Association for Public Policy Analysis & Management

Subsidized employment programs that increase labor supply and demand are a proven, underutilized strategy for reducing poverty in the short and long term. These programs use public and private funds to provide workers wage-paying jobs, training, and wraparound services to foster greater labor force attachment while offsetting employers’ cost for wages, on-the-job training, and overhead. This article proposes two new separate but harmonized federal funding streams for subsidized employment that would expand automatically when and where economic conditions deteriorate. Participating states and local organizations would be offered generous matching funds to target adult workers most in need and to secure employer participation. The proposal would effectively reduce poverty among workers during work placements, and improve long-term unsubsidized employment and other outcomes for participants and their families.

Serving 20 percent of the full universe of eligible participants would provide subsidized employment for 2.4 million participants and would benefit more than seven million members of those workers’ households. The proposal would reduce the nation’s overall poverty rate (SPM) from 14.3 percent to 14.0 and thereby lift approximately one million people out of SPM poverty and almost .5 million out of SPM deep poverty. Participating workers would see their chance of living in poverty fall by 62 percent. Low-income families that have incomes above the poverty level but less than twice the poverty level would also see benefits that would increase their families’ income-to-needs ratio by nearly 20 percent. As a result, this article proposes a national strategy for funding state and local subsidized employment programs to increase total employment levels, especially among workers with serious or multiple barriers to employment. The two separate but harmonious federal funding streams would leverage state, local, and private (both for-profit and nonprofit) resources to create decent job opportunities for workers who likely would not otherwise be hired. The resulting employment immediately provides income through wages and earnings, and in some cases would have deeper and long-term positive effects that would tend to reduce poverty among participants and their children while improving outcomes for their communities. This idea is a missing and politically viable notion for reducing poverty.