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Barriers such as limited skills or work experience can get in the way for some who want to find and keep a job in both good and bad times. Although today’s official unemployment rate is low, many workers still have trouble finding jobs that pay enough to cover the basics. As we explain in our new report, federal policymakers could create a permanent national subsidized employment program with (1) dedicated funding to improve work prospects for those who are struggling and (2) an infrastructure that could expand quickly when the next recession hits.
Subsidized employment programs offer job seekers who would otherwise be unemployed a temporary, paid, government-funded job that helps them meet their basic needs, gain meaningful work experience, and build skills to help them succeed in the workplace. These programs can boost employment and earnings for disadvantaged workers, as evidence spanning four decades shows. Further, lessons learned from the Great Recession-era Temporary Assistance for Needy Families Emergency Fund (TANF EF) demonstrated that, with adequate federal funding, states can quickly launch and operate large-scale subsidized employment programs.
For subsidized employment programs to be most effective, they should be flexible enough to expand to meet the needs of many unemployed workers when the economy is weak, and contract when labor demand is stronger while continuing to provide needed employment support. Further, key design elements, including the target population, work placement strategy, subsidy structure, and funding mechanism, should reflect the programs’ core purpose.
We don’t yet have solid evidence that one program design is better than another, so federal policymakers could consider multiple models for a subsidized jobs program. They’d face three main decision points:
- Setting design guardrails. They would determine the extent to which they will set basic program design elements and let states decide the details.
- Determining federal and state investment levels. They would decide how much federal funding is available for subsidized jobs during good economic times, whether to require states to match the federal funds, the type of funding stream, and whether both federal and state funding should adjust during downturns.
- Responding to changing economic circumstances. Beyond the funding mechanism, they would decide how the program’s funding and basic design would change during downturns (through, for example, a built-in trigger that automatically gives states more flexibility in their program’s design during a recession and more funds to meet higher demand for subsidized jobs).
A permanent infrastructure would have several advantages. First, it would develop employment strategies on an ongoing basis for people who have the hardest time finding paid work. Second, it would provide a ready-made platform that could be expanded quickly to act as an automatic stabilizer to help revive the economy during the next recession. Finally, it would generate more evidence on the most effective strategies to help unemployed workers and reduce poverty. That would prove important because we still have much to learn about how to design subsidized employment programs to maximize their effect on employment, earnings, and other positive outcomes.