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 premi- ums to employers with net increases in insurable earnings for youth aged 18 to 24. In each of two datasets, statistically and economically significant impacts on employment are observed for the targeted age group relative to older age groups. However, neither dataset exhibits a concurrent change in aggregate unemployment; instead there is a reduction in those not in the labour force. Oddly, no program impacts are observed for females and all of the effects involve only males. Notably, evidence of displacement – substitution away from slightly older non-subsidized workers towards the younger subsidized group – is observed. Although modest, these spillovers suggest that the aggregate impact of the program is less than that observed for the targeted group.