Bad Math on New Jobs Tax Credits at the NYT

The NYT gave us a dose of bipartisan nonsense on its oped pages when it ran a piece by Senators Schumer and Hatch that called for giving employers a tax credit equal to the 6.2 percent employers' side contribution for Social Security on people hired this year. The problem with this idea is that there is a large body of research, most of it connected with the increases in the minimum wage, that shows that labor demand is not very responsive to changes in the cost of labor. If raising the minimum wage by 15-20 percent doesn't cause employers to hire fewer workers, then there is no reason to believe that cutting the cost of labor by 6.2 percent will lead them to hire more workers. There may be some substitution with longer term unemployed being hired instead of new entrants as a result of this tax credit, since it would only apply to people who have been out of work for at least six months, but it is just silly to imagine that it can have any noticeable impact on employment. The NYT should have known better in choosing its pieces, even if the authors are senior senators. (Schumer also should have known better as a support of past minimum wage hikes.)

--Dean Baker