The Work Opportunity Tax Credit (WOTC) was “designed to encourage employers to increase hiring of members of certain disadvantaged groups, but studies have found it had little effect on hiring choices or retention…Most of the benefit of the credit appeared to go to large firms in high turnover, low-wage industries, many of whom use intermediaries to identify eligible workers and complete required paperwork. These findings suggested very high levels of windfall costs, in which employers received the tax credit for hiring workers whom they would have hired in the absence of the credit” (p.1).
In 2009, a majority of states began operating subsidized employment programs using money from the Temporary Assistance for Needy Families (TANF) Emergency Fund (EF). The TANF EF subsidized job programs provided much deeper subsidies than under WOTC, so they had a greater potential to influence employer action. Agencies began using the EF subsidies to “encourage employers to expand employment during the recession or to hire disadvantaged workers whom they would not otherwise have considered” (p.2). Based on the promise of subsidized employment programs such as TANF EF, this report concluded that future federal funding for the WOTC should be redirected to support subsidized jobs programs (p.16). (Abstractor: Author and Website Staff)