observed. Oddly, no program impacts are observed for females; all of the effects are for males. Notably, we find evidence of displacement - substitution away from slightly older non-subsidized workers towards the younger subsidized group. These spillovers suggest that the aggregate impact of the program is less than that observed for the targeted group.