The Government Pays Companies To Hire

Before you go, we thought you'd like these...
Before you go close icon

government paying companies to hireThe jobs plan that Obama outlined Thursday evening contained a number of incentives to get employers to hire, primarily in the form of tax credits. But an even more radical form of federally-subsidized employment has become increasingly popular in the last few dark years: paying companies to hire.

Although the specifics vary by county, the principle is the same: Companies don't want to risk hiring a potentially unsuitable candidate, so local employment boards use federal funds to pay up to 90 percent of an individual's salary for a few months. That means if an employee's wage is normally $10 an hour, the company only has to pay $1. After this period, many companies, satisfied by the employee's performance, will hire him or her full-time, reports The Miami Herald.

While employments boards have focused on vocational classes in the past, the epidemic of joblessness meant that even trained and qualified individuals weren't getting offers. There was just too much supply, and not enough demand.

In order to qualify for these programs, individuals must be low-income; in Broward County, Fl., for example, a family of four must make less than $44,000 a year, and subsidies are capped at $5,000 per employee.

Some consider the program subsidized training, others an extended interview, and still others anti-free market favoritism.

Broadening Tax Credits

Employers receive additional tax credits if they hire individuals from certain categories, like unemployed veterans, ex-felons, and young people without an education. Obama's jobs plan, for the first time, includes on this list individuals who have been unemployed for six months or more.

Many Republicans disagree that additional government spending can solve America's jobs crisis. "The only way we can bring about a stable, long-term recovery is by shifting the center of gravity away from Washington and toward those who actually create the jobs," Senate Minority Leader Mitch McConnell, R-Ky., said after the president's speech.

A tax credit, however, is both government spending and lowered taxes, depending on which way you look at it.

Criticism of these programs existed even before Obama's plan, and particularly since the 2009 stimulus bill, which included hundreds of millions in extra funding to incentavize employers to hire. Many see it as giving some groups, like low-income individuals, an unfair advantage over other groups, like new graduates.

But many workers and employers testify to the value of these programs. For the unemployed, it can provide job opportunities that would otherwise never exist, and for small businesses, it can provide the flexibility to open up opportunities again.



Next:5 Key Points From President Obama's American Jobs Bill Speech



Don't Miss: Companies Hiring Now



Stories from AARP

Read Full Story

From Our Partners