The TANF Subsidized Jobs Program: Helping the Market Get Closer to Full Employment

September 10th, 2013 at 4:47 pm

In policy discussions about getting back to full employment, I often make the point that if the market fails to create the needed quantity of jobs, there’s a role for policy to help make up the difference.  Many find that a radical idea, or at least one that perhaps made sense in the 1930s, but is antiquated by now.

What if I told you that, in fact, there recently was such a program—a temporary one that was an unheralded part of the Recovery Act—that in its heyday placed “more than 260,000 low-income adults and youth in temporary jobs in the private and public sectors…?”

Well, there was.  The above quote comes from a post on the CBPP blog yesterday by my colleague Donna Pavetti.  She, in turn, is citing a new evaluation of the TANF (Temporary Assitance for Needy Families) Emergency Fund, a program wherein state employment programs worked with employers, mostly in the private sector, to create jobs where, for a limited time, the wage is mostly paid by the federal government.  Most states—39 in all—joined in and used $1.3 billion to subsidize job creation.  That comes to $5,000 a job, which in this business is known as big bang-for-the-buck.

Here’s a summary of the findings from the new study:

  • Participation in subsidized employment programs led to significant increases in employment and earnings. Participants in four of the five programs covered by the study were much more likely to have an unsubsidized job in the year after working in a subsidized job than in the year before joining the program.  The findings from Florida are especially noteworthy because researchers could compare participants with applicants who were eligible for the program but didn’t receive a subsidized job. There, participants earned an average of $4,000 more in the year after the program than in the year before it, compared to a $1,500 increase for people in the comparison group (see figure below).
  • The programs were especially effective for the long-term unemployed. In Mississippi and Florida, average annual earnings of the long-term unemployed rose by about $7,000 after participating; in Los Angeles and Wisconsin, they rose by about $4,000. In all four sites, earnings rose much more among the long-term unemployed than among people who had been unemployed for shorter periods.
  • Employers reported hiring more workers than they would have otherwise and workers with less experience than their usual hires. Two-thirds of the employers interviewed for the study said that they created new positions for subsidized workers.  [This is important, because there’s always concerns about job displacement in these subsidy programs—i.e., replacing an unsubsidized workers with a subsidized one, thus gaming the system and not creating a new job—JB.]  Over half said they hired people with less work experience than their usual hires.
  • Most participating employers reported multiple benefits from the program. These included expanding their workforces, serving more customers, and improving their productivity.

OK, you’re saying…that was then, this is now.  Surely nobody wants to keep this going.

Wrong again!  According to Donna: “…at least five states — Nebraska, Colorado, California, Minnesota, and Rhode Island —expanded state funding or provided new funding for subsidized employment for TANF recipients or other disadvantaged individuals.”

So, yeah.  Rep Paul Ryan isn’t going there anytime soon, but if we plot the path forward based on the constraint called “House Republicans” will we get nowhere fast.  If we instead recognize that in a society that wants to poverty reduction through work, there must be jobs—then we have a rationale for scaling up efficient programs like this one.

 

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Source: Economic Mobility Corporation

 

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5 comments in reply to "The TANF Subsidized Jobs Program: Helping the Market Get Closer to Full Employment"

  1. Tim Bartik says:

    Jared:

    I appreciate your continued efforts to highlight the need for job creation policies.

    This is a very significant study and deserves attention. My past position has been in favor of explicitly requiring job creation by assisted firms, but this study suggests that this might not be necessary during a deep recession, when there is little job-creation going on without the program.

    The Achilles Heel of ordinary fiscal stimulus is the large costs per job created, which you documented in your studies of the fiscal stimulus in the past. We need to find job creation efforts whose gross costs are much less than the $100,000 per job of regular fiscal stimulus.

    If we want to deal with job gaps of millions of jobs, we need to find more direct job creation methods that will have costs closer to those suggested by this new study. I argued this over two years ago, and I still believe this prescription is appropriate:

    http://investinginkids.net/2011/08/24/cost-effective-short-term-job-creation-policies/


  2. smith says:

    I would like to offer a much different interpretation of the results, with important policy implications. Only 2/3 of employers even claimed they created new positions. Of those 2/3 there is no measure of how many of the new positions would not have been created without the program (I’m assuming, because I haven’t read the whole report yet). Since employers only got $5,000/job and minimum wage costs $15,000/yr, employers were still absorbing at least 3/4 of the cost, so they couldn’t be hiring because of the incentive. Maybe they hire sooner, maybe full time instead of part time, maybe they consider someone who they normally wouldn’t give the time of day. The ripple effect has to be to lower wage scales for everyone. It’s a direct form of corporate welfare.

    A better idea to address cyclical downturns is what Germany did to supplement wages and prevent layoffs.
    One might also consider $5,000 incentives over prevailing wages to induce employers to hire people in a similar program.
    Not sure if that’s fair either. It’s complicated. Sorry you’re unemployed and qualified, but the owner gets $5,000 to hire people with worse luck or qualifications. At least that doesn’t lower the wages of everyone.

    Don’t we have enough need for road repair, teachers, policeman, social workers, or basic science research, to boost employment without subsidizing private industry?

    This idea is susceptible to the weakening of labor and might create a new subsidy contest among states, similar to competing tax breaks.

    There are better ideas to reach full employment and it’s possible to have full employment and weak labor.


  3. Momauwi Woods says:

    My name is Momauwi Woods, I have been a TANF reciepient for almost a year, After going through an awful divorce and job lost, I was forced to apply for assistance. I live in Washington D.C. where competition for employment is like fighting for air.

    I have had no luck getting work through Case Management or Employment Services offered in my city. I have identified many barriers such as lack of education and internet,but when competition is so strong like it is in the city where I live, its been painfully difficult. Anyone who has any oppourtunities, please reach out to me. Im willing to relocate if need be. The rent in Washington D.C. for a one bedroom apartment in a low income are is $1000 a month and min, wage is $7.50/hr. Im lost here. Please email any suggestions to me eotyout@gmail.com. Thanks.


  4. Momauwi Woods says:

    Update:

    I have been a TANF recipient for almost two years now, Still no work, I have completed several TANF job programs, still with no luck in finding a job that will allow me to pay my low income rent of $875. I have a four year old son. I was contacted by the moderator of this post, who offered the same job programs that have failed me.

    I am willing, able, capable of working. Like many Americans my search for work has been long and difficult. I receive $275 a month to take care of my four year old and my self.

    I have documented my experience with great detail. I have emails I sent out to many DC officials who are responsible for job creation and resources. None can help.

    There was a man that I met who gave me a great opportunity working children in the community selling newspapers. Yet residents became annoyed with the young teenagers knocking on their doors and began to complain until eventually our contract was terminated. Myself and the teenagers were only trying to create a job for ourselves when it seems to be none, We were constantly harassed by the police.

    The heavy/costly regulations in trying to start up a business, racist society, greedy corporations such as WalMart, gentrification and high cost of education has made it extremely difficult to end this cycle of poverty.

    Yet I still have faith that, There are people in this country who are willing to unite and reciprocate the duties of building a great nation.

    I still work with the children at the Youth Enrichment Services Program, which was founded to try and create jobs for people such as myself. But I do not get paid as it is very difficult to monetize this effort with a background of poverty and lack of education.

    I was offered a change to go to school in Nepal, I competed for a chance to participate in a training program that would help me learn to organize and build resources in my community, the cost was $3,000 plus travel and passport expenses. A hefty fee for someone in my position.

    If there is anyone out there that can help. Please contact me mrsfreeusa@gmail.com


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