These types of programs may provide some compensation for training or work activities, but may not conform to typical experiences in competitive employment. There are multiple, interrelated theories underlying publicly supported subsidized job programs, as shown below in Figure 2.
The rationale for subsidized employment may vary based on economic circumstances. For example, during economic contractions, public subsidized jobs programs can play a countercyclical role by increasing employment and the incomes of working families, which is accomplished by making it more affordable for employers to hire workers.
Even when the economy appears to be achieving full employment, subsidized employment programs can still reach the disadvantaged individuals who want to work but who struggle to secure and maintain sufficient and stable employment. Under any economic circumstance, these programs may serve a valid purpose by transferring resources to disadvantaged workers and their families in a socially and politically palatable manner. One immediate effect of these programs is to increase earnings and employment during the time of participation.
They can also provide a chance to build up recent work history and develop new skills, which may in turn help convince future employers that the participant is capable of being productive and reliable.
One basic rationale for subsidizing work is to reduce the cost of a job to a given employer, and thus increase the marginal demand for labor. A similar rationale centers on reducing potential risks for employers, particularly when they hire an individual with what the employer perceives to be a barrier to employment for example, a spotty work history, a disability, or a criminal record.
In addition, just as direct public employment can finance productive activity, such as the provision of public goods, subsidized employment can similarly result in valuable goods and services that are being under produced by market forces.
To be sure, there are potential downsides to this approach to raise employment levels, including concerns about relative cost-effectiveness and the use of public money to subsidize indirectly private profits— insofar as placements are with private for-profit employers. Figure 3 below identifies three common approaches to subsidizing employment for disadvantaged populations. The labor supply approach looks to strengthen incentives for workers by increasing the rewards from employment.
Integrated approaches, which are the focus of this report, directly raise both labor supply offering direct wage and other supports and services to workers and labor demand offering employment, wage, or OJT subsidies to employers. These integrated approaches also allow for more wraparound supports and services for workers.
Such credits are generally considered fairly inefficient, due to a large share of their value typically going to employers for hires that would have been made without the subsidy. The report also excludes the Earned Income Tax Credit EITC and other large-scale standalone employment and earnings subsidies that are paid directly to workers without additional supports. Though these subsidies are enormously important for some families with multiple barriers to employment, they do not directly help address those barriers, apart from supplementing low pay.
The essence of these programs is that clear eligibility and benefits for workers or employers are specified, and all eligible applicants can benefit from the subsidy.
In contrast, grant programs allow program administrators significant discretion in designing and targeting subsidies. This section lays out a broad framework aimed at helping practitioners develop more innovative and effective subsidized employment programs.
The framework identifies key components, parameters, and decision points for subsidized employment programs, as outlined in Figure 4 below. This section explores potential variations among programs, offering practitioners and program developers a clear framework for design options and trade-offs with regard to helping the most disadvantaged workers.
For example, this framework notes how subsidized employment programs differ by the structure and type of work experience and subsidy provided, as well as by intensity expectations of the worker and employer and duration. Source: Georgetown Center on Poverty and Inequality. The chosen target population s for any program will have implications for program design. To be sure, many people face multiple barriers that cut across the categories described below.
Therefore, effective programs may be those that are able to address a wide range of potential barriers regardless of the targeted population s.
The needs of and most promising opportunities for young single mothers are likely to be different from those of men with criminal justice involvement, for example. At the same time, both groups may face human capital and behavioral health challenges. This section explores the overlapping barriers that these populations and others face. Keeping in mind that integrating disadvantaged populations into mainstream programs and services may be the most effective strategy in many cases, many of the models profiled in the report directly or indirectly target nine overlapping categories of people who often need wraparound services and supports— some temporary and some ongoing—to succeed in the labor market.
The notions of barriers to employment and hard-to-serve populations are not new. In fact, they have been a particular focus in the era following the welfare law. Researchers, with particular attention to the Temporary Assistance for Needy Families TANF population, 10 have identified and defined these barriers in distinct but intersecting ways.
One common approach is to categorize barriers into the following four overlapping, broad groups: The lines between these overarching categories are not bright. These individual and structural barriers reflect a complex mix of socioeconomic dynamics, including actual and perceived work limitations. For example, a worker returning to his community after a lengthy period of incarceration may face more than one type of barrier. This framework attempts to build upon previous thinking about barriers, by expanding the list above to include additional crosscutting considerations relevant for subsidized employment program design.
Figure 5 below shows an expanded list of barriers to employment. Program designers must think through what barriers potentially are appropriately and effectively addressable via subsidized employment programs, as well as the mechanisms through which such programs may lead to positive outcomes.
Some barriers stem primarily from identifiable deficits of hard and soft skills, resources, or experience on the part of an applicant. Someone lacking a high school diploma, for example, would fall into this category. Other barriers may result from prevailing prejudices, including those affecting assessments of risk on the part of employers.
Someone with a disability or who is perceived as likely to have caregiving responsibilities may experience such barriers; this is also evidenced by the many communities of color that have faced well-documented labor market discrimination.
Still other barriers, like unstable housing and limited access to transportation, may reflect structural challenges and represent serious logistical impediments to sufficient and stable employment. Subsidized employment programs may help mitigate these barriers through varying mechanisms.
For barriers stemming from identifiable deficits in potential job performance, they can offer work experience, training and support services, and hard and soft skills development.
In some circumstances, subsidized employment programs may also increase the availability of jobs suited for people with particular barriers to employment. Subsidies may, for example, facilitate more opportunities for an employer to create or fill a position appropriate for applicants with intellectual disabilities or physical limitations.
Although barriers related to systemic labor market discrimination may often not be addressable through subsidized employment, people with other employment barriers often face discrimination as an additional barrier—and subsidized employment initiatives may increase employment rates among populations facing systemic discrimination.
These deficits may be in the area of hard skills which includes technical, more easily-measurable skills such as educational credentials , or soft skills which are less tangible—but equally as important— interpersonal and professional norm-oriented skills. Barriers pertaining to hard skills may be addressed by connecting individuals to services such as high school or General Education Development test GED completion support, vocational training, or skill certification.
Soft skills can be taught informally as a complementary element of any hard skills-developing training, education, or on-the-job experience, or formally, through educational and other support services.
Educational attainment of less than a high school level may be among the most common barriers to employment among low-income workers. A lack of relevant work experience may also be barrier, particularly for older workers, who may need additional training to adapt to new technological and other industry changes.
Health problems, including those related to behavioral health, trauma, and physical, intellectual, and learning disabilities, can burden individuals and families in ways that negatively affect employment. Employment programs that provide wraparound services such as transportation or occupational therapy could help expand the range of work options for individuals with physical limitations.
They may also counterbalance the perceived risk or expense of hiring on the part of employers, and help overcome any stigma associated with disabilities. In the case of behavioral health issues this includes mental illnesses and substance use disorders , subsidized employment programs that include mental health services, counseling for substance use disorders, and personalized case management may be particularly important here, as research suggests that such services, when well-provided, can help people with behavioral health issues achieve employment goals.
Trauma can also pose a substantial barrier to employment. Trauma includes exposure to violence and abuse, such as sexual assault, domestic violence, and adverse childhood experiences. Research on the direct relationship between the experience of domestic violence and employment outcomes is inconclusive, but suggests that domestic violence can substantially magnify the negative effects of psychological distress on employment outcomes, and further suggests that these effects can be quite durable.
Many workers who are pregnant or are caregivers for young children, family members with disabilities, or elders face unique challenges, including limited social resources and a lack of feasible care options.
Sole caregivers—many of whom are disproportionately women—for young children in particular may find it especially difficult to afford reliable, high-quality care that allows them to fulfill the responsibilities of competitive employment.
Some research suggests that employer discrimination based on pregnancy, a well-documented phenomenon in many areas of the labor market, may be even more acute for women who receive public assistance. The collateral consequences of criminal justice system involvement are significant, limiting access to housing, education, public benefits, credit, and employment, among other crucial needs and services.
Individuals with criminal records and incarceration experience have a particularly difficult time navigating the formal labor market. People with criminal records may lack crucial skills, or not be properly socialized into formal work environments. Correctly or not, employers may also assign a greater risk premium to applicants with a criminal justice background, out of concern that applicants will either lack crucial skills or be prone to delinquency or criminality.
The populations of interest for this report will tend to have limited economic and social resources—a barrier to employment in and of itself. In particular, many individuals with serious or multiple barriers to employment are not part of families with the capacity to support them. Some of the other barriers to employment enumerated in this section may stem directly from this disadvantage of limited resources.
Unstable housing is one such barrier to employment. Living far from employment opportunities or having limited access to transportation can also be a substantial barrier. Work-appropriate clothing may be beyond the financial reach of some jobseekers. Other barriers may have little inherent relationship to socioeconomic status e. People who are in poverty, and especially deep poverty, may face a host of challenges to labor market success that are more easily overcome by those with access to greater resources.
Wraparound services that address these resource deficiencies may be especially crucial for these individuals. Some barriers to securing employment arise almost entirely from prevailing prejudice based on personal characteristics. Nevertheless, subsidized employment, combined with appropriate supports, may be a promising strategy for helping to increase employment among groups most likely to experience discrimination in the labor market.
Having arrived to the United States recently or without lawful status often poses substantial barriers to securing competitive employment. Lack of lawful status poses obvious challenges in securing stable formal employment employers are often reluctant to hire workers lacking lawful status due to legal risks and being paid fairly.
Some recent immigrants may not have skills that are easily transferable to the U. English-language learners will face especially limited prospects. It then matches these barriers with the primary subsidized employment strategies discussed in more detail later in this framework especially well-suited to address them. To be sure, many disadvantaged workers will have multiple barriers best addressed through multiple strategies.
In addition, individual subsidized employment strategies general employment subsidy, OJT, work experience, wraparound services, and providing an alternative to competitive employment may be more effective in combination with each other. At their core, all subsidized employment programs offer a general employment subsidy, which may be especially helpful for increasing the hiring of workers facing systemic discrimination in the labor market.
To be clear, though subsidized employment programs are not intended to and are not necessarily likely to be especially effective in addressing discrimination, they nevertheless can help people facing those barriers and increase employment among groups experiencing labor market discrimination. Some programs have the specific goal of connecting participants with competitive unsubsidized employment. Others may not intend this to be the end goal for all participants, but rather seek to provide income support through employment to those for whom personal and socioeconomic barriers—or macroeconomic circumstances, during recessionary periods—make competitive employment difficult.
Programs can of course attempt to serve both purposes and populations. Large-scale programs may require particular attention to concerns about worker displacement.
Below, options for subsidies, work placements and expectations, training, and the provision of additional services are discussed briefly. Subsidies can be configured in a variety of manners, with differential consequences likely for different arrangements, with regard to what exactly is being subsidized, to what extent, and for how long. Subsidies ordinarily offset wage costs directly, but OJT or other training closely intertwined with a specific job , benefits, and even human resources and overhead expenses may also be offset.
Subsidies can fully offset or only partially offset an employer cost—typically wages, but sometimes on-the-job training or overhead. In addition, subsidies can be disbursed at a steady rate over the course of the subsidy period or taper off, reducing the percentage of the wage subsidized over time potentially affecting the likelihood of an employer keeping participants on the job once program supports end.
Subsidies in programs examined in this report vary considerably in the length of time they last, with some ending after only a few months and others continuing for more than a year.
While systematic evidence on the impact of subsidy duration is lacking, it is notable that the rigorously evaluated programs in this scan that have longer subsidies have the most consistent record of improving employment and earnings. The timing of pay e. Considerations include the long-term placement strategy, the sector of employment, employer size, who the employer of record sometimes a third party aside from the employer should be, and the availability of opportunities to advance within an organization or industry.
Some programs aim to find jobs that are explicitly transitional. With this design it may be possible for administering organizations to develop stable relationships with employers who can cycle many participants through the same or similar subsidized positions over time.
This model may raise particular concerns about displacement, as it may be difficult to induce employers to create jobs that would not exist but for the subsidy if such jobs are expected to continue unsubsidized.
There is also a question of scale, and whether administering organizations will have the capacity to regularly find new permanent openings in the labor market. These two strategies are not mutually exclusive—it may be possible for programs to apply the two models in parallel, taking into account labor market conditions and the specific needs and skills of target populations and individual participants.
Some programs limit-subsidized jobs to public or non-profit employers. Others focus on connecting participants with for-profit, private sector jobs. Others provide subsidized employment in two or all three sectors.
Non-profit or public employers may be more willing than for-profit employers to work with individuals that have multiple or serious barriers to employment.
However, in some cases, they may have less flexibility in permanently expanding their payroll, may face weaker incentives for improving worker productivity, and may be less likely to help workers develop transferable skills, thus potentially reducing the chances that participants transition to unsubsidized jobs. These distinctions are likely overstated here, but they nevertheless may affect the extent to which subsidized employment mirrors competitive employment and offers workers experiences that can be lead to future labor market success.
Targeting or limiting programs to smaller employers may also allow closer monitoring and deeper understanding of the employers, in turn reducing the risks that employers hire subsidized workers in place of unsubsidized workers they otherwise would have hired. Some practitioners have found that small businesses are more likely to have flexible hiring policies and are more interested in subsidized employment programs, especially when an intermediary—not the business—is the employer of record, thus reducing administrative and fringe expenses for businesses.
They may also vary in the status given to participants at work, often as regular employees, but sometimes as interns or volunteers. These choices have implications for Unemployment Insurance UI , workers compensation, health insurance, and other benefits and protections. These decisions affect the administrative and financial burden on participating employers, in turn affecting their willingness to participate.
When subsidized jobs are intended to be transitional, advancement opportunities and connections with career pathways are important. Some programs may seek to target specific employers or industries with established career ladders along which entry-level employees can advance. As with other factors that can limit subsidized job placements, emphasizing advancement opportunities may be in tension with scale.
The particular work experience of any subsidized jobs program will depend on a number of structural features, including the nature of worker responsibilities, supervision, and team environment. Programs vary significantly by the expectations placed on workers, often reflecting fundamental decisions about the extent to which the work experience should mimic competitive employment.
One choice is whether a program will stipulate part-time or full-time work. Some programs may require only a few hours of a work each day for four days a week, with training or other services on the fifth day, while others may require a standard hour work week. Such expectations can change over the course of a placement, as exemplified by some of the models reviewed in this report. President Trump just signed an executive order creating the National Council for the American Worker that is designed to put in place public-private workforce training programs.
Prior to that, President Obama signed into law the Workforce Innovation and Opportunity Act, which took effect in The need for subsidized workforce training is real, and it's in our national interest to ensure our workforce has the skills to stay in step with the times as business needs change, defining news ways of working in a highly digital economy.
Public-private workforce training is nothing new. While most of the programs in the early s were for subsidized employment in the public sector, program administrators throughout the nation collaborated with the private sector. The next major investment in subsidized training was through the Comprehensive Employment and Training Act, which ran from through Compared with the s and '80s, today's appropriations for training programs are funded at far lower levels.
Our workforce needs are transforming at a rapid pace. These programs, usually funded by the government but managed at the state level, have money to subsidize a new employee's salary while the worker undergoes training. This helps employers who don't necessarily have the financial ability to pay employees unskilled workers while they are learning the job or gaining experience.
Employers receive reimbursements for a portion of the wages paid to the employee after submitting documentation to the state agency that administers the federal funds. Employers who participate in the wage-subsidy programs, must carry workers' compensation insurance, which is not covered as a reimbursable item under the program. Lack of basic skills, employer instability, and other barriers can lead to chronic unemployment or trap them in low-wage work.
This enables employers to pay workers so they can learn on the job and develop marketable skills leading to higher-wage work. Low-income parents who participate in TANF need better, more accessible job training and support services to obtain family-sustaining work.
States are very interested in coordinating their programs, but progress has been slow.
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