Following the large increase in unemployment brought about by the recession, policymakers in Congress and the Administration expressed considerable concern regarding the economic problems faced by veterans, particularly those disabled since 9/11. This concern has motivated a range of new federal programs aimed at improving veteran employment, including legislation passed in 2007—H.R. 2206 (in particular, Section 8211) of the 110th Congress, (P.L. 110-28), signed into law on May 25, 2007—which expanded the use of the Work Opportunity Tax Credit program (WOTC) to incentivize hiring of disabled veterans. However, there has been little attempt to gauge the effectiveness and relative costs of many programs focused on reducing veteran unemployment.
RAND researchers undertook a study designed to measure the impact of the 2007 WOTC tax credit expansion on the employment and earnings of disabled veterans. They found that the new tax credits expanded employment significantly among the target group of disabled veterans. Further, RAND researchers found that the cost of these tax credits is roughly on par with prior tax credit programs designed to increase the employment of other populations, but are significantly less costly than other federal initiatives designed primarily to create jobs, such as the American Recovery and Reinvestment Act ($151,000 per job-year).
- The recently established tax credit added 32,000 disabled veterans to the employment rolls in 2007 and 2008 and increased target group earnings by 40 percent, representing more than $1 billion in additional yearly income for these disabled veterans. These jobs were primarily full-time.
- Veterans aged 40 and over and veterans who were not receiving Social Security payments (such as Social Security Disability Insurance) benefited most from the program, and employment grew for veterans with both cognitive and physical disabilities.
- The tax credits cost the government roughly $10,000 or less per job-year, on par with other tax credit programs and substantially less than some larger-scale federal employment initiatives.
These findings suggest that tax credits can be an effective tool in the effort to further the employment prospects of disabled veterans.