A subsidized employment program is when the government offers a subsidy to an employer (could be private sector or public sector) to hire those from a certain eligible group. The eligible group can be defined in many ways: for example, those who live in a certain set of neighborhoods, or those who have been unemployed for a certain time, or single mothers, or the disabled, or older workers, or those just emerging from jail or prison, or those who are already in some income-support program and trying to make a transition to work, or other groups. The basic idea of subsidized employment is that it\’s better to pay people to work than it is to support them while they aren\’t working–and further, there is a hope that subsidized work experience can be a transition to being hired by an employer who doesn\’t need a subsidy.
Indivar Dutta-Gupta, Kali Grant, Matthew Eckel, and Peter Edelman provide a useful overview of the existing research in \”Lessons Learned from 40 Years of Subsidized Employment Programs,\” published by the Georgetown Center on Poverty and Inequality in Spring 2016. The report calls subsidized employment a \”promising strategy,\” which seems a fair judgement if one mentally adds \”but not yet proven.\” There are two major federal government studies now underway involving subsidized employment. The \”Subsidized and Transitional Employment Demonstration (STED), 2010-2017\” being run by the US Department of Health and Human Services in seven cities and the Enhanced Transitional Jobs Demonstration study is being run in seven cities by the US Department of Labor. Results from these studies should become available over the next couple of years.
- Subsidized employment programs have successfully raised earnings and employment. This effect is not universal across programs or target populations, but numerous rigorously evaluated interventions offer clear evidence that subsidized employment programs can achieve positivelabor market outcomes. Some of these effects derive from the compensation and employment provided by the subsidized job itself, but there also is evidence that well-designed programs can improve outcomes in the competitive labor market after a subsidized job has ended.
- Subsidized employment programs have benefits beyond the labor market. Fundamentally, subsidized jobs and paid work experience programs provide a source of both income and work experience. A number of experimentally-evaluated subsidized employment programs have in turn reduced family public benefit receipt, raised school outcomes among the children of workers, boosted workers’ school completion, lowered criminal justice system involvement among both workers and their children, improved psychological well-being, and reduced longer-term poverty; there may be additional effects for some populations, such as increases in child support payment and improved health, which are being explored through ongoing experiments.
- Subsidized employment programs can be socially cost-effective. Of the 15 rigorously evaluated (through experimental or quasi-experimental methods) models described in this report, seven have been subject to published cost-benefit analyses. Keeping in mind that more promising and effective models are more likely to lead to such analyses, all seven showed net benefits to society for some intervention sites (for models implemented at multiple sites) and some target populations. Four of these seven models were definitively or likely socially cost-effective overall.