Georgia Works doesn’t work
The last place I’d look for innovative job creation ideas is Texas, but Georgia isn’t far behind. President Obama hasn’t endorsed the Rick Perry sub-minimum wage job creation machine yet (see Paul Osterman’s op-ed in Tuesday’s New York Times), but he has given a shout out to a terrible idea from Georgia known as Georgia Works. I’ve been part of an effort to discourage the administration from including a Georgia Works-like proposal in the president’s Thursday jobs speech, but I’m afraid it’s been a losing battle.
In 2003, long before the Great Recession, Georgia started allowing employers to try out new employees for eight weeks without having to pay them anything. Unpaid employment is generally illegal, of course. It violates the federal minimum wage law. Georgia thought it could get around the law by letting the try-out employees continue to receive their unemployment insurance benefits. In addition, the state provided stipends to help the employees pay for transportation to and from work.
When the U.S. Department of Labor (DOL) discovered what was going on, it cautioned Georgia that the unemployed could continue to receive unemployment insurance benefits only if they were receiving state-approved training, and not if they were re-employed. But DOL also pointed out that bona fide trainees don’t have to be paid the minimum wage. So Georgia began calling its try-out employees “trainees” and required the employers to provide some training, though in practice the training might not amount to much.
This is obviously a great deal for the employers who participate, who get eight weeks of employment free, without paying even Social Security taxes or unemployment insurance taxes, let alone wages and benefits. Their competitors haven’t complained very much, perhaps because they know that in the long run, such a program will drive down entry wages low enough to benefit them, too (many employers have discovered the similar advantages of unpaid internships). But what kind of deal is Georgia Works for employees? Its proponents defend it on the basis that it’s voluntary and it gives the unemployed some hope of getting permanent employment at the end of the try-out.
Unfortunately, even the state of Georgia doesn’t claim much success for the program. Only one try-out employee in four got hired by the business that got his or her free labor, even according to the state’s unaudited claims. The state has never published any study that provides any evidence that the program improves the participants’ chances of getting a permanent job, let alone one at decent wages and with good benefits.
And as for job creation, Georgia has failed miserably. From July 2010 to July 2011, Georgia lost more jobs than any state but Indiana. All but six states gained jobs over that period, but Georgia lost 24,900 jobs. Georgia’s unemployment rate remains among the nation’s highest, a full percentage point worse than the national average.
Clearly, this is a record to run from, not one to impose on the rest of the nation. So why would President Obama praise Georgia Works? Does he know the program has dwindled to the point that fewer than 20 of the unemployed were participating in it last week? The answer appears to be that his hunger for bipartisanship has overcome his reason. Representative Eric Cantor (who wants to stop paying Emergency Unemployment Compensation to the millions of long-term unemployed who are receiving it), likes Georgia Works. Speaker of the House John Boehner likes Georgia Works too. Apparently, that’s enough to convince the president to ignore the stubborn fact that Georgia Works is a failed program with the potential to do serious damage to an already weak labor market.
My biggest fear is that Georgia Works, no matter how scrupulously it’s reformed and policed, is the first step onto a slippery slope leading downhill to workfare, the notion that the jobless ought to “work off” any benefits they receive. There are plenty of right-wing pundits and politicians who consider unemployment insurance a form of welfare, rather than a protection workers earn and pay for with their work and deferred wages.