The Targeted Jobs Tax Credit (TJTC), which was enacted in 1978, provided an incentive to employers to hire impoverished youth and other individuals from designated groups. In line with classical economic theory, advocates of TJTC anticipated that the legislation would boost total employment by reducing the cost of employing targeted workers. The Reagan administration opposes extending TJTC on the grounds that: (1) employers used it for workers they would have hired anyway; (2) any additional hiring of targeted workers under TJTC merely displaced other workers; and (3) the potential cost of TJTC could multiply tenfold since it is an entitlement program. Research on effectiveness of TJTC indicated that, at least to some extent, the views of the Reagan administration are justified. If Congress extends TJTC, it should tighten the program's provisions and exercise more diligent oversight to determine the credit's effectiveness. More information should be collected about the program, post-hiring voucher requests should be prohibited, the capability of the U.S. Employment Service should be increased, employers should be required to retain eligible workers for a minimum period to qualify for the tax credit, the wage base for the credit should be increased, the impact of vouchers on job search success should be examined further, and the eligibility determination system should be monitored more carefully. (MN)