Combining Subsidized Employment and Strong Evidence to Drive an Equitable Economic Recovery

By Dr. Angela Jackson, Partner, New Profit and Roger Low, Policy Director, America Forward

The United States today faces an evolving economic crisis that has driven unemployment higher than at any time since the Great Depression. Black workers, in particular, are losing jobs at twice the rate of white workers. We’ve seen this before — the Great Recession a decade ago was far more severe and prolonged for Black and Latinx households. To confront this historic challenge, we need bold solutions focused on the workers most impacted by this crisis, who were already under intolerable pressure as a result of worsening economic inequality.

In order to meaningfully address the continued dislocation of millions of American workers, it is clear that we will need sustained, energetic and transformative economic recovery legislation over the coming months. In response to that imperative, we see an opportunity to transcend the current poisonous partisan divide and help our communities emerge even stronger.

Congress could reemploy millions with an ambitious new subsidized employment program, creating pathways into the workforce for those most overlooked. Imagine a single mom, with no post-secondary degree, limited access to transportation, who just lost a minimum-wage job after the pandemic began. She will most likely have a harder and longer path to reenter the workforce, and she will face disproportionately high hurdles to employment if she is a person of color. Paying an employer who offers her a job an outcomes bonus could be game-changing. To maximize the effectiveness of new funding, Congress should tie “hire, train and retain outcome-payments” to worker earnings, build the public sector’s capacity for performance management, and ensure communities of color are fully included.

Accelerate subsidized employment

In June,Senators Ron Wyden (D-OR), Tammy Baldwin (D-WI), Chris Van Hollen (D-MD), Michael Bennet (D-CO) and Cory Booker (D-NJ) introduced the Jobs for Economic Recovery Act, landmark new subsidized employment legislation to pay for eligible individuals to receive six months of wages and benefits in new jobs. This followed an April letter from these members endorsing subsidized employment “informed by the successful programs that states were able to get up and running quickly during the Great Recession to place individuals in a wage-paying job.”

Subsidized employment has a strong record of effectiveness, particularly during recessions. This strategy works best when focused on individuals experiencing barriers to employment, such as those who have experienced persistent poverty or incarceration. Including mission-driven businesses and nonprofits such as Year Up, Goodwill Industries International, Cara, Resilient Coders or Roca that specifically employ and train such individuals would further strengthen this approach; independent research shows these entities increase job retention, while also often earning revenue from the sale of services and products, yielding a good return on investment for society.

Incorporate in COVID-19 recovery, with a focus on equity and evidence

Beyond supporting subsidized employment, members of both parties have in recent years advocated for results-driven policy more generally. Last Congress, Senator Patty Murray (D-WA) and then-House Speaker Paul Ryan (R-WI) collaborated to pass the Foundations for Evidence-Based Policymaking Act, supporting the use of data to make government more effective. That same year, Senators Todd Young (R-IN), Michael Bennet (D-CO), and others from both parties created a new breakthrough federal fund that pays specifically for better outcomes. Since then, Democrats and Republicans have introduced new bills building on these accomplishments.

When Congress takes up a longer-term COVID relief bill, lawmakers should marry robust subsidized employment with a bipartisan focus on measurable outcomes to support widespread, sustainable, and equitable reemployment.

An intentional focus on equity is essential. States must connect employment subsidies and related services specifically with Americans who experience barriers to employment or who especially need economic relief. The proposal should be designed as a starting point to counter the structurally inequitable effects of a recession on Black and Latinx households.

“Hire, train and retain” outcomes payments should be conditioned on independently validated data that previously unemployed individuals are working, on a path to earning a living wage, and have health coverage. These payments could be tied on a person-by-person basis to those who enter (or reenter) and remain in the workforce, via an outcomes contract streamlined enough to rapidly scale. Public agencies in Northern Virginia, Connecticut and other states were pursuing projects prior to the pandemic with this innovative payment model. Rigorous evaluations should measure aggregated impact over time. Decoupling success payments from a larger evaluation, without requiring external financing, would make this approach a scalable strategy for economic recovery.

Modernize and sustain an effective public response

In order to respond effectively to the current economic crisis, funding must flow quickly, reaching millions of workers and employers who need help now. This proposal could be channeled through existing unemployment or job-training programs, or incorporated into the workforce development section of a new infrastructure bill.

State and local governments should also reserve some of this funding for evaluations, data improvements and performance management capacity-building. This would help government agencies across America not only survive this fiscal crisis, but emerge on the other side of it more modernized, and more able to measure outcomes and disaggregate data to fight inequity.

This moment creates an imperative for Congress to rapidly reemploy millions of Americans, while embedding evidence and outcomes to ensure that programs are equitable, effective, and sustainable. Lawmakers from both parties have a real chance to meet this challenge in the next COVID-19 relief legislation — they should not miss it.

America Forward unites social entrepreneurs with policymakers to advance a public policy agenda championing innovative & effective solutions to social problems.