Funded in part by the Abrams Nieman Fellowship for Local Investigative Journalism at Harvard University.

DeMond Bush was living in his friend’s basement in Louisville, Kentucky, in 2017 when he heard about a job that could help him get beyond his past. Since getting out of prison two years earlier, the 43-year-old had cycled through day labor and temp work but hadn’t been able to find anything steady. He’d spent more than two decades behind bars for a violent crime that he was charged with as a teenager. During that time, he’d done everything he could to prepare for a better life — earning several associate’s degrees, learning a trade and performing in nine Shakespeare plays. But the world outside didn’t seem to care.

So when the temp agency Express Employment Professionals offered him a “temp-to-hire” position at a warehouse run by Tennant Company, a cleaning products manufacturer, Bush couldn’t help but get his hopes up. Bush said Express wasn’t concerned by his record and told him that if he worked 90 days as a temp, he’d be considered for a job working directly for Tennant with higher wages, plus benefits and sick days.

“I’m thinking, ‘I’m going in and prove myself, work hard, they’ll judge me based off that,’” said Bush, who was born in New Jersey but occasionally slips into a Southern lilt.

His plan seemed to be working: Bush said his managers told him he was doing a good job and he’d likely get hired. That changed on his 90th day on the job, after Tennant ran a background check, Bush said. In an instant, Bush’s months of hard work vanished. When he showed up for work the next day, a company representative escorted him off the property.

“I was feeling like, man, you know, I put this effort into this thing,” Bush said. “And then here it was, something from 27 years ago, it’s still haunting me. It seems like I can’t get past it, no matter how hard I work or what effort I put into it.”

Yet to the federal government, this outcome was worthy of a reward. Bush’s temp work was more than enough to qualify Express for a tax credit worth up to $2,400.

After losing the job, Bush became homeless and was caught in Indiana, having crossed state lines without permission. That was a violation of his parole, and Bush returned to prison.

When Congress passed the Work Opportunity Tax Credit to encourage businesses to hire and retain marginalized workers, lawmakers made it clear that the credit should be used for permanent employment — not dead-end temp jobs like Bush’s.

Instead, 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. ProPublica analyzed data from nine states’ WOTC applications and found that nearly a quarter of the jobs certified for the tax credit between 2018 and 2020 were with temp agencies. The numbers become even more striking when the analysis is limited to one eligible group — workers with felony records. Thirteen of the top 14 employers certified to get credits for those workers were temp agencies.

In addition, some of the credit’s biggest beneficiaries are temp agencies with long records of labor violations.

Express did not respond to multiple calls and emails. Tennant, which benefited from Bush’s work but wasn’t eligible for the credit because it wasn’t his direct employer, declined to comment.

Coming out of the welfare reform movement of the mid-1990s, the WOTC aimed to give groups like food stamp recipients, residents of high-poverty areas and formerly incarcerated people access to long-term employment. In exchange, companies could write off thousands of dollars from their taxes for each worker they hired.

But the program’s rules didn’t match that intent. To receive the minimum tax credit — worth 25% of a worker’s wages — a company need only employ a worker for 120 hours, or about three weeks of full-time work. Employers can get the maximum credit — 40% of a worker’s wage, up to $2,400 — after just 10 weeks. The criteria say nothing about type of employer or the quality of the job and don’t forbid companies with a history of workplace violations from participating.

In the absence of tighter rules, the WOTC has become a financial boon for large low-wage employers with high turnover, including Walmart, Dollar General and Amazon. Those three companies are the top recipients of the tax credit in ProPublica’s analysis.

Walmart and Dollar General did not respond to requests for comment. Amazon spokesperson Barbara Agrait said, “Like many other companies, we utilize the Work Opportunity Tax Credit and we believe it helps to break down barriers some may face when seeking employment and encourages a strong and diverse workforce.”

But few industries have benefited as much as temp agencies.

Corporate filings by publicly traded temp agencies reveal how big a windfall the tax credit has been. One company, Kelly Services, reported receiving tax credits, “primarily” WOTC, worth $164 million over 10 years, or 48% of its U.S. pre-tax earnings. TrueBlue, which owns the day-labor firm PeopleReady, reported receiving tax credits — also described as “primarily” WOTC — worth $114 million over the past 10 years, or 29% of its pre-tax income. The credits reduced TrueBlue’s federal income taxes by 69% and Kelly Services’ by 73%.

“Everybody’s winning except the formerly incarcerated person,” said Andrea C. James, executive director of the National Council for Incarcerated and Formerly Incarcerated Women and Girls.

Taylor Winchell, a TrueBlue spokesperson, said the WOTC “addresses a compelling need,” and suggested temp jobs serve the program’s goals by giving workers the chance to learn skills and providing “a path to permanent employment.” Kelly Services declined to comment on its use of the tax credit.

The departments of Labor and the Treasury share responsibility for the WOTC, but neither agency collects much data on it, even as it diverts billions from public coffers. Studies published over the last two decades cast doubt on whether the tax credit has led to long-term jobs.

“One of the most shocking things I ever discovered was how short these jobs are,” said Sarah Hamersma, an economist at Syracuse University who found that the subsidized jobs had little or no effect on workers’ long-term employment.

“I used to tell people, ‘I’m just waiting for someone to call me to give my testimony,’ but nobody does,” she said. “My cynical view is this is a program that clearly benefits businesses and gets support among that contingent. And it looks like it benefits vulnerable workers. So it tends to get a lot of support.”

The American Staffing Association defended the industry’s use of the credits. “As hiring experts, staffing agencies can help individuals obtain job training and uncover talents, experiences, and skills that can help them put their best foot forward with future employers,” Toby Malara, vice president for government relations, said in a statement.

Labor Department spokesperson Monica Vereen said the law doesn’t allow it to deny WOTC certifications based on job type or an employer’s record of labor violations. However, she said, “the department welcomes the opportunity” to assist Congress in strengthening the program. Similarly, Treasury spokesperson Julia Krieger said, “While we would like WOTC to lead to lasting employment, the IRS is administering the statute as it was enacted by Congress.”

Today, the WOTC costs the federal government about $2 billion each year. That’s enough to provide free community college tuition for 512,820 people, and, after adjusting for inflation, it’s about eight times what Congress estimated the program would cost in 1996.

Back then, lawmakers made the tax credit temporary so that the government could fully assess its effectiveness before making it permanent. A formal review has yet to occur.

Sen. Sherrod Brown, D-Ohio, co-sponsored legislation last year to make the tax credit permanent but voiced concern after learning of ProPublica’s findings. “These agencies could be scamming the system using American tax payer dollars,” he said in an email. “It’s unacceptable, and my office will be looking into this to ensure the WOTC program is doing what Congress intended it to do: supporting workers and helping them secure good, long-term employment opportunities.”

A Failed Program Resurrected

The origins of the WOTC can be traced to the mid-1970s, when the jobless rate for young Black workers seemed stuck near 40%. The Carter administration set out to tackle what it called the “structural unemployment” of marginalized workers with public works projects and job training programs. But lawmakers balked at the cost and decried public programs for leading to temporary and dead-end jobs. The private sector, one prominent Democratic senator said, was more likely to lead to “further advancement and to a permanent job.”

The Targeted Jobs Tax Credit, which would form the basis of the WOTC, became law in 1978.

It failed spectacularly.

In 1994, Labor Department auditors found that most of the subsidized jobs lasted less than a year and that 92% of participating workers would have been hired even without the credit. The inspector general testified that “for the most part, the only ones benefiting” from the program were employers and he called on Congress to end the program.

The next year, a labor historian concluded in a research paper that “interest groups distorted the credit into a windfall for businesses that hire large numbers of low wage workers” and spawned “a whole industry” of consultants who processed the tax credits for employers.

Another industry was also poised to benefit. Around the time that lawmakers were devising the tax credit, lobbyists for the staffing industry were convincing state legislators to deregulate employment agencies, which had long been associated with exploitation, said George Gonos, a former sociology professor at the State University of New York at Potsdam who has spent his career studying the temp industry. One way lobbyists did this was by making staffing agencies — not the clients to whom they sent workers — the “bona fide legal employers” of temp workers.

“Not only could the employers get people through temp staffing agencies with lower wages and without rights, but the temp agency could also collect subsidies on the side for everyone they placed,” Gonos said. “Man, what a racket.”

Kelly Services and two other staffing agencies helped found a lobbying group dedicated to preserving and expanding the tax credit. Within months of the credit’s expiration in 1994, Kelly Services and others began asking lawmakers to revive it.

They found their opportunity in welfare reform.

In 1995, lawmakers resurrected the tax credit under a new name: WOTC. As Congress planned to require welfare recipients to work to receive benefits, lawmakers hoped that a new version of the credit might drive demand for those workers.

One of the WOTC’s architects, Rep. Amo Houghton, R-N.Y., bemoaned how many people left welfare only to find temp work. “They move into a job and out of a job, into a job and out of job,” he said. The new credit, he told colleagues, would ensure people become permanent employees.


But Congress tweaked the old program only slightly: Employers would now need to confirm that the job applicant was eligible for the program before hiring and would have to employ workers longer to receive the maximum credit. The minimum credit was still available after just three weeks.

Many of the old problems persisted. Echoing past criticism, the Government Accountability Office noted that the program mostly benefited billion-dollar corporations with a large number of low-skilled workers and high turnover. A 2001 report showed that only 17% of employees remained at their jobs long enough to earn more than $6,000. That report also included a survey in which a majority of participating employers said applicants’ eligibility had no effect on their chances of being hired.

Such warning signs have had little impact. In April, the White House featured the tax credit prominently in its “strategy to expand employment opportunities for formerly incarcerated persons.”

William Signer, who worked on tax issues for former Rep. Charles Rangel, D-N.Y., and now lobbies for the WOTC on behalf of payroll and tax credit processing firms, said the WOTC is beneficial “regardless of whether the first job results in permanent employment.”

Though Houghton died in 2020, Bob Van Wicklin, who was Houghton’s legislative director when WOTC passed, said of the subsidized workers that “Amo definitely would have intended for them to get a full-time job — not a temp job.”

Rangel, who championed the WOTC alongside Houghton, said in an interview that he’s proud of the tax incentive. But he acknowledged the program has shortcomings and said using the tax system to address economic hardship was a legislative compromise.

“The tax system should not be used for social benefits,” he said. “There should be permanent programs providing for the needs that people have.”


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How the Work Opportunity Tax Credit Subsidizes Dead-End Temp Work — ProPublica