[Congressional Record Volume 140, Number 68 (Thursday, May 26, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 26, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                    THE WELFARE TO WORK ACT OF 1994

                                 ______


                           HON. SAM GEJDENSON

                             of connecticut

                    in the house of representatives

                         Thursday, May 26, 1994

  Mr. GEJDENSON. Mr. Speaker, today I am introducing the Welfare to 
Work Act of 1994. The purposes of this legislation are to provide an 
incentive for employers to hire current AFDC recipients, to reward work 
over welfare, and to create new jobs.
  I developed this legislation because I am convinced that a vital 
element of welfare reform is for Government to provide business with 
the necessary tools to create enough jobs to employ everyone who is 
trained and qualified. My bill would give employers a 1-year refundable 
tax credit of up to $4,500 against the gross wages of a new employee 
hired off AFDC. A 50-percent credit applies to the first $6,000 of 
wages, and a 25-percent credit applies to the second $6,000 of wages, 
for a total of up to $4,500.
  By subsidizing an AFDC recipient's wages for 1 year in a full-time 
job that pays well enough to live on, we can save hundreds of millions 
of dollars over the long run, ending the cycle of low-wage jobs and 
welfare dependency for tens of thousands of families. Many AFDC 
beneficiaries combine work with AFDC, but they cycle on and off welfare 
because the only work available is seasonal jobs or occasional jobs in 
which they work a few days at a time. Many more are in sectors of the 
workforce which are not covered by unemployment insurance, and AFDC 
provides a substitute safety net. The bill supplies a tax credit for 
employers who get someone off welfare, not for those who occasionally 
employ AFDC recipients in temporary, low-wage jobs. The Targeted Jobs 
Tax Credit already provides up to $2,400 for such hires. Thus, the 
welfare to work tax credit would replace TJTC for permanent, full-time 
hires.
  The Welfare to Work Act can reduce the average stay on welfare by 
reducing the need for anyone to stay on it long term, through its 
double incentive approach for employers to hire AFDC recipients and for 
them to accept jobs at higher incomes. Further, the Welfare to Work Act 
will contribute to stabilizing families by helping people become self-
reliant.
  The State of Minnesota enacted a pilot program very similar to the 
Welfare to Work Act, called the Minnesota Emergency Employment 
Development Program [MEED]. The program gave direct cash subsidies 
every week to employers for wages of people they hired off the State's 
welfare program. The State paid employers $4 per hour of the employee's 
wage.
  Minnesota's findings were impressive. The 2-year pilot program and 
125,000 applicants from State welfare for 30,500 places. The program 
created 14,000 new jobs in the private sector and served as a powerful 
economic development tool. By its own account, the state recouped its 
entire investment in the program in 3 years, while it increased tax 
revenues and decreased welfare expenditures. Originally, the 2-year 
pilot program's goal was to place 40 percent of the participants in 
private sector jobs; the rest were to be in Government. Private sector 
response was so positive that during the second year the private sector 
target was increased to 60 percent, and the actual private sector 
placement was 70 percent. At the end of the pilot program, more than 83 
percent of the workers in the private sector stayed on the job--they 
were permanently employed, many for the first time. And the others did 
not all go back on welfare--many returned to school, or found other 
jobs.

  The small business results were just as impressive. Of the businesses 
which employed people under the MEED program, 79 percent expanded their 
operations, and 52 percent invested in new equipment. More than 4,000 
small businesses participated. Economic development was promoted by 
creating new jobs in small businesses for unemployed and displaced 
workers.
  Reinvesting dollars which were formerly used for welfare as a 
temporary, 1-year wage subsidy creates an economic development ``domino 
effect'' through which businesses first expand their workforce and then 
require more raw materials, contributing to indirect employment of 
workers in other industries. The newly employed former welfare 
recipients buy more goods and services from their wages than they could 
from welfare payments, becoming better consumers as well as taxpayers.
  In Connecticut, the maximum annual AFDC benefit for a family of three 
is $6,972. The Welfare to Work Act would save taxpayers the difference 
between the welfare payment and the tax credit: $2,472. In addition, 
there would be savings from reductions in food stamp benefits and 
Medicaid.
  The Welfare to Work Act stipulates that an employer may only take the 
tax credit once per employee, to avoid creating a cycle in which 
employees are laid off and rehired so the employer can take the credit 
again. Further, the credit is only available for hiring an employee 
whose employment has not generated more than 24 months of such credit 
for any previous employers. This limitation effectively gives each AFDC 
recipient up to 2 years of work under the credit for different 
employers, if needed.
  Of course, additional steps are needed to fully implement welfare 
reform, such as day care, health care, and job training. The Welfare to 
Work tax credit is an important part of helping to create the new jobs 
that will be necessary to end welfare dependence. With Welfare to Work, 
everybody wins: employers get a tax break to expand their business; 
AFDC recipients get more income and a brighter economic future; States 
and Federal Governments reduce expenditures for long-term welfare and 
realize increased revenues from expanded economic activity.

                          ____________________