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Next Relief Package Should Include Funds for Subsidized Jobs

The economic relief package that policymakers are now negotiating must both reduce extreme hardship and lay the groundwork for a strong recovery. Funding for subsidized jobs — an effective approach during the Great Recession of a decade ago — could help address both goals. The Senate Republican plan doesn’t include enough funding to address hardship and doesn’t let the funds go to subsidized employment.

While inadequate to meet current needs, the Temporary Assistance for Needy Families (TANF) Coronavirus Emergency Fund in Senate Finance Committee Chairman Chuck Grassley’s American Workers, Families and Employers Assistance Act — one of the bills comprising the Senate Republican plan — provides a foundation to build on. It would provide $2 billion to address the increased costs of basic assistance, short-term emergency assistance, and work supports. Policymakers should increase the Fund to $10 billion — the amount included in the Pandemic TANF Assistance Act from Ron Wyden, the Senate Finance Committee’s top Democrat — and adopt Wyden’s proposal to include subsidized employment and make funds available to immigrants and to families with and without children.

States could use Grassley’s proposed TANF Coronavirus Emergency Fund to increase spending on work supports, but that won’t help people who can’t find jobs. Giving states funds that are explicitly designated for subsidized jobs now will enable them to have subsidized jobs in place when it’s safe for people to fill them.

Subsidized employment is especially valuable to people of color, who face much labor market discrimination and recover more slowly from economic downturns. By the end of 2020, the current recession is projected to wipe out ten years of employment gains that Black workers achieved in the recovery from the Great Recession. Black workers, who fare much better in a tight employment market, made much slower gains than white workers did, research from that period finds. Higher unemployment in recessions widens racial gaps, reducing racial equity and hurting the economy as a whole. A plan for subsidized employment will do just the opposite, advancing racial equity and boosting the economic recovery.

We know that subsidized employment works. As decades of evidence show, it dramatically improves participants’ employment and wages. Some programs improve employment outcomes long after they’ve ended, recent evaluations found. And evidence from the TANF Emergency Fund, which funded 260,000 subsidized jobs during the Great Recession, shows that with adequate funding and flexibility, states can scale up programs quickly to respond to an economic downturn.

Today’s economic crisis grew rapidly — so states need the funds to kickstart subsidized employment programs now. Particularly due to the unique health, safety, and child care challenges of the pandemic and resulting partial lockdown, states will need extra time and money to ramp up programs that could focus on virtual work, pandemic response, or other timely employment opportunities. With sufficient funds and lead time, states could rapidly get people back to work when their economies fully re-open.

Further, we must consider making a federal subsidized employment plan permanent. While subsidized employment is a key tool to boost wages and employment during a downturn, these programs support workers with barriers to employment no matter the economic conditions. A racially equitable recovery will address not just the cyclical disparities in outcomes for workers of color, but also structural barriers to meeting basic needs. A permanent, federal subsidized employment program would support workers of color, workers with low incomes, and employers in the long term and create a foundation for scaling up when the next recession hits.