How Can Subsidized Jobs Help the Most Disadvantaged Workers Recover from the COVID-19 Recession?

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Subsidized employment uses public funds to create jobs for the unemployed and are especially useful during economic downturns. Many have argued that subsidized employment programs should be part of policymakers’ response to pandemic-induced mass joblessness.

MDRC has been studying subsidized employment for more than 40 years and recently completed two large-scale federal projects that rigorously tested 13 subsidized employment programs in eight states. The programs served very disadvantaged workers, such as people receiving cash assistance or people returning to the community from prison.

To learn more about subsidized employment programs and how they can be designed to reach the most disadvantaged, Leigh Parise spoke with MDRC Senior Vice President Dan Bloom.

Leigh Parise: Policymakers talk about solutions, but which ones really work? Welcome to Evidence First, a podcast from MDRC that explores the best evidence available on how to improve the lives of low-income people. I'm your host, Leigh Parise. Subsidized employment, which uses public funds to create jobs for the unemployed, has been a useful tool for addressing mass joblessness during recessions. Subsidized jobs put people to work during the recession in 2009, in the 1970s, and even during the Great Depression. A similar program may be needed if COVID-19 also leads to a severe and long-lasting recession.

MDRC has been studying subsidized employment programs for more than 40 years, and recently completed two large-scale federal projects that rigorously tested 13 subsidized employment programs in eight states. The program served workers with significant barriers in the labor market — for example, those who are receiving cash assistance or people returning to the community from prison. Joining me is Dan Bloom, an expert on subsidized employment programs here at MDRC. Thanks so much for joining me, Dan. Can you tell me more about what these programs actually do?

Dan Bloom: So, it's pretty much as you described it a minute ago, Leigh. Subsidized employment programs use public funds to create or support jobs for people who can't find work in the regular labor market. There's lots of different versions of subsidized employment and the programs may have somewhat different goals, but almost all of them share a common purpose, which is to get money into the hands of people who can't work — and to do it in a way that allows people to contribute productively to society and keep their work muscles from atrophying.

Leigh Parise: And what types of subsidized employment programs were the best at placing disadvantaged workers in jobs?

Dan Bloom: Right. So I should start by saying that all the programs that we've studied have targeted people who face particular disadvantages in the labor market. So people who don't have a lot of work experience or formal education, people who have criminal records, and so forth. And a very large percentage were people of color who face discrimination in the job market. Subsidized employment can make sense for some of these folks even when the labor market is doing fine overall because they have a hard time finding jobs even when the unemployment rate is low.

So our studies were partly designed to see whether the programs improve people's ability to get regular jobs over the long term. But one of the things we looked at is how quickly and easily they were able to get people into subsidized jobs in the first place. And that's really critical in a severe recession. So we looked at several kinds of programs. And in general, we found that the ones that place people into subsidized jobs with nonprofit organizations or public agencies or social enterprises were able to get people working most quickly. And by social enterprises, I mean businesses that have a social purpose — for example, like a Goodwill Industries affiliate, or we studied a company called RecycleForce in Indianapolis that recycles electronics and it almost exclusively hires people who are coming home from prison.

Leigh Parise: You said nonprofits, public agencies, and social enterprises have been better at this than for-profit employers. Can you say a little bit more about that and what you think some of the reasons are?

Dan Bloom: I don't think we know for sure, but the simplest explanation is probably that for-profit businesses need to make a profit, and they're going to hire workers who they think will help them do that. So even if they're getting a subsidy, they may not hire someone who they think will require extra help or take up time from supervisors. And then when you think about a recession, like we're in now, another factor is that even with a subsidy, businesses are not going to hire people if there's nothing to do — for example, if they don't have customers. Whereas a nonprofit, community-based organization, there's always a lot of work to do, and they can always use people to help. And they can work with people who may need a little bit extra support or supervision.

Leigh Parise: Can you say a little bit more about the differences between placing somebody with a nonprofit or public agency or a social enterprise versus a for-profit company?

Dan Bloom: We looked at some programs that mostly made their placements in nonprofits, or sometimes they actually placed people within the program itself because the program was, for example, a social enterprise. And we also looked at some programs that try to place participants into for-profit employers. And the only sort of conclusion I'm talking about here is that the ones that place people with nonprofits or social enterprises were able to get people into subsidized jobs quickly, really quickly. Whereas the ones who tried to place people into for-profit businesses were not necessarily able to do that, and in some cases they weren't able to place them at all. But even when they did, it took a lot longer.

Leigh Parise: So, Dan, can you tell us more about the subsidized employment programs themselves? Can you tell us a little bit more about those? What are those organizations? How do they operate? How do they actually find people who need their support?

Dan Bloom: There's a really wide variety of these programs, and the ones we studied, I would say the majority, the sort of “lead agency” was a nonprofit organization itself. Sometimes it was a public agency, but often it was a nonprofit agency. And they often have a particular target group, and so how they recruit people sort of depends on who their target is. So, for example, if you're a particular program that is set up to serve people coming home from prison, you might establish a relationship with the parole agency because a lot of people come out of prison and they go onto parole. And people who come out of prison onto parole are actually required to be working.

Parole officers are looking for places to send their clients, who need to find jobs. So they will get to know these subsidized employment programs that will refer their clients to those organizations. Same thing might happen if the program targets people who are receiving public assistance: The public agency that runs the welfare program will send people to particular subsidized employment programs when they need to find a job while they're on public assistance. That's sort of the typical way some of these things work.

Leigh Parise: So it sounds like the relationship between those programs and the organizations into which they may be placing the people they work with are probably pretty important. Can you talk a little bit about that?

Dan Bloom: Again, you know, the answer to every question about subsidized employment is “it depends,” because there are so many different kinds of models. But for some of them it's very straightforward. For example, I mentioned before there's a company called RecycleForce in Indianapolis that recycles electronics and, you know, makes some money from doing that and hires people coming out of prison. So for them, it's very straightforward. They get referrals and they put them into work right inside their company, and it happens right away. That's often the way a Goodwill Industries affiliate will also operate. So they'll get referrals, they'll put them to work in retail stores, and they may be working; they'll be doing a variety of things in the retail stores.

Other subsidized employment programs, the kind of lead organization is more like a broker and they're looking for places to place people. And so they'll reach out to either other nonprofit organizations or other for-profit businesses. And those relationships are really important because they're basically saying to these other entities, "I have workers here and I can give them to you, I can refer them to you to do work in your organization, and I can subsidize their employment. So you don't have to pay for it or you only have to pay for part of it."

And that's a tricky message, right? Because if I'm a for-profit business and I hear that, my first reaction might be, "What's wrong with them, that you're going to pay me to employ them?" And so it's a very delicate kind of discussion that goes on, where the subsidized employment organization is saying, "These are good workers, they're reliable workers, but yes, they may need a little bit more help. And that's why you're getting the subsidy, to compensate you for the fact that they may need a little bit more supervision or a little bit more help because they have less work experience."

Leigh Parise: And do the organizations provide the kinds of supports or guidance to the employers about what that might need to look like?

Dan Bloom: Yes, typically there's a sort of a “case manager” type person who continues to work with the participant. They'll help them do some preparation before they go to work, but then they'll keep working with them after they're in the subsidized job. And so they'll be checking in with them; sometimes they're visiting them at work and, you know, seeing how it goes. A lot of that depends on the particular relationship between the program and the workplace. Some workplaces will not want people to be coming to visit at the work site; other places are fine with it.

But that's one of the things that the programs kind of sell to the work sites — to say, "We're still around, and if something comes up, the person has difficulty with child care or some kind of family crisis, or they're having difficulty with their supervisor or whatever, we can step in and help."

Leigh Parise: I have to imagine that there are times where having that kind of support or that kind of intervention is actually valuable for the organization more broadly —that some of the things, the techniques you might learn or the experiences that you have with the supporting organization could be valuable to you in terms of the way that you think about dealing with your employees, your staff, more broadly as well.

Dan Bloom: Yes, I think absolutely, particularly when placements are happening in smaller organizations, whether they're for-profit or not-for-profit, these are organizations that don't have an HR department. You know, they're not large kind of sophisticated organizations with a lot of infrastructure. And so in some ways what these case managers are doing is providing some of the functions that an HR department might provide in a larger organization.

Leigh Parise: Thank you. As we're recording this, the unemployment rate is at 13 percent, and predictions are that it's going to remain high for the foreseeable future. Are there ways in which you think that a well-designed subsidized employment program might be a valuable part of an economic recovery plan?

Dan Bloom: Yes, I really think that it could be a valuable part. I don't know what's going happen in the coming months; I'm not sure anybody knows. But as you say, a lot of economists are predicting that we're going to have a long period of high unemployment in front of us. And subsidized employment programs have operated on a large scale in past recessions and they have been able to do their core function, which is to get money into people's pockets and have them do productive work. They've been able to do that on a large scale and to start up pretty quickly. And it's a way to stimulate the economy and keep people working.

And I want to just clarify that I'm not suggesting that if we have a large subsidized employment program, it shouldn't include for-profit employers. I mean, of course it should. I just worry that if we're not careful about how we design it, these more disadvantaged workers could get left behind because there are a lot of more experienced workers out there who are jobless and they're going to be at the front of the queue. And so I think it's important that in the design of a program, you target some funds and some slots to those workers who are going to have a harder time and to the nonprofits and social enterprises and public agencies that are most likely to hire them.

It's important to remember that this recession was caused by a particular event, and the impact of the pandemic and the unemployment that's caused by it have both been felt much more strongly by low-income people and by people of color. And that's one of the reasons why I think it's really important that we remember that in designing programs to try to combat the recession that we've got now.

I mean, I think, you know, in a crisis situation, you're going to place people where you can place them. And in large numbers, it's sometimes hard to, you know, be super creative and thoughtful about making sure that the jobs will prepare people for the next generation of employment. I think, ideally, any subsidized employment program is teaching people skills that will allow them to be employable in the future in whatever direction the labor market is going. You know, it's probably a little harder to do that when you have millions and millions of people out of work and you're trying to get them into jobs as quickly as you can.

Leigh Parise: Can you say a little bit about the scale of these programs? How many people are they often serving? What does a typical caseload look like?

Dan Bloom: The programs we've studied are not super large, I mean, they might serve a couple of hundred people a year. When you have a large-scale program, it would probably have lots of small programs like this combined into some sort of infrastructure that would go together. And so, when states set up subsidized employment programs during the 2009 recession, in a very short period of time, they were able to place about a quarter million people into jobs across the country, and that's large in one respect — I'm sure there were many more people out of work than that. But they tend to be an amalgamation of a bunch of smaller programs, all doing work in different geographic areas or different neighborhoods or different populations.

Leigh Parise: And what do you say to people who during this time in particular might say things like, "But everybody needs jobs right now. Unemployment rates are so high. Why are you focused on those populations? What about me? I lost my job — can I get subsidized employment?"

Dan Bloom: Well, that's a fair question. And as I said, I think programs should focus on a broad range of unemployed workers. I just think it's kind of incumbent on us not to forget the people who need the most help, and this is exactly the kind of time when they tend to be forgotten. And particularly the fact that this recession and this pandemic have been so hard on lower-income people and what we call essential workers, and I think it's just very important that they not be forgotten. I don't think they should necessarily be prioritized over others, but just that they have their fair chance as well at the job slots.

Leigh Parise: Thanks so much for joining me, Dan, to discuss this useful approach in helping the most disadvantaged workers access jobs during this difficult economic time. It was really great having you.

Dan Bloom: Thanks, Leigh. I enjoyed it.

Leigh Parise: To learn more about our take on subsidized jobs, check us out at Did you enjoy this episode? Subscribe to the Evidence First podcast for more.

About Evidence First

Policymakers talk about solutions, but which ones really work? MDRC’s Evidence First podcast features experts—program administrators, policymakers, and researchers—talking about the best evidence available on education and social programs that serve people with low incomes.

About Leigh Parise

Leigh PariseEvidence First host Leigh Parise plays a lead role in MDRC’s education-focused program-development efforts and conducts mixed-methods education research. More