New Report Documents Benefits of Subsidized Jobs Programs for Disadvantaged Workers

Indivar Dutta-Gupta & Kali Grant
Georgetown Center on Poverty and Inequality

It’s no secret that millions of people of color, people with disabilities, recent immigrants, people with criminal justice system involvement, and other disadvantaged groups face substantial barriers in securing and maintaining decent employmenteven when the overall unemployment rate is low. Challenges ranging from family responsibilities and limited access to education and training to legal obstacles and systemic discrimination threaten equal opportunity.

One policy tool with potential support from both sides of the aisle is subsidized employment. As we found in our just-released study reviewing 40 subsidized job programs over 40 years, this approach is a proven and promising way to provide benefits to workers, employers, and communities alike.

Subsidized job programs work by providing a subsidy to employers willing to hire workers with barriers to employment. Employers face lower costs and risks when taking a chance on employees they would otherwise ignore. For workers, the programs offer a valuable opportunity to earn income while also accessing training and needed resources. Additionally, these programs have led to improved health outcomes, strengthened families, and lowered public benefit use. They have also improved school outcomes among the children of workers, lowered criminal justice system involvement for workers and their kids, and reduced long-term poverty.

Take the Youth Incentive Entitlement Pilot Project (YIEPP) program (late 1970s – early 1980s), which saturated both rural and urban communities across the country with job opportunities. YIEPP provided a package of subsidized after-school and full-time summer jobs (both private and public) to more than 76,000 disadvantaged young people. Participants, many of whom were youths of color or in low-income or welfare-receiving households, were required to continue school and meet academic and work performance benchmarks. YIEPP substantially increased earnings among African-American youth about 3.5 years later; positive effects were also found for Hispanic females. Sizeable participation rates also demonstrated that youth unemployment was primarily a question of job availability, not motivation.

Four decades later, from 2010 through 2011, the Mississippi Subsidized Transitional Employment Program and Services (STEPS) program provided a few thousand low- and moderate-income parents with subsidized employment for up to six months. Participants were disproportionately female and African American. They had limited education, were often long-term unemployed, and had very low annual earnings before program participation. The program did not directly provide additional support beyond a wage subsidy. However, it appears to have been very promising before federal funding cuts contributed to its demise. STEPS was highlighted for its potential in features by NPR, PBS, and others.

Other disadvantaged groups are often targeted and helped by subsidized jobs programs. From 1983 to 1986, the Homemaker-Home Health Aide (HHHA) demonstration targeted welfare participants, primarily single mothers. HHHA provided several weeks of formal classroom training, plus an average of 26 hours of closely-supervised practicum experience. Placement was then guaranteed in up to 12 months of full-time, subsidized employment as a homemaker or health aide. Counting the value of the work itself, social benefits from HHHA outweighed costs in six out of seven demonstration states.

The Transitional Employment Training Demonstration (TETD) and the Structured Training and Employment Transitional Services (STETS) initiatives from the 1980s raised employment and/or earnings among people with intellectual disabilities, while the Minnesota Subsidized Employment Program is currently testing two transitional job strategies for public benefit participants, including recent immigrants.

Ensuring disadvantaged workers have access to jobs is an important step in promoting equity. Moving forward, policymakers and practitioners should devote more attention and dedicated resources to take full advantage of subsidized employment as a tool for reducing poverty and expanding opportunity for all.