U.S. senators look to get unemployed back to work

Tax credits offered to reduce jobless rates

4/5/2014

A group of senators including Ohio’s Rob Portman are trying to make a dent in the nation’s chronic long-term unemployment problem by offering a tax incentive to employers willing to hire someone who has been out of work for six months or more.

“We have higher levels of long-term unemployment than we’ve had in any recession in our history, including in deeper recessions like in ’81,” Mr. Portman said Friday. “There’s something structurally wrong here, and we’ve gotta get these people back to work.”

The U.S. Bureau of Labor Statistics said 3.7 million people have been out of work for 27 weeks or longer as of March. That makes up 35 percent of all of the nation’s unemployed workers. While that figure has come down in recent months, it remains well above previous historical highs.

Mr. Portman, a Republican, joined with two Democrats to write an amendment to a tax credit extension bill that would make the long-term unemployed eligible for the Work Opportunity Tax Credit. That provides employers a tax credit of between $1,200 and $9,600 for hiring certain groups of people, including veterans, ex-felons, and those who receive food stamps.

The amendment passed the finance committee and the bill is expected to be taken up by the full Senate soon.

There’s evidence that the longer someone is out of work, the more likely employers will pass them over for new jobs. Mr. Portman said giving employers an extra reason to hire those individuals should get people back in the work force, and give them a chance to freshen their skills.

“It’s not going to be the only solution here, but I think it will help provide companies an incentive to look at the long-term unemployed and give them a chance,” he said.

Steve Mangum, dean of the college of business administration at the University of Tennessee, said programs like the Work Opportunity Tax Credit have historically been some of the best ways to increase employment in specific groups of people.

“They increase the probability of employment,” he said. “They also seem to have some positive impact on the overall salary and wage the person earns. There’s also, in most studies, a positive impact in the duration of the resulting employment. Overall there are very positive results.”

The credits also come with little to no risk. Generally, the credits are available only once, and there’s no evidence, Mr. Mangum said, that they lead to higher turnover rates.

Still, while it might make a big difference to someone who lands a job after being out of work for eight months, they don’t have a large effect on the overall economy.

“It’s not as if the program increases the amount of overall hiring employers do. It moves the focus of the hiring effort to individuals in these targeted groups,” Mr. Mangum said.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134 or on Twitter @BladeAutoWriter.