With all due respect to Len Burman, I think it should be noted that there is considerable theoretical and empirical research support for the notion that SOME type of wage subsidy program might do something useful to encourage job creation during recessions. I don’t think that it is convincing to simply dismiss the notion by citing the opinion of one person, Emil Sunley. If we’re citing Brookings publications, it might be noted that the Brookings Institution saw fit to organize two major conference volumes on the topic of wage subsidies. There is the conference volume from 1978 edited by John Palmer, "Creating Jobs: Public Employment Programs and Wage Subsidies". There is a 1982 volume edited by Robert Haveman and John Palmer, “Jobs for Disadvantaged Workers: The Economics of Employment Subsidies”. These volumes have extensive discussion of research on various designs of wage subsidies in different countries. Wage subsidies have been favored by a number of prominent economists. Robert Haveman has long been an advocate of reviving the New Jobs Tax Credit. . Nobel-prize winner Edmund Phelps wrote an entire book advocating wage subsidies, in his 1997 book “Rewarding Work”. Harvard Professor Dani Rodrik recently wrote favorably of tax-linked employment subsidies at his blog, at http://rodrik.typepad.com/dani_rodriks_weblog/2008/12/a-proposal-employment-linked-tax-incentives-1.html Professor Dan Hamermesh of the University of Texas wrote a piece at the New York Times “Freakonomics” blog favoring Obama’s revival of the New Jobs Tax Credit, at http://freakonomics.blogs.nytimes.com/2008/10/17/an-example-of-economics-at-work/ . In addition to John Bishop’s work on the New Jobs Tax Credit of 1977-78, an article by Jeffrey Perloff and Michael Wachter in the American Economic Review in 1979 provided some empirical evidence that the NJTC was effective in creating jobs. I reviewed the evidence on wage subsidies in chapter 8 , engagingly titled “Wage Subsidies”, of my 2001 book “Jobs for the Poor: Can Labor Demand Policies Help?” On the whole, there is some evidence that such wage subsidies can make a significant difference if properly designed. Targeted wage subsidies to the disadvantaged are more complicated to design properly than more general wage subsidies, because targeted wage subsidies have to somehow deal with stigma effects, in which employers don’t want to hire disadvantaged workers identified as such by the wage subsidy program. Chapter 1 of this book, which summarizes the entire book, can be downloaded here: http://www.russellsage.org/publications/books/0-87154-097-5/chapter1_pdf . Some estimates from my book that are relevant to the effectiveness of a revived New Jobs Tax Credit are in a memo I released in October of 2008, available here: http://www.upjohn.org/Bartik-NJTC-proposal.pdf . Wage or employment subsidies tend to have a limited political constituency. Conservatives tend to be suspicious of these subsidies because they involve extensive government interference with private sector decisions about employment. Liberals tend to be worried that business will take the subsidies without changing employment levels. However, on the whole, the evidence suggests that such subsidies, if well-designed, will induce some significant job creation. As with all tax breaks or subsidies, they will also provide windfall gains for actions that will be undertaken anyway. The question is whether we can design wage or employment subsidies sufficiently well that the benefits from additional employment creation justify the costs of the subsidies, including the costs of windfall gains. The devil is in the details. The Tax Policy Center could make a real contribution by thinking through how an employment subsidy might best be designed in today’s economy. How do we encourage employment creation, particularly for the hard-to-employ, while minimizing windfall gains for employers? How do we do so, and yet keep the subsidy design reasonably simple? These issues have already been extensively discussed, yet might well benefit from a fresh look.