The Big Ideas for Job Creation project reviews suggestions from leading experts who have come up with practical, scalable proposals to create more jobs for the U.S. economy. This brief shows how a current tax credit program (Work Opportunity Tax Credit) is not creating jobs and could be redirected into subsidized job opportunities (Temporary Assistance for Needy Families Emergency Fund). Subsidized job programs have recently shown promise, even if they are not a panacea to the unemployment issues. The program would be operated by federal and state agencies with state flexibility for design, and could provide low-income parents and youth an opportunity to earn income in a socially valued way, to reconnect with the world of work and learn skills that might lead to future employment.
How effective is The Work Opportunity Tax Credit (WOTC)?
Findings & Stats
Direct surveys of employers find little evidence that the WOTC drives employers’ hiring behavior.
WOTC certifications remain very low compared to the potential number of eligible participants. Lack of information about the WOTC may be one reason that employers do not participate in the program.
Statements & Quotations
Policymakers have expressed skepticism about the effectiveness of the WOTC for nearly as long as it has existed; it has continued in part because of the perceived lack of a viable alternative approach to promoting private sector employment among disadvantaged workers.
[We] recommend redirecting the cost of the WOTC into formula grants to states to support subsidized jobs, modeled on the experience under the TANF Emergency Fund. Such a transformation could increase both short- and long-term employment of disadvantaged workers, assist small businesses, and reduce the windfall benefits going to low-wage, high turnover employers.