How a tax credit to boost minority hiring became a gift to temp agencies

The work opportunity tax credit is a federal program that allows businesses to receive a tax credit if they permanently hire and retain people from marginalized groups. But a recent investigation by reporter Emily Corwin for ProPublica found that temp agencies that place people in short-term jobs, which some people call “dead end” jobs, are benefiting from this program the most. “The $2 billion program is now handing out hundreds of millions of dollars a year in subsidies for the very jobs lawmakers wanted to avoid rewarding,” she wrote. 

“Marketplace” host Kai Ryssdal spoke with Corwin about the tax credit’s unintended consequences. The following is an edited transcript of their conversation. 

Emily Corwin: So we found that the program is not just a boon to large, low-wage employers with high turnover, but more surprisingly, it’s a huge boon to the temporary staffing industry, which by definition is not offering permanent employment. And so in our data, you know, nearly 1 in 4 of the certifications for this tax credit is going to temp agencies. If you take Kelly Services, for example, over the last decade, Kelly Services received $164 million in tax credits, which — to put that in context — is half of the company’s pretax earnings. So it’s really a big, substantial impact that the program’s making.

Kai Ryssdal: One of the things that these temp companies say is that, “Hey, look, temp jobs are temporary, but they are steppingstones to permanent employment.” Does that hold up in practice?

Corwin: Researchers, economists who have actually studied this say, you know, no. I mean, there are times when temp jobs lead to permanent employment, there are instances. But do they routinely lead to permanent employment? The answer is no.

Ryssdal: You spent a lot of time on the phone with a lot of people who had been hired into companies to get this tax credit. Pick your favorite. Give me a story.

Corwin: Sure. So I didn’t just spend time on the phone. I actually also drove [from] Chicago down to Atlanta, and I talked to just tons of people in parking lots outside of temp agencies. And just one thing is that the sheer number of people with felony records working for temp agencies is astonishing. DeMond, a character who I sort of feature in my reporting, is a person who was formerly incarcerated. In his case, he was incarcerated for a long time for violent charges, which he maintains his innocence. When he got out, he had done a ton of work inside to prepare himself for life on the outside. He had gotten multiple associate’s degrees, he had gotten multiple certificates in carpentry, he was hoping to get a job with a labor union. And instead, he found he could only get temp work. And like many people in his shoes, he was attracted to temp agencies, “temp-to-hire” positions. And he was told, you know, you work 90 days earning, I think it was $14 an hour. And you won’t get benefits at first. You know, he just worked so hard. His manager loves him and says, you know, “We’re going to, we’re going to definitely bring you on permanently when your time is up.” And 90 days are up, he applied for the job. And for the first time this company, Tennant Co., runs his background check and discovers that he has this record and says, “Oh, hold up. No, no. We don’t hire people like you.” And he’s back to zero. He’s unemployed. He’s devastated. But the temp agency, you know, not only got to collect a percentage of his wages, through their contract with this company, but they also now are eligible for, you know, up to $2,400 in tax credits for having hired a formerly incarcerated person.

Ryssdal: I hate to end on a deeply cynical question, but I kind of have to. You spent a very long time reporting this and chewing over what it meant. Did any of it surprise you?

Corwin: I was surprised, honestly — this is even more cynical than your question— I was surprised by how many people accept their fate as temp workers earning less than the people they’re working alongside because of their criminal record. And honestly, at times, it made me really question what I was doing. Is there anything wrong with this if the people who are involved in it have accepted it so completely? And I had to circle back and be like, yes. But that left me feeling pretty cynical, too, to be honest.

Ryssdal: Yeah, no, I hear you. Emily Corwin, it’s a good piece, if, you know, kind of depressing in ProPublica about the work opportunity tax credit and how it’s used or perhaps misused in this economy. Emily, thanks a lot.

Corwin: Thanks, Kai. I mean, is that, like, too depressing a note to end on?

Ryssdal: Absolutely not. It’s what it was. That’s why I asked the question. I mean, how do you do this work and not come out of it going, ‘Jesus!’? You know?

Corwin: Because the truth is, now that I think about it, I was also deeply inspired by DeMond Bush and his resilience. But yeah, so, I don’t know.

Ryssdal: These are real reactions. I appreciate you taking the time, Emily.