Subsidies go to high-turnover, low-wage industries

Millions of dollars in state subsidies designed to stimulate job creation have gone to a handful of Houston-area employers, mostly in industries where wages are low and employee turnover is high, a Houston Chronicle analysis shows.

Call centers, security guard services and retailers are benefiting the most from a wage subsidy program called Texas Back to Work that has distributed $6.6 million to Houston-area businesses since it began two years ago.

"We're paying them to fill the jobs they'd ordinarily fill anyway," said Rick Levy, legal director for the Texas AFL-CIO in Austin, who said the list of recipients highlights the labor group's concerns with the program.

People can find minimum-wage jobs on their own, Levy said.

"Let's use state money to really lift people up," he suggested.

While 1,150 companies have signed up for the program - which provides up to $2,000 for each qualified worker hired - just 11 firms have claimed more than half of the $6.6 million in taxpayer-funded subsidies.

Leading the list are Wal-Mart, which has collected $704,200 for hiring 404 employees, and ACS, which received $509,600 for bringing on 305 workers, according to data from the Gulf Coast Workforce Board.

ACS operates call centers, information technology support, medical billing and human resource consulting services.

Began in 2010

Texas Back To Work was intended to spur statewide job creation when it started in 2010 with $15 million in funding from the state Legislature.

The Legislature since has added another $20 million, and the program got an additional $10 million from federal funds designated for needy families.

Levy questions the logic of subsidizing Wal-Mart. The giant retailer already has received 10 percent of the total funds and potentially can more than double that because it has another 459 employees enrolled in the program.

Wal-Mart spokesman Dan Morales said the program allows the company to hire out-of-work Texans who have little or no retail experience, with the subsidy funding some of their training.

Those new employees represent less than 5 percent of Wal-Mart's hires in the Houston area since it joined the program, Morales said. He said full-time hourly employees in Texas earn an average of $12.19 an hour.

For some, the jobs may lead to advancement, Morales said, noting that nearly 75 percent of the retailer's managers began as hourly associates.

Texas Workforce Commission Chairman Tom Pauken credits the financial incentives with getting more than 25,000 Texans back to work.

"We wanted to get as many people as possible off the unemployment rolls," he said, to reduce the cost of providing benefits funded by a payroll tax on businesses. Employers who may have been reluctant to take a chance on hiring someone who is unemployed can use the subsidy to provide training, he said.

To qualify, employees must be receiving unemployment benefits or have exhausted them and must have earned no more than $15 an hour in their last job, according to the commission.

Companies must receive applications through Work in Texas, a government-sponsored online job search board. That requirement encourages more companies to use the service, Pauken said.

Through the end of 2011, employers in Texas received $29 million in subsidies, according to the commission. About $15.8 million is remaining, including $3.5 million for the Houston area.

The program ends when regions exhaust their funds, which for most areas probably will be at the end of this year.

Hires and pink slips

The second-biggest local user, ACS, a Xerox subsidiary, stands to receive as much as $462,000 more in wage subsidies - on top of the $509,600 it already has received - if another 231 employees who are enrolled in the program stay on the job for at least 120 days.

While ACS was receiving wage subsidies in 2011, however, it also was handing out pink slips.

The company blamed a reduced workload for its decision to cut 200 workers from its call center in Houston last April. That same month, the company collected $29,600 in wage subsidies. And in August it collected $43,800.

ACS was able to redeploy many of the Houston call center workers to other positions, said Kevin Lightfoot, vice president of external communications. ACS has about 1,000 employees in Houston.

The rules prohibit companies from firing workers so they can hire new ones who qualify for the subsidy, according to the Gulf Coast Workforce Board, but they can receive subsidies for rehiring workers they terminated.

Maurice Emsellem, policy co-director for the National Employment Law Project in Oakland, Calif., said Texas may be using its limited resources to subsidize normal turnover in low-paying jobs rather than creating long-term employment opportunities.

Emsellem suggested that companies shouldn't get the full subsidy until employees hired under the program have been on the job at least six months, rather than 120 days.

10 most common

Texas Back to Work could be a good program that puts workers on a path to better jobs, said Leslie Helmcamp, policy analyst for the Center for Public Policy Priorities in Austin. But there is no requirement for companies to provide training to their new employees, she said. Nor does the program target in-demand, high-paying occupations.

Helmcamp analyzed statewide data and found 42.5 percent of the payments are subsidizing 10 occupations. Customer service representatives - such as those who work at call centers - are the most common, followed by cashiers, security guards, retail clerks, sales representatives, telemarketers, bill collectors, stock clerks, helpers and production workers.

lm.sixel@chron.com