Working On Welfare
This story appears in the January 1998 issue of Entrepreneur. Subscribe »
For at least a decade, small business has been touted as the major job-creation machine behind the U.S. economy. Now the government has tapped small business to play a leading role in the national effort to put welfare recipients to work. But does Uncle Sam really understand what you need to do this?
Since we first told you about the potential business opportunities resulting from welfare reform legislation last January, much has taken place. One of the biggest changes has been the government's shift in focus from welfare reform itself to the welfare-to-work effort. Under this movement, state and federal governments are focusing on transferring people from the welfare rolls into unsubsidized jobs as quickly as possible.
States have touted the success of their own welfare-to-work programs by noting the number of people who have left the rolls. According to the U.S. Department of Health and Human Services Administration for Children and Families, 607,000 families left the welfare rolls since The Personal Responsibility Work Opportunity Reconciliation Act was signed into law in August 1996. Now states are working to reach their first required goal of moving 50 percent of eligible caseloads into the work force--encompassing an estimated 2 million people nationwide.
Pitching In
Federal, state and local governments have asked the business community to take an active role in getting these welfare recipients into the workplace. And business is listening: Several national coalitions have been formed to assist with the process. One of the major forces in this effort is The Welfare to Work Partnership, created last May by United Airlines, UPS, Burger King Corp., Monsanto and Sprint to encourage the private sector to hire those coming off welfare. Membership in the partnership, open to any company that has hired or commits to hire at least one welfare recipient, has already grown to include some 2,200 companies nationwide.
"The partnership was launched with the simple mission to encourage businesses of all sizes, sectors and regions to hire and retain those on public assistance without displacing current employees," says Eli J. Segal, president and CEO of the nonprofit partnership.
It's accomplishing this by giving business owners the information, technical assistance and support they need to hire welfare recipients. Blueprint for Business: Reaching a New Work Force is one resource the partnership is using. The free 50-page publication, published by The Welfare to Work Partnership and the National Alliance of Business, provides resources such as informational Web sites, examples of successful programs, a realistic look at obstacles business owners face in hiring welfare recipients, and suggestions on how to get federal, state and local government help in areas such as employee training.
In addition to organizations like the partnership, federal government agencies have been asked to take an active role in the welfare-to-work campaign. For example, the Small Business Administration's (SBA) activities range from conducting national surveys to determine labor force needs to identifying small businesses that are willing to hire welfare recipients.
The SBA has also pledged to use the Small Business Development Centers, Women's Business Development Centers, Service Corps of Retired Executives (SCORE) volunteers and other resources to help the effort. Members of the Business Women's Network, in partnership with the SBA's Office of Women's Business Ownership, recently pledged to hire more than 10,000 women on welfare as part of its Welfare-to-Work Initiative.
The Big Picture
Organizations representing the small-business community strongly support the welfare-to-work movement--but some of their members question the benefits.
It's not that these entrepreneurs don't need the workers. After all, hiring welfare recipients would ostensibly solve a pressing problem many firms face nationwide: a severe labor shortage. But there's much more to their needs than just willing hands; one fear business owners have is that those coming off welfare don't possess the education needed for many positions.
Their fears are not unfounded. According to a report from the Urban Institute for the Department of Labor's Employment Training Administration, a general profile of the welfare population reveals that 42 percent have less than a high school degree. (Seventy-five percent of the U.S. population aged 25 and older has a high school diploma.) On the plus side, however, 42 percent of recipients have earned a high school diploma or equivalent and another 16 percent have some college education. Seventy percent have recently worked, and the average employment experience is 4.2 years.
For firms in areas such as the service, retail and hospitality industries, which do not require highly skilled employees, matching these people with jobs may be possible. "Retailing is often the first employer of people coming into the work force, and we are eager to recruit," says Kathy Mance, vice president of research, education and community affairs at the National Retail Federation. The organization, which represents an estimated 1.4 million retail establishments, projects the industry will need 3 million new employees between 1994 and 2005.
While retail and related fields can absorb entry-level employees with rudimentary skills, manufacturing jobs and positions such as office clerks, secretaries and bookkeepers require workers with much more training.
"Manufacturers need skilled employees because entry-level positions require a different kind of person than [they did] five years ago," says Phyllis Eisen, executive director of the Center for Workforce Success at the National Association of Manufacturers. "Employees need communication skills as never before. With organizations flattening and more individual responsibility being pushed down to the front line, these new workers must be able to handle a [variety of tasks, including] a call from a customer.
"Manufacturers can't afford to [hire] someone who will cause a defect," Eisen says. "There is no tax break or subsidy valuable enough to accept reduced productivity."
Eisen says today's factory employees must also be able to work in teams and possess basic computer skills. And therein lies another major problem for many small businesses. In addition to being concerned that welfare recipients may not understand "soft" employment skills such as getting to work on time and working a full day, entrepreneurs often perceive that these individuals do not have the basic job skills needed.
"I would do anything to help individuals [on welfare]," says Julie Johnson McKee, owner of Rockford, Illinois-based Pacolet International Translations Inc. "However, as a business owner who has bills to pay and children to feed, I still have to look at the bottom line. I cannot bring in an employee who does not have good phone skills or a fairly solid basic knowledge of computers. We're just too small, and we don't make that kind of profit."
McKee is especially sensitive to the issue of hiring welfare recipients. For about 10 years in the late 1970s and early 1980s, the Illinois entrepreneur and her three children went on and off Aid to Families With Dependent Children. Today, McKee's 4-year-old firm has seven in-house workers and 300 contract employees worldwide. Pacolet International brought in approximately $750,000 last year.
While McKee is actively involved in welfare-to-work initiatives, other small-business owners think that in the abstract, having access to the new labor pool welfare recipients represent is a good idea--but they are concerned about whether these people can do the job with the minimal training businesses can afford to provide.
"The job I would have [involves] clerical work and customer service," says Frank S. Joseph, founder of Key Communications Group Inc., which produces The Federal Personnel Guide, an annual guide of federal employee rules and regulations. "We talk with dozens of federal agencies and individuals in the federal government selling, explaining and taking orders for our products. The person [in this position] has to keep in touch with our circulation management service and do filing and invoicing."
It's not an easy job, says Joseph, and one he is reluctant to fill with a person on welfare. "I think it's too scary to bring in a welfare recipient, knowing what I've read all my life about people on welfare," says Joseph, whose wife, Carol A. Jason, now owns the company, which is operated from the converted basement of their Chevy Chase, Maryland, home. "I figure they don't have the education and job skills [required]."
Easing Fears
Government officials are trying to allay these concerns by contracting with public, private, nonprofit and for-profit intermediaries to provide the skills the business community says welfare recipients need. According to Blueprint for Business, about 25 percent of the welfare population is work-ready, requiring only short-term training and job-readiness assistance. Approximately half are described as "investment-needed," meaning more intensive training and job readiness services such as work habit and attitude adjustment are required. The balance are classified under "more investment needed" and are people with alcohol or drug problems, physical or mental disabilities, or emotional disorders.
The assistance intermediaries can supply ranges from providing two-weeks of "soft" job-readiness skills training to helping employers develop tailored training programs. In California, for example, the Greater Avenues for Independence (GAIN) Program, funded by federal, state and county revenues, provides employment training and educational services, including help in the job search, application and interviewing processes. GAIN also pays for child care, transportation, books, tools and more.
Goodwill Industries International offers employment training, counseling and placement programs through its 187 locations in the United States and Canada. Because the agency has its own retail stores, it's also able to provide students with hands-on retail experience.
In New Mexico, Intel Corp. has taken an approach that individual or groups of small businesses could also utilize. The computer giant is working with state and local governments as well as local community colleges to provide low-income residents with Intel Opportunity Scholarships, lab equipment and other support that helps them complete a specially designed two-year course and train for jobs that pay a minimum of $30,000 a year. "We set up a situation that allows people to retain their welfare benefits, and we pay them [through scholarships] to go to school," explains Intel corporate affairs manager Tracy Koon.
When creating and implementing the program, Koon says Intel officials found that business cannot take on the welfare-to-work effort alone. Says Koon, "If government, the private sector and the education community come together, it can work.'
Taxing Matters
The federal government has also begun offering a number of tax subsidies to further entice employers to hire welfare recipients. The Work Opportunity Tax Credit was reauthorized in August to give a federal income tax credit to businesses that hire people from one of eight target groups, including welfare recipients, between October 1, 1997, and July 1, 1998. Business owners can obtain a credit of up to $2,400 for each eligible new employee.
The Welfare to Work Tax Credit is a new deduction that earns employers as much as an $8,500 tax credit for hiring long-term welfare recipients between December 31, 1997, and May 1, 1999. Businesses must keep the workers on staff at least 400 hours, or 180 days, to be eligible for the credit.
In addition to the tax breaks, in fiscal year 1998, the Department of Labor will award $400 million in competitive grants to private entities to fund programs that move welfare recipients into unsubsidized employment. Because the private entity must submit the grant application in conjunction with its local Private Industry Council (these councils administer welfare-to-work programs in more than 600 locations nationwide) or political subdivision (an area such as a city or county that has its own government officials), this is an excellent way for a small business or group of companies with a need for labor and an innovative training, transportation or child-care program to obtain government funding for a project.
Getting There
While training programs and tax subsidies may persuade employers to hire welfare recipients, they won't induce an owner to retain workers who don't show up, repeatedly arrive late or don't work a full day--common occurrences among women trying to transition from welfare into the working world. These attendance problems are typically caused by two issues government and business continue to grapple with: inadequate transportation and unaffordable child care.
Though many Americans struggle to find transportation and child care, employers often find that welfare recipients are particularly vulnerable to these problems. Consider these facts: Nationwide, 94 percent of welfare recipients do not own a car. Most also live in urban or rural areas, yet the bulk of new jobs being created are located in the suburbs.
To address problems such as these, an organization of civic, religious and nonprofit groups called the Welfare to Work Coalition to Sustain Success was formed in May. The coalition consists of community-based groups, such as the Boys and Girls Clubs of America, that have created or expanded programs to give employers the resources they need to help their employees.
Beyond the coalition, states and local communities are also addressing these two critical issues. In the area of transportation, some small suburban firms have joined forces to provide shuttles and other transportation for their urban employees. And in Michigan's Menominee County, which had 119 families on welfare in June 1996, volunteers have heeded the call of Project Zero and have offered welfare recipients free haircuts, rides to work or child care while they search for jobs.
In Virginia, officials in Culpeper County created a countywide before-school, after-school and summer day-care program in conjunction with the local business community.
Obviously, there is no one solution to the question of how to get small business involved in hiring welfare recipients. From training costs to transportation and child care, there is still much work to do. It will take creativity, a willingness to invest time and money in employee development, and partnerships with government to create services that fill in the gaps between what welfare recipients have . . . and what small business needs.
Resource Roundup
To learn more about hiring welfare workers, check out the following resources.
1. The Welfare to Work Partnership provides information and assistance to companies interested in hiring welfare recipients. It has a toll-free information line, (888) USA-JOB-1, and a Web site (http://www.welfaretowork.org ).
2. Hiring Welfare-to-Work Employees: A Step-by-Step Guide for Small Businesses is accessible only at the Department of Labor's Web site (http://www.dol.gov ).
3. Public Employment Service is a state-operated program that matches employers and job seekers through a network of 1,800 offices throughout the United States.
Employers can list available jobs on the service's Internet site, America's Job Bank. For information, visit the Web site at http://www.ajb.dni.us .
4. America's Talent Bank (http://www.atb.org ) is an electronic resume system where employers can search for potential employees.
Playing Their Part
Entrepreneurial companies are not the only sector of the business community being asked to shoulder the responsibility for hiring welfare recipients. Major corporations are being urged to play a part as well. And while small firms don't have the financial resources larger companies do, entrepreneurs can learn a lot by examining how large companies structure welfare-to-work programs.
Some big businesses choose to tap into existing educational programs, while others, such as Intel Corp. and Marriott International Inc., find that creating internal training curricula fills their needs much better. Marriott's Pathways to Independence is one of the corporate world's most publicized welfare-to-work programs.
"Based on a lot of experience, we found when you hire people with little or no work experience and put them on the job with minimal [training]--basic orientation--three weeks later, they will be gone," says Janet Tully, Marriott's director of community employment training.
To combat this problem, in 1991, Marriott launched Pathways in Atlanta. The six-week training program combines classroom instruction with occupational skills training. "We teach three basic things in training: dependability, accountability and self-esteem," says Tully.
But Marriott doesn't stop with classes and training, Tully says. After the instructional program, Marriott guarantees graduates an offer of full-time employment and provides them with a support system of co-workers and supervisors to make sure issues like transportation and day care are solved.
While the hotel giant could easily afford to foot the entire bill for the training program, Marriott has teamed up with private industry councils, Job Corps, the Jewish Vocational Services, and Common Ground Community organizations, which reimburse the corporation for about 60 percent of the training costs.
Contact Sources
Boys and Girls Clubs of America, 600 Jefferson Plaza, Rockville, MD 20852
California Department of Social Services, Greater Avenues for Independence (GAIN) Program, http://www.dss.cahwnet.gov
Chip Coleman, c/o Culpeper County, 155 W. Davis St., Culpeper, VA 22701, (540) 825-1251
Goodwill Industries International, (800) 741-0197, http://www.goodwill.org
Intel Corp., http://www.intel.com/intel/community/index.htm
Key Communications Group Inc., 5617 Warwick Pl., Chevy Chase, MD 20815-5503, (800) 705-5353
Marriott International Inc., Marriott Dr., Washington, DC 20058, (301) 380-7484
National Association of Manufacturers, (202) 637-3000, peisen@nam.org
National Retail Federation, 325 Seventh St. N.W., #1000, Washington, DC 20004
Pacolet International Translations Inc., P.O. Box 2261, Rockford, IL 61131-0261, pacolettrans@compuserve.com
Small Business Administration, 409 Third St. S.W., Washington, DC 20416, (800) 8-ASK-SBA
Urban Institute, http://www.urban.org
U.S. Department of Health and Human Services, Administration for Children and Families, 370 L'Enfant Promenade S.W., Washington, DC 20447, http://www.acf.dhhs.gov
U.S. Department of Labor, Employment Training Administration, (202) 219-6871, http://www.dol.gov
