Employment programs do provide economic stimulus

Merrick Executive Director John Wayne Barker is shown with a client, Alec M. Alec M. is working on a Smith Micro Tech contract. Photo courtesy of Merrick, Inc.

Employment of people with disabilities does have a positive economic stimulus effect and a strong return on investment. Cuts to such programs could be described as “pennywise and pound-foolish.” A recently released case study of Twin Cities-based Merrick, Inc. outlines the economic benefits and social dividend of employment programs. The study showed that public investment in day service programs at Merrick produce $3 of economic benefit for every dollar spent.

When all of the benefits resulting from Merrick’s activities are added up, the $3.8 million program costs are outweighed by $10.9 million in economic benefits. Merrick, Inc., is a private, non-profit corporation, licensed by the Minnesota Department of Human Services (DHS) as an adult day services, day training and habilitation and supported employment services provider, It is located in Vadnais Heights, a suburb of St. Paul.

C. Ford Runge conducted the study. He is Distinguished McKnight University Professor of Applied Economics and Law at the University of Minnesota. The Stimulus Effects of Employment Programs for Minnesota’s Citizens with Disabilities: A Case Study of Merrick, Inc. is his study.

Runge’s study, published by the Disability Studies Quarterly can be found online at: http://bit.ly/ECSinDSQ

Merrick serves more than 350 adult clients and employs 153 professional staff. The agency develops job sites, with more than 70 businesses. Approximately 180 clients work a day from 8:30 a.m. to 1:30 p.m. in a facility either receiving therapeutic services or working on various contracts outsourced to Merrick.

About 130 people work on contract and the other 50 receive services.

The other 170 clients are transported from the facility to employer-based work sites. Some of the current business partners include Accurate Components, Design House Greeting Cards, MedTox, Kowalski’s Markets, Dodge Nature Center, University of Minnesota Horticultural Science and Landscape Architecture Department and Warner’s Stellian. Merrick is always seeking more work sites.

Merrick Executive Director John Wayne Barker said that in 2011 Merrick supported 42 clients hired directly by the employer at an average wage of $7.71 an hour and provided pre-vocational support to 289 clients on-site with an average hourly rate of $2.40 an hour.

“Our primary focus on a day to day basis is finding meaningful work opportunities for clients in our program. Given a chance, we can provide you an employee that will not only help your bottom line but will improve your corporate culture and your involvement in your community beyond measure,” said Barker.

In his study, Runge noted that throughout the United States, human services programs have been cut. He recounted the past several years of cuts in Minnesota as part of his study, as well as the overall climate of reduce support for Minnesotans with disabilities.

Using Merrick, Inc. programs, Runge provided an alternative perspective to the cuts and described social dividends of employment in long-term care programs. “These extend well beyond the services provided to clients. Other dividends include wages to program staff, avoided costs of residential supervision, taxes paid by clients and staff and grants supplementing state taxpayer dollars,” Runge said. “Companies that employ people with disabilities through contracts with such programs do so because it makes good business sense.”

Runge’s study indicates that there is a tangible stimulus such programs provide. It describes the social dividends of employment programs for people with developmental disabilities. These dividends extend well beyond the services provided to clients and their wages, transportation, and supervision. Other dividends include wages to program staff; avoided costs of residential supervision, taxes paid by clients and staff.

Also, many programs seek to leverage state support by seeking grants supplementing state taxpayer dollars. Finally, the companies that employ people with disabilities through contracts with such programs do so both because of their civic concern and because it makes good business sense.

Runge looked very broadly at benefits, including those to the Merrick clients, its professional staff, the savings in residential care costs when people are working, taxes, private sector benefits to employers and found support and charitable giving augmenting the public funding.

Wages earned by Merrick clients are modest by any standards, but are still a source of economic support and a wage stimulus to the Minnesota economy. Total client earnings at Merrick in fiscal year 2010 were $536,750. Using the same multiplier calculation described for professional staff, such client wages generated $1,073,500 in final economic activity. In fact, the multiplier is probably higher because most are charged co-pays, have program fees or must “spend down” to remain Medicaid eligible so that a lower proportion of their earnings are saved. Additionally, if only 50% of these earnings are spent on items subject to the state sales tax, clients at Merrick pay $18,000 a year in sales. Beyond any monetary reward, wages earned by clients generate an incalculable but significant form of social capital: a sense of belonging and self-worth.

Runge also extrapolated what the Merrick findings mean in the context of other similar Minnesota programs. The 295 programs served 16,235 clients. The calculated stimulus of the $10,925,314 at Merrick in aggregate benefits works out to $31,215 for each of its 350 clients. If this number is used to estimate the benefits to Minnesota’s 16,235 clients, the total for the state as a whole is $506,778,470. over half a billion dollars. Runge observed that this is “hardly a drag on the state’s economy.”