Targeting Tax Relief at Youth Employment

Abstract

Canada's Youth Hires program was a targeted employment subsidy that rebated employment insurance premiums to employers with net increases in insurable earnings for youths aged 18–24 years. Using a difference-in-differences approach, in each of two data sets statistically and economically significant employment impacts are observed. Most of the evidence suggests that the 2–2.4 weeks of increased employment resulted from an aggregate reduction in those not in the labour force, with at most a modest change in the unemployment rate. Many estimated effects are larger for men than for women. Notably, strong evidence of displacement (substitution away from slightly older non-subsidized workers) is not observed. However, there may be a small reduction in full-time schooling for the targeted group.