Revisiting Work Opportunity: From Tax Credits to Subsidized Jobs Big Ideas for Job Creation in a Jobless Recovery June 16, 2011 Elizabeth Lower-Basch Senior Policy Analyst

American Recovery and Reinvestment Act States could receive 80 percent of increases in spending in one or more of three areas:  Assistance  Non-recurrent, short-term benefits  Subsidized employment Each state could receive up to 50% of block grant over two years Total pool of $5 billion. 2

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TANF Emergency Fund Jobs Public Sector Employment Subsidized Employment Demos 5 WPA, CETA Large scale Broad eligibility Mostly public sector Homemaker-Home Health Aide Demonstration, TJ Small scale Mostly private sector Targeted to welfare recipients, ex-offenders

Scale Target population  TANF recipients  Youth  Ex-offenders  UI, SNAP recipients  Broader low-income populations Administration (direct hire, intermediaries) Subsidy structure 6

Illinois: $10 per hour, hours per week, pay all payroll costs except UI Florida: 100 percent of wages and payroll costs up to 40 hours at prevailing wage up to a maximum of $19.51 South Carolina: minimum wage for 20 hours per week plus payroll costs for 6 months Oklahoma: 100% of wages up to $12 in month 1; 50% in months 2-4; bonus in month 10 if still employed equal to 50% of wages in months 2-4 7

Illinois: $11,551 Florida: $23,849 South Carolina: $4,432 Oklahoma: $8,313 with incentive; $5,196 without incentive (Assume 6 month placement if not specified ) 8

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Created in 1997 as one year credit, extended since then (with lapses, replaced retroactively) 9 target groups specified in law: welfare and SNAP recipients, youth in disadvantaged communities, ex-offenders, veterans, individuals with disabilities. For most groups, maximum credit is $2,400  Larger credit for disabled veterans, long-term welfare recipients  Smaller credit for summer jobs for youth 10

11 Credit is 40% of first $6000 of wages if worker is employed for 400 hours Drops to 25% if worker is employed hours No credit if employed less than 120 hours

Employers do not report taking it into consideration in hiring Most certifications processed by contractors Mostly claimed by large employers in high turnover industries with many low-skilled workers – retail, restaurants, temp agencies, Study suggests modest short-run impacts on employment, earnings (~10 percent), no long- term impacts 12

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Expansion of “food stamp youth” group from youth ages in families receiving SNAP to cover individuals aged in such families. Temporary ARRA coverage for unemployed veterans, disconnected youth. Increased participation?? 14

Redirect WOTC costs to subsidized employment programs Operate through WIA agencies, with state option to use TANF or SNAP E&T instead State control over program design, within general targeting at low-income populations At mid-range estimated cost of $12,500 per participant, $1.1 billion would allow states to serve 88,000 workers 15

WOTCSubsidized Jobs Modest subsidy of large populationDeeper subsidies of smaller numbers of workers No connection to training or job development Could be tied to training and job development High windfall costsLower windfall costs Subsidizes lousy jobsWIA agencies could target higher quality placements Eligibility categories set nationallyStates could determine priority populations 16

For more information: Elizabeth Lower-Basch