Subsidized Employment: Two Randomized US Studies

In certain locations and among certain groups, participation in the labor force is low. Can government-subsidized transitional jobs offer a method of getting more people connected to the labor force, in a way that persists after the government support is withdrawn or the transitional job comes to an end?

A couple of years ago, the Georgetown Center on Poverty and Inequality published a study on "Lessons Learned from 40 Years of Subsidized Employment Programs," which I discussed here. The report looked at a range of programs over time, with different design features, and a mixture of successes and failures. It also pointed to two federal studies of subsidized employment that were underway: The Subsidized and Transitional Employment Demonstration (STED) being run by the US Department of Health and Human Services in seven cities and the Enhanced Transitional Jobs Demonstration (ETJD) study is being run in seven cities by the US Department of Labor.

Both studies now have some results available. Both are randomized studies, which are thought of as the gold standard for this kind of research: that is, among a group of possible participants, some are randomly selected for a subsidized job and the others form a control group for purposes of comparison. Results from the studies are at best only modestly encouraging.

For some evidence on the STED program, Sonya Williams, Richard Hendra of MDRC have written "The Effects of Subsidized and Transitional Employment Programs on Noneconomic Well-Being" (Office of Planning, Research and Evaluation Report 2018-17 February 2018).

"The Subsidized and Transitional Employment Demonstration (STED) is designed to investigate the effects of subsidized and transitional employment programs on both financial and nonfinancial well-being. Participants were assigned at random to a program group that had access to program services, including subsidized or transitional jobs, or to a control group that did not. Several of the STED programs produced large employment and earnings effects in the first year after random assignment because program group members participated in subsidized or transitional jobs at high rates. However, one year after random assignment the employment rates of the program group and the control group were about the same ...

"While thus far these programs have tended to have limited long-term effects, they do clearly have effects in the short term. Since well-implemented transitional and subsidized employment programs generally have high participation rates, they generally give at least temporary increases in employment and earnings to people who otherwise cannot find jobs in the private labor market. These results in this report indicate that these programs also temporarily improve subjective well-being. While these temporary effects fall short of the primary goals for implementing transitional or subsidized employment programs (that is, long-term improvements in self-sufficiency) they may improve outcomes in more subtle ways."
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