As President Obama and Congress dig in their heels during the heated negotiations over the fiscal cliff, the public hears about the middle class collectively wringing their hands over potential caps on tax deductions and changes in Medicare eligibility rules. Likewise, the wealthy are well represented, as is their worry over a potential raise in their tax rate. The media largely ignore the poor and the unemployed, however, those most suffering in the economic climate.
It is possible President Obama might change that. One interesting component of the president's hand has come to light. In addition to his proposal to collect $1.6 trillion in new revenues and cut $400 billion in entitlement spending, the president also wants to give parts of his failed 2011 American Jobs Act another go in the form of $50 billion of stimulus. While the details aren't yet clear as to what would comprise his $50 billion stimulus, there is at least talk of increasing funding for infrastructure and extending unemployment insurance and the payroll tax holiday. Some progressives might also wonder whether the proposed stimulus could contain funding for the most disadvantaged and the long-term unemployed, who have largely been left out of the fiscal cliff discussions. Funding for the Pathways Back to Work program, which focused on this population, was included in the proposed 2011 jobs act. If it were to make a return in a final fiscal cliff deal, it could be a boon to those most in need of economic help.
Programs like Pathways Back to Work seldom make front page news but are quite effective and widespread. Thirty seven states run such programs, often called transitional jobs programs, and many were created in the recent recession. They help people with significant barriers to employment by providing job skills training, support services and subsidized wages, enticing employers to take part. A small percentage--less than 2 percent--of Temporary Assistance for Needy Family (TANF) dollars go toward jobs programs for the very needy each year. The last time the federal government seriously funded these efforts was in the American Recovery and Reinvestment Act (ARRA) with the TANF Emergency Fund in 2009 and 2010. Though the program ended in September 2010 and funds ran out, the federal government gave states more than $1.3 billion to hire more than 250,000 people over the life of the effort.
According to Liz Schott of the Center for Budget and Policy Priorities, the federal government subsidized 80 percent of increased spending on subsidized jobs that went to pay workers' wages and provide services in the program. This often amounted to full subsidization as the federal government allowed states to count employer training and supervision as the other 20 percent of their increased spending. Training and services varied from state to state. Schott noted that for as much as the TANF Emergency Fund effort accomplished, most transitional jobs programs focus on securing long-term jobs for people, not employing them in short bursts. "I think that the ARRA program, the emergency fund of the recovery act, was really a stimulus," she said. "It was about getting people jobs right now. It wasn't so much a traditional transitional jobs model, where you're really taking current TANF recipients with limited skills and building their skills and investing other wraparound services to make someone more employable."
Researchers have explored the effect of transitional jobs programs on poverty in some states. Researchers have shown that in Illinois, a 5,000 worker statewide transitional jobs program can reduce poverty by .2 percentage points and a 40,000 worker statewide transitional jobs program can reduce poverty by 3 percentage points. With the TANF Emergency Fund dollars, Illinois established a program called Put Illinois to Work that employed 26,000 people. According to Melissa Young of the Heartland Alliance, which administered Illinois' program, "Transitional jobs programs are a key part of the poverty reduction conversation."
The effect on the unemployment rate is less clear. Illinois and many states are still crunching numbers to determine how many subsidized workers retained employment. Young is in charge of The National Transitional Jobs Network at the Heartland Alliance, which is devoted to helping the most vulnerable find work. "At its most basic level, transitional jobs programs get people who would not otherwise be working in jobs," she said. "And we do know that they keep them working even in really weak economies."
Young's National Transitional Jobs Network and Schott's Center for Budget Policies and Priorities advocated to extend the TANF Emergency Fund. When it wasn't extended, they and others worked to include the Pathways Back to Work in the American Jobs Act, Obama's jobs bill. The bill did not pass. Yet Young and others continue to push for jobs programs because they help disadvantaged Americans and often have further benefits for the community.
"Transitional jobs programs have also been shown to lower the receipt of public benefits," Young said. "So again as people are working and earning income, they are relying on fewer public benefits. And that's a good thing from a cost-based perspective. I think the other piece of the puzzle that we see is the wages earned by individuals in transitional jobs programs directly have a ripple effect in communities by increasing the demand for local goods and services. Essentially, it's an income transfer. People use the money almost immediately to meet their basic needs. We see really great positive impacts on employers because of these kinds of programs. Employers report greater financial stability, improved production and customer satisfaction because of these types of programs." Young also said the programs increase the tax base of communities.
Whether politicians can revive federal funding for programs for the poor amid contentious talks remains to be seen. Already funding for the disadvantaged is at risk, with the Pew Center on the States reporting that up to 18 percent of federal grant money used for social services could be cut if politicians can't reach a deal. Some also worry that Medicaid could be cut back as a part of a deal. But there is little doubt that transitional jobs programs can be effective and alter the lives of workers and their communities. And including it in a stimulus proposal would be a good idea.