Abstract
Although wage subsidies are currently in favor with policymakers, there is no evidence as yet that they are more cost-effective than public service employment (PSE) programs in practice. Here estimated is the cost per net job created of the New Jobs Tax Credit (NJTC), the most costly and ambitious federal wage subsidy ever undertaken. Data were gathered by 309 structured telephone interviews of private firms located in Wisconsin during the latter half of 1979. The value of jobs tax credits earned by each firm was calculated independent of voluntarily disclosed information. Results indicate that the NJTC is, at best, no more cost-effective than the Comprehensive Employment and Training Act (CETA). The NJTC failed to live up to expectations because of: 1. firms' perceptions of small changes in labor costs as a minor determinant of employment, 2. the program's perceived complexity, 3. the difficulty of ascertaining its value early in the taxable year, 4. prohibitive adjustment costs accompanying rapid expansion, 5. limited substitutability among factors of production, and 6. a strict intrafirm delineation between operations and finances.