Will subsidized wages for the chronically unemployed improve hiring?

The Miami HeraldSeptember 7, 2011 

Jerold Nelson didn't possess the skills needed to land a job at Interactive Blue, a utility contractor in Coral Gables. But the 51-year-old brought an unusual selling point: The company only had to pay him about $1.50 an hour.

Laid off for nearly a year, Nelson still wasn't willing to work for nearly nothing. Instead, he qualified for a federal training program that temporarily subsidizes up to 90 percent of a new hire's wages. The discount was enough for Interactive owner Robert Mena to try out Nelson, who last month won a permanent position helping to permit cable systems for the company.

“In this economy, it’s tough to take a chance on hiring someone who is not an exact match,’’ Mena said. “It gave us more flexibility.’’

Nelson’s subsidized journey from long-term unemployed to promising employee could serve as a model for the next phase in Washington’s fight against one of the weakest job markets since the Great Depression.

When President Barack Obama unveils his job plan before a joint session of Congress Thursday night, analysts expect him to propose more hiring incentives like the one that gave Nelson his job.

The push to pay employers to hire will bring more attention to subsidies that aren’t new and, according to experts, aren’t that popular, either. The on-the-job training incentive that Interactive Blue received dates back to the 1970s, and already employers have a wide range of tax credits for hiring the poor, veterans, felons and other job seekers deemed in need of special help.

While still fairly obscure, hiring subsidies became more popular during the recession. The 2009 stimulus bill included hundreds of millions in extra funding for the programs, which helped local job boards offer more dollars for employers. “In the last 16 months or so, we have ramped up that program enormously,’’ Mason Jackson, head of Broward’s federally funded employment board, said of the on-the-job training effort.

Employment boards like Jackson’s Workforce One spend federal dollars on vocational classes to make the unemployed more hireable. But the recession made it harder to translate the extra training into job offers, since employers have so many applicants available.

With subsidies, employment boards try to offer employers a cheap way to test out an employee and see if he or she can handle the position.

“Instead of sending you to a computer class, I can send you directly to the employer,’’ said Rick Beasley, executive director of the South Florida Workforce Investment Board, which runs federal job-training programs in Miami-Dade and Monroe. “I can retool you on the job.’’

The South Florida Workforce board could not say how many people are enrolled in its on-the-job-training program. Workforce One said 252 people have used it in Broward since July 2010, with about 110 enrolled now. The latest federal data puts Broward’s unemployment rolls at roughly 95,000 people.

The training program only offers so much help for employers, and limits who can qualify. In Broward, wage subsidies are capped at $5,000 per employee and up to three months of training. Applicants also are limited by their income levels: Someone with a family of four must make less than $44,000 a year to qualify. Eligibility rules and subsidies vary from county to county.

Employers face stricter eligibiilty rules for tax credits that can pay them up to $9,000 for hiring someone. To receive the rebates, companies must hire people on welfare, unemployed veterans, ex-felons, young people without schooling or applicants who fall into other troubled categories. Going months without a job does not qualify for a tax credit — at least not yet.

Obama is expected to expand eligibility in his Thursday speech before a joint session of Congress. “The categories will be broadening,’’ a Labor Department official said Tuesday.

Already, states are experimenting with paying employers to hire the long-term unemployed.

In southern Connecticut, the federally funded job training board that serves Bridgeport raised $500,000 in private dollars to launch its program. Dubbed the Platform to Employment, it pays up to two months of wages for people who have exhausted all 99 weeks of federal and state unemployment aid. Coupled with counseling and volunteer work in the early weeks, the program hopes the free wages will spur employers to take a chance on workers.

To read the complete article, visit www.miamiherald.com.

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