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Welfare Reform Project

Selling Employers on Welfare Reform--February 1999 State Legislatures Magazine

By Jack Tweedie and Jenifer Vasquez

There is no better place to end "welfare as we know it" than at the door of an employer. And if jobs are the answer to poor people becoming self-sufficient, then employers must be in the picture.

States are finding that employers have more than jobs to offer. Involving businesses in welfare-to-work efforts brings key resources and problem-solving abilities to the task of helping people get into jobs and off welfare. In Maryland, a private firm, BMC Enterprises, developed its own program to train and employ recipients at its stores. A Florida program provides education and training geared to what growing businesses say they need. Efforts between private citizens, business and a nonprofit organization support the welfare-to-work initiative in Missouri. Business leads a program in Oklahoma that contracts with companies to move recipients into work. And in Washington, where the aim is for better-paying jobs, the focus is on an intensive 12-week training program and building strong relationships with local employers.

Sometimes the best approach is simply just to ask. Minnesota legislators went to employers to find out why they were reluctant to hire welfare recipients. A major concern was the high cost of unemployment insurance. If a company hired someone who did not work out, letting her go would increase its unemployment costs. Businesses said it was too hard to evaluate recipients when they had little or no work experience. So lawmakers exempted hires of welfare recipients from unemployment insurance ratings for the first six months. The result?

Very successful, according to Lee Nelson of the Minnesota Department of Economic Security. "We're asking that the initiative be extended in legislation for three more years because it's a great idea. The purpose is to help remove the disincentive an employer might have in hiring a welfare recipient," he says.

To further engage private employers in the process, states such as Wisconsin and Texas have transferred their cash assistance programs to their labor and employment security departments, which focus on helping participants find jobs rather than just calculating eligibility and benefit payments. In several states, welfare workers share offices with job search centers. In Florida, the state board that oversees welfare changes must include a majority of members who are in management and business positions. The state also requires cross-membership among local welfare boards and work force development councils. Arkansas legislators established coalitions to encourage business participation at the local level. When some counties had difficulty recruiting business members, legislators got on the phone to encourage participation.

As more welfare recipients go to work, their success stories help convince more employers to get involved. Already, findings from the U.S. Department of Human Services indicate that employers nationwide who hire welfare recipients are pleased with fewer turnovers and increased loyalty among employees. As the success stories build, more and more states are reaching out to their business communities to help design programs and training.

In Baltimore, Md., BMC Enterprises owns and operates 15 Stop Shop Save grocery stores, located mainly in low-income areas. As the largest black-owned business in Baltimore and the 14^th largest in the country, the stores serve a significant number of poor families. Working with referrals from the Department of Social Services, the mayor's office and the Baltimore Urban League, BMC employs and trains welfare recipients for its neighborhood stores. These hires are made under the social services subsidized work program that uses grant money to encourage businesses to hire welfare recipients.

"In Maryland, our preference is to find people jobs in the private work force as opposed to public jobs," says Delegate Samuel "Sandy" Rosenberg. "To make this happen, we've used partnerships, tax credits and other training money, and it's working."

BMC runs a six-week training program with two weeks of classroom time and four weeks of on-the-job training in a store. During the training, recipients are under the social services work program and continue to receive their full public assistance benefits. Once they start the on-the-job training at a store, BMC supplements their benefits with a $50 per week, needs-based stipend.

After the first two weeks of on-the-job training, participants go on the BMC payroll at $5.50 per hour, but payment is withheld until the job training is completed. This delayed payment helps ease the transition between welfare assistance and regular paychecks. Public benefits end when the training ends, but work at Stop Shop Save stores starts at $6 an hour and employees are eligible for raises every six months, usually in 50-cent increments. Medical benefits are provided after 90 days, but welfare hires can maintain their Medicaid benefits for one year.

Florida lawmakers passed legislation that puts businesspeople in charge. Legislators took the responsibility for implementing welfare reform away from state agencies and gave it to a state board and 24 local coalitions. The Work and Gain Economic Self-Sufficiency (WAGES) Board and the local coalitions control the welfare budget and set policies for the program. The chair of the WAGES board must be a businessperson, and most members must come from outside state government. And most of those outside members must have business or management experience. Their powers are far-reaching. When the Department of Labor and Employment Security proved reluctant to participate, the WAGES board slashed its welfare-to-work budget and reallocated the money and the department's responsibilities to the local coalitions.

Local control is the driving force in Florida. The local coalitions, made up of business and community leaders, have had remarkable success in getting corporate leaders to participate. Business leaders recognize the responsibility of the local community to help poor families, and they know that key decisions about welfare and employment programs are being made right at home. The coalitions can focus their programs on the employers and needs of their areas. They have developed a variety of innovative programs in job training, transportation and extensions of child care by taking advantage of local resources

One of Florida's statewide innovations is the Performance-Based Incentive Funding Program (PBIF) that gives financial incentives to community colleges and vocational programs to train poor people for high-wage, full-time jobs. Training programs identify high-growth jobs in the local area and develop programs to prepare students for those jobs. Their budgets are based on the number of participants they train and place. They receive additional incentives for enrolling, graduating and placing welfare recipients.

In Kansas City, Mo., a commission created by the state in 1994 to administer a welfare grant program has since evolved into a separate nonprofit agency with multiple funding that not only seeks jobs for recipients, but works to create new businesses and improve services such as Medicaid and foster care. The Local Investment Commission (LINC) is managed by a 36-member citizen board, over half of which is from the business community. Since 1995, it has put 2,400 welfare recipients to work.

LINC provides state subsidies to employers who hire welfare recipients and works with other organizations that provide job training, placement and case management to welfare recipients.

In Tulsa, Okla., the Metro Area Chamber of Commerce spearheaded an initiative to train and put welfare recipients to work after members realized there was a growing shortage of low-skilled labor for local companies and a rapid rise in welfare cases. Its nonprofit subsidiary, the Industrial Exchange (IndEx) develops contracts with local companies that need light manufacturing and packaging work done. In exchange for their welfare benefits, participants spend half a day in an education program and the other half working. IndEx is using welfare reform to keep jobs in Tulsa, provide recipients with valuable work experience, education and training, and respond to labor market trends and the entry level hiring needs of the city's industries.

Designed to reduce labor costs for companies, keep jobs in the area and provide participants with work experience, IndEx has enrolled 286 people since 1996. Stressing the importance of partnerships, Wayne Rowel, IndEx president, says they are the reason the program is successful. "I've been at this since 1992, and there's no other way to do it. And every year we work to include more businesses. We want to be as inclusive as possible."

Legislators support the project as a way to get vital business contributions to welfare reform. "I firmly believe that you enhance communities, schools and organizations if you have collaborative efforts," says Oklahoma Representative Abe Deutschendorf. "The business community is very interested in getting people off welfare. Everyone is--even those on it."

Arizona has a four-year old program that focuses on finding welfare recipients jobs in restaurant, retail, electronic assembly, health care services, tele-service and early childhood development. The Arizona Business Initiative Partnership (BIP) is designed to help the state Department of Economic Security get better information on skills needed in various industries and to develop better ties with employers.

Key elements of the program include identifying industry sectors, establishing working industry groups, providing customized pre-employment training, referring participants to training and aiding in job placements. From September 1995 to July 1997, 177 recipients entered a BIP training program and 167 graduated--a 95 percent completion rate. "Business partners have been very helpful in making placements and helping meet performance measures effectively and comprehensively. We've found that an employer can still address the bottom line of making a profit and helping with a public initiative like welfare reform. Working together you can make it fit," says Bill Hernandez, the assistant director of the Department of Economic Security, Division of Employment and Rehabilitation Services.

"For many businesses, finding good employees is difficult because we have such low unemployment rates," says Arizona Representative Mark Anderson, who thinks it wise for business to take a good look at welfare people.

"Partnering is obviously a good thing to do and another way to encourage self-sufficiency," he says. "One of the hardest parts about it is getting the message out to the private sector and helping them to realize they can be part of the solution. "

The state of Washington aims to help welfare recipients to not only find a job, but find good jobs and to make their lives better. Its nonprofit organization, Washington Works, provides job training and placement and assistance after participants go to work. Established in 1992, Washington Works began building strong, positive relationships with local employers and finding recipients jobs with above-average wages. The program consists of a four-week course on personal effectiveness covering issues like work maturity, dependability, responsibility and professional behavior. Next, participants begin an eight-week course on customer service, computer, basic, administrative and job search skills, and resume writing.

Washington Works includes a "graduate services" program, which matches mentors with participants and graduates. And there are follow-up visits with graduates and employers. An Employer Advisory Council, with 15 to 20 employers, advises the program on job skills training and public relations. From November 1992 through March 1997, the program had a 66 percent job placement rate with 98 percent of placements with employers offering medical benefits and starting wages averaging $8.58 per hour.

Business has become a central partner in many states' welfare reform efforts. As these efforts shift to issues of job retention, wage progression and career development, the roles of employers will expand. States, communities and businesses have developed a variety of programs that provide the critical foundation as welfare becomes less of a "government issue" and more of a community one where local employers and nonprofit organizations play active roles.

For more information contact Jack Tweedie at (303) 830-2200

 Human Services Welfare Reform