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Tech, Construction and Manufacturing Businesses Turn to Ex-Inmates, As Job Markets Tighten

Topics: Growth

Historically, ex-inmates have had a tough time finding employers who are willing to take a chance on them.

In the past, most employers have overlooked this group of job applicants due to concerns about integrity and reliability. Nearly half of all employers still ask for criminal history on job applications, according to a 2017 survey by Sterling Talent Solutions, a firm specializing in employee background checks.

Yet, as the number of people coming out of prisons continue to grow and jobs go unfilled, businesses are starting to change their mind.

In the U.S., 650,000 people are released from prisons each year. More than two million people are currently imprisoned in the United States, according to the Prison Policy Initiative. Meanwhile, the demand for workers in industries such as manufacturing, construction and technology have driven up wages in these sectors.

One of the starkest examples of change comes from Dane County, Wisconsin, where the unemployment rate was just 2 percent in November 2017. Manufacturers there are now hiring inmates at full wages to work in factories – even while they are serving their prison sentences.

The New York Times reported that Stoughton Trailers, a manufacturing company that employs about 650 people in Dane County, has hired more than a dozen inmates in the last year. They’ve done so because even after raising wages, offering employee referral bonuses and expanding in-house training programs, they still couldn’t get enough workers.

Another similar example comes out of the booming construction industry in Cochise County, Arizona. The Southeastern Arizona Contractor Association saw that construction companies simply didn’t have enough workers to build homes quickly enough. To remedy the situation, the association decided to partner with the Cochise County Sheriff’s Office to refer ex-felons to their construction jobs.

Meanwhile, Indianapolis recently announced plans to offer tax breaks to businesses that agree to hire ex-offenders.

Even the tech sector – which needs more skilled workers – is broadening their approach to the talent pipeline.

In 2016, a host of tech companies including Facebook, Google and Koch Industries made public promises to consider hiring people with criminal records as part of former President Obama’s Fair Chance Pledge.

Last year, Richard Bronson launched 70MillionJobs, a for-profit recruiting firm for people with a criminal record. The firm has set an ambitious goal to find jobs for one million of the 70 million Americans with a criminal past, and it has raised money from Silicon Valley investors.

Some tech veterans are using their skills to help prisoners become coders and entrepreneurs. For example, the non-profit, the Last Mile (founded by husband and wife tech veterans Beverly Parenti and Chris Redlitz), teaches software programming, design and entrepreneurship in four California prisons. Those enrolled in the group’s web development shop inside San Quentin State Prison do design work for businesses while still behind bars, so that they can build up their portfolios, references and savings for when they get out.

Why Businesses Are Hiring More Worker with Criminal Records

Clearly, labor shortage is a big motivator.

“When the unemployment rate is high, you can afford to not hire anyone who has a criminal record, you can afford to not hire someone who’s been out of work for two years,” said Lawrence H. Summers, the Harvard economist and former Treasury secretary. “When the unemployment rate is lower, employers will adapt to people rather than asking people to adapt to them.”

But there are several other factors at play that explain why businesses are turning to this historically untapped talent pool.

1. Tax Credits and Incentives

Hiring ex-felons can be good for an employer’s bottom line. Several tax credits are available for hiring ex-felons, such as the Federal Work Opportunity Tax Credit.  Some states also provide partial wage reimbursement, additional tax credits and other training funds for employers who hire ex-felons.

“We’ve had three (subsidies) that amount to several hundreds of thousands of dollars to bear down on training our employees,” said Mike Hannigan, CEO of Give Something Back. “It’s amazing to me how many resources are available to a company.”

Employers who hire felons can also apply to get a free fidelity bond funded by the federal government, to protect them against employee dishonesty or theft.

2. Reduce Turnover, Increase Tenure and Loyalty

Turnover can be extremely costly and disruptive. One article suggests replacing an employee can cost anywhere from two-and-a-half to five times the employee’s annual wages in direct costs. Indirect costs, including lost productivity, although hard to quantify, are just as real.

Because ex-inmates have far fewer employment opportunities than other employees, they tend to value the opportunity to earn a living and may work harder to prove themselves to their employers and families. This study from the Kellogg School of Management found that voluntary turnover rate for employees with criminal records is about 13 percent lower, and ex-felons are no more likely to be fired compared to other employees.

3. Contribute to society by disrupting the cycle of crimes

Businesses are facing increasing pressure from their investors, customers and employees to show that they are not only making profits, but also having a positive impact in society.

Last month, Laurence D. Fink, founder and chief executive of the investment firm BlackRock,  the largest investor in the world with more than $6 trillion in investments, wrote a letter to inform business leaders that they must contribute to society – in addition to making profits – if they want the continued support of BlackRock.

“Society is demanding that companies, both public and private, serve a social purpose,” he wrote in a draft of the letter that was shared with The New York Times. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

By hiring ex-cons, businesses can disrupt the cycle of crimes. By providing financial security for ex-cons and their families, and reducing the rate of re-incarceration, businesses can create wide-reaching socioeconomic impact.

When it’s already hard enough to find great employees without a criminal record, it makes sense for companies to reconsider how they’re building their talent pipeline.

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Image: David Werbrouck/Unsplash

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