Tax Incentives and Older Workers: Evidence from Canada
Guy Lacroix and Pierre-Carl Michaud
Working paper #2
September 2024
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This study provides empirical evidence on the effectiveness of a tax measure aimed at increasing the employment rates of older workers in Quebec, Canada. Using multiple data sources and various identification strategies, the authors first apply a Quebec-Ontario difference-in-differences design but do not detect robust employment effects for most age groups, except for those aged 60 to 64, though the common trend assumption does not hold. For this latter group, an alternative identification strategy exploits variation in treatment intensity over time using longitudinal administrative tax data for Quebec only. No impact on transitions in or out of the labor force is found. A small positive effect on earnings (intensive margin) is observed, but with a negative impact on the net tax liability of the affected workers. To address the invalid comparison with Ontario, the study investigates the credit’s impact using a staggered adoption design that leverages differences across cohorts within Quebec. The results align with the alternative approach. In conclusion, the tax measure does not appear to be a cost-effective way of raising public revenues or increasing employment rates among older workers.