In
Hillary Clinton’s big speech on the economy last Thursday, she touted a litany of policies to boost economic growth and raise the wages for American workers, from a higher minimum wage to a big infrastructure investment to increased funding for paid apprenticeships. Taken together, the ideas represent a comprehensive economic platform.
But Clinton’s agenda is missing one key idea for keeping Americans employed when economic downturns hit, a policy that proved hugely successful after the Great Recession: subsidized employment.
As part of the economic stimulus, Congress spent $5 billion to create the Temporary Assistance for Needy Families Emergency Fund (TANF EF), a small funding boost for the TANF program, typically known as welfare. The new funding was mostly spent on basic cash assistance and emergency benefits, critical for low-income families to afford their day-to-day essentials after the financial crisis.
But a chunk of money—$1.3 billion—was earmarked for subsidized employment, a low-cost experiment that used federal resources to put people back to work. This wasn’t a direct employment program like the New Deal’s Works Progress Administration, which paid millions of workers in the 1930s to construct new roads, bridges and buildings. Instead, the government gave states considerable flexibility with how to implement their programs. Some states directly paid the wages of those with subsidized employment, with employers putting workers directly on their payrolls and then receiving a partial reimbursement from the government
. Other states contracted with community providers to pinpoint employers willing to participate in the program and place workers at those firms. A few states targeted the funding specifically at the long-term unemployed and those below the poverty line.
While the designs varied among the 39 states that created subsidized employment programs, people who’ve looked closely have foundthey were almost universally successful at putting Americans back to work—and it was a relatively cheap way to do it.
One study, from the Center for Budget and Policy Priorities, found that the TANF Emergency Fund put 260,000 low-income workers in subsidized jobs in less than two years. That’s a cost of less than $5,000 per job created. By comparison, in 2011, the White House estimated that $1 billion in infrastructure investment created 13,000 new jobs—a cost of $77,000 per job. Compared to the road-building projects that politicians love to talk about, the Emergency Fund was a bargain. Another
study found that 63 percent of employers created jobs that they would not have existed otherwise and the gains to workers lasted after the program ended.
So how’s it doing now? Funding ran out in 2011 and was not renewed. It might seem obvious to let a jobs program lapse during periods of strong job growth, but actually, experts believe it’s important to at least keep a small version of program alive during such times because subsidized employment programs are challenging to set up fresh in the middle of a recession. As Jared Bernstein, the former chief economist to Vice President Joe Biden,
has suggested, a permanent program that expands during economic downturns is likely to be more effective at putting Americans back to work than a series of ad-hoc programs launched after each recession.
Whether the Emergency Fund could be significantly scaled up after the next recession is an open question. The 270,000 jobs created represent just a fraction of the 10 million jobs lost after the Great recession. With more funding, states may have a difficulty convincing employers to take part in a subsidized employment program or may have to increase subsidies to entice employers to participate, raising costs. However, the Emergency Fund’s success, albeit on a modest scale, has made experts optimistic that a larger program could demonstrate similar results.
In her speech Thursday, Clinton emphasized that her plans are designed to make sure jobs are available to all Americans. “I believe every American willing to work hard should be able to find a job that provides dignity, pride and decent pay that can support a family,” she said. “So starting on Day One, we will work with both parties to pass the biggest investment in new, good-paying jobs since World War II.”
Clinton has proposed a $275 billion infrastructure program and spoken about bringing back manufacturing jobs by cracking down on currency manipulation and negotiating better trade deals. But those policies largely don’t help the millions of low-paid service sector workers that tend to benefit from subsidized employment. The labor market for the construction industry, for instance, is tight already, so a big infrastructure program is
unlikely to create many new jobs; as for manufacturing, the sector employs less than 10 percent of the workforce. The
unemployment rate for the leisure and hospitality industry, on the other hand, is still 6 percent, above the 4.9 percent national average. In wholesale and retail, it’s 5.2 percent.
Clinton’s platform includes some policies to help those workers, such as increasing the minimum wage. But experts believe a subsidized jobs program would provide an additional level of support for sectors of the economy that receive less attention from policymakers. Such a program has an additional benefit of being industry-neutral, meaning all industries have an equal opportunity to participate in it.
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