Companies that sidestep the government are also sidestepping attractive government subsidies, Segal points out. (See "Credit Where Credit Is Due," below.) But small-business owners aren't exactly crying in their beer over that loss. The Welfare to Work Partnership reports that only 12% of its member companies with fewer than 50 employees use the federal government's Work Opportunity Tax Credit (WOTC), compared with 48% of companies with more than 3,000 employees. Several CEOs interviewed for this article didn't know the credit existed, and most that did assumed that applying for it would be a bureaucratic nightmare. "The government is a big pain in the tail," grouses Tucker, echoing the sentiments of many. "Their credits don't turn me on."
Not everyone is so dismissive of public subsidies. Take Mike Malloy, for example. A police sergeant currently on disability leave, Malloy has consistently recruited from the welfare rolls since founding his Providence, R.I., security and investigative company, NESCTC, three years ago. More than half of his 40 employees and close to a third of his management staff are former welfare recipients. The state of Rhode Island, which some say has one of the nation's most progressive and generous welfare-to-work programs, gives Malloy an hourly-wage subsidy of $2.50 for each former welfare recipient he employs, for the first six months' of that worker's employment. Malloy also collects a Work Opportunity Tax Credit of $2,000 for each one who lasts a year. "I take that money, and I use it for training," says Malloy. "And that's what gives me a market edge."
Without the subsidy and the tax credit, Malloy says, he'd be forced to take the standard industry approach to training, which he describes as "show them a 20-minute video and put them in a uniform." Instead, Malloy requires every employee to complete 55 hours of a security curriculum that he designed and to earn a grade of at least 70% in each of 14 courses. Those who pass receive an additional 25 hours of customer-service training, which Malloy contracts out. In recognition of such efforts, the NESCTC CEO was named Welfare to Work Small Business Owner Associate of the Year.
"This isn't just about hiring people," says hair salon owner Kay Hirai. "It's about me being their advocate."
The majority of NESCTC's employees hail from Rhode Island's RIte Works Employment and Retention Services office in Cranston. Malloy describes its director, June Allen, as a "savior in tight labor times. When I'm competing for a contract, I might say to June, 'I'm going to need 10 of your people, fast,' " he says. "It allows me to be more competitive." Allen's office runs customized training programs, provides case management, and helps Malloy's new employees find transportation and child care. "She calls in personally to check on them," says Malloy, "to make sure they're living up to our expectations."
Malloy, too, goes out of his way to help former welfare recipients solve the personal problems that tend to gum up their productivity. One such problem was providing care for the children of single mothers who work the night shift. Malloy's solution was ingenious. "He has a security contract with one of the public-housing authorities," says Allen. "So he approached some elderly women, the mothers of his employees who live there, and arranged for them to become child-care providers whom we can then pay under our child-care subsidy program." To alleviate another difficulty, Malloy routinely sends supervisors to pick up employees with transportation problems. Is it too much hand-holding? "If we wanted high turnover," he reasons, "we could just close our eyes."
Malloy's experience is the rule: most CEOs committed to hiring former welfare recipients learn to make allowances. How other employees react to those allowances is unpredictable. At NESCTC, staff members are thrilled that the welfare-to-work folks bring training dollars into the company, money that benefits everyone. Conditions are less harmonious, however, at Studio 904 Inc., an $870,000 hair salon in Seattle. President and founder Kay Hirai says that the special arrangements she's made for her welfare-to-work employees have concerned other staff members. "I had someone say to me that it's a distraction to have these people around, that it might seem that the disadvantaged people have more advantages," says Hirai, who has hired 14 former welfare recipients in four years. (Only 3 remain.)
"This isn't just about employing people," says Hirai. "It's about me being their advocate." The company owner has, for example, helped former welfare recipients get into cosmetology school, provided them with special on-the-job training, and frequently allowed them time out of the workday to make court appearances or to look for housing. "Because I want them to succeed, it began to look to other employees that they were getting more," she says. "But if my other employees came to me with problems, I would help them too."
