www.clasp.org revisiting work opportunity: from tax credits to subsidized jobs big ideas for job...
TRANSCRIPT
www.clasp.org
Revisiting Work Opportunity:From Tax Credits to Subsidized JobsBig Ideas for Job Creation in a Jobless Recovery June 16, 2011
Elizabeth Lower-BaschSenior Policy Analyst
www.clasp.org
The TANF Emergency Fund
• 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
www.clasp.org
States Drew Down $1.3 Billion for Subsidized Jobs
3
Subsidized Employment
26%
Short-term Non-re-current
42%
Basic Assistance32%
Allocation of Expenditures
www.clasp.org
Over 260,000 Subsidized Jobs
4
www.clasp.org
Program Design Varied by State
TANF Emergency Fund Jobs
Public Sector
Employment
Subsidized Employmen
t 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
www.clasp.org
Variation in…
• Scale• Target population
TANF recipients Youth Ex-offenders UI, SNAP recipients Broader low-income populations
• Administration (direct hire, intermediaries)• Subsidy structure
6
www.clasp.org
Examples of Subsidy Structures
• Illinois: $10 per hour, 30-40 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
www.clasp.org
Examples of Maximum Subsidy Costs
• 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
www.clasp.org
Funding Ended 9/30/2010
9
www.clasp.org
Work Opportunity Tax Credit
• 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
www.clasp.org
Work Opportunity Tax Credit
11
• Credit is 40% of first $6000 of wages if worker is employed for 400 hours
• Drops to 25% if worker is employed 120-399 hours
• No credit if employed less than 120 hours
www.clasp.org
Impacts of WOTC
• 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
www.clasp.org
In 2010 WOTC Cost Over $1 billion
13
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
200
400
600
800
1,000
1,200
Work Opportunity and Welfare to Work Credit Expenditures
Welfare-to-Work
WOTC
Year
Millions f
rom
Corp
ora
tions a
nd I
ndiv
iduals
(2010
dollars
)
www.clasp.org
Why Are Costs Rising?
• Expansion of “food stamp youth” group from youth ages 18-24 in families receiving SNAP to cover individuals aged 18-39 in such families.
• Temporary ARRA coverage for unemployed veterans, disconnected youth.
• Increased participation??
14
www.clasp.org
Recommendation
• 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
www.clasp.org
Why replace WOTC?
WOTC Subsidized Jobs
Modest subsidy of large population
Deeper subsidies of smaller numbers of workers
No connection to training or job development
Could be tied to training and job development
High windfall costs Lower windfall costs
Subsidizes lousy jobs WIA agencies could target higher quality placements
Eligibility categories set nationally
States could determine priority populations
16
