‘Subsidized employment’ shown as win-win-win: report

Bill Knight column for Thursday, Friday or Saturday, July, 28, 29 or 30

Five years ago this month, a report from the Department of Health & Human Services concluded, “Subsidized employment can help address employers’ reservations by lowering the financial risk of hiring, and potentially offsetting up-front hiring, orientation and training costs, while providing steady work to participants that builds skills.”

Now a new report from Georgetown University underscores that judgment, saying subsidized employment has advantages to workers, employers and government.

Subsidized employment generally refers to third-party employers that get public-funding assistance to underwrite positions, which can be temporary, transitional or permanent. That 2011 study, written with researchers from the Urban Institute, added that those with less than a high school education face a common barrier to employment for low-income workers.

“A lack of formal work experience, especially common among young adults, or a lack of recent work experience (e.g. those who are long-term unemployed) are related factors,” the HHS said. “A lack of relevant work experience may also be a barrier, particularly for older workers, who may need additional training to adapt to new technological and other industry changes.”

It’s been too long since HHS’ report, but maybe “Lessons Learned from 40 Years of Subsidized Employment Programs,” from co-authors Indivar Dutta-Gupta, Matthew Eckel, Peter Edelman and Kali Grant of Georgetown’s Center on Poverty and Inequality, will once more promote increased opportunities for the disadvantaged (and, again, employers and government) – and perhaps this time result in action.

Based on decades of data on various subsidized endeavors’ experiences and experiments, the research defines nine categories of disadvantaged: long-term unemployed workers; older workers who have been pushed out of the labor market due to economic dislocation; disconnected youth; people with work-limiting disabilities; single mothers and non-custodial parents; people with criminal records; disadvantaged immigrants, especially refugees and asylum seekers; people in areas of particularly high unemployment; and people experiencing homelessness.

“Subsidized employment is a promising strategy for boosting incomes and improving labor-market outcomes and well-being – especially for disadvantaged workers,” the researchers show.

Among the many programs the team evaluated were efforts dating to the 1970s in Chicago, Detroit, Milwaukee, New York City, Philadelphia and St. Paul.

Their key findings:
• The number of disadvantaged people willing to work consistently exceeds the number in competitive employment.
• Subsidized employment programs have a wide range of potential benefits.
• They can be socially cost-effective.
• Subsidized employment programs with longer-lasting interventions and/or complementary supports may be particularly likely to improve employment and earnings.
• Such programs require further innovation to more effectively target specific population subgroups.

The advantages to individuals are jobs and higher income, say researchers, who detail probable consequences:
“Immediate employment and income unavailable through unsubsidized employment; stronger families (higher child support payments paid by participants, lower divorce rates, higher marriage rates); reduced criminal justice system interaction for adults and children; improved health for adults and children; work experience, training, and services offer potential for longer-term gains in labor market and other domains.”

Employers – public, private for-profit and private non-profit – can benefit from lower costs and risks for employing the disadvantaged, the study reports:
“Wage, on-the-job training, or overhead subsidies for hiring targeted workers; subsidies, work experience, and wraparound services lead to larger and more productive workforce immediately and in the future,” researchers said.

And government – plus society overall – can cut spending and increase tax revenues:
They say results include “higher taxable incomes for adults and children; higher economic output from work done by participants; improved population health for adults and children; reduced criminal justice system expenditures on adults and children.”

The report concedes that subsidized employment is no single, sure-thing cure-all.

“Subsidized employment programs are neither silver bullets for all labor market challenges nor fully mature yet for every reasonable target population of disadvantaged workers,” the report notes. “There is no substitute for worker empowerment or strong labor standards.”

However, the report makes five recommendations:
1. Make subsidized jobs programs a permanent part of U.S. employment policy.
2. Establish substantial, dedicated funding streams.
3. Ensure opportunities for advancement.
4. Promote program flexibility.
5. Facilitate greater innovation.

“Subsidized employment is a proven, promising, and underutilized tool for lifting up disadvantaged workers – particularly those in or at risk of poverty or with serious and/or multiple barriers to employment,” the co-authors say.