Nearly 15 million people in the U.S. who would like to work are unable to find a job right now—despite a historically low national unemployment rate.1 This joblessness is not uniformly distributed across the country but concentrated in the most disadvantaged communities, particularly Black and Brown communities. A targeted, large-scale subsidized employment program can help these communities increase employment and reduce poverty.
Last year the national unemployment rate was 3.6 percent.2 The last time the national rate was this low was in 1969.3 But the national average hides the fact that there are many communities that are suffering from persistent, high levels of joblessness. In every state, one can find communities that have been similarly left behind due to deindustrialization, disinvestment, and discrimination related to the legacy of redlining and other policies. These communities tend to have a high share of workers with low incomes or workers of color. For example, last year the unemployment rate in the majority-Latinx town Yuma, Arizona, was 10 percent, nearly three times the national rate. It was 11 percent in both Flint, Michigan, and Magoffin County, Kentucky, predominantly Black and white locales, respectively. It was higher still in Jefferson County, Mississippi, where the unemployment rate is 14 percent and the large majority of residents are Black. It was 16 percent in the Alaska Native-majority Kusilvak area of Alaska.4
A large-scale employment program, where the federal government subsidizes all or part of a worker’s wages and targets communities with the highest rates of unemployment, can help increase employment where it is needed most. During periods when the national unemployment rate is holding steady or declining, the program should be ramped up to reduce unemployment in places with high rates of joblessness. This would help all communities share in the nation’s prosperity.
A half-century’s worth of evidence proves subsidized employment is a powerful, beneficial, and versatile policy tool for supporting structurally excluded communities and workers, who face a variety of systemic barriers to employment and who also tend to be most impacted by inflation. Well-designed programs that provide on-the-job training and vital wraparound supports, like child care and transportation assistance, can strengthen local economies and boost employment rates. Subsidized employment programs have also been shown to increase incomes, reduce involvement with the criminal legal system, improve the psychological well-being of participating workers and their families, and reduce long-term poverty.
Programs can be tailored to meet the specific needs of different communities, with lasting ripple effects. For example, evaluations of the New Hope program in Milwaukee showed improved test scores and academic performance among children of participating workers five years after the subsidized employment placement ended, and improved positive social behavior eight years after the placement’s end. There are countless other examples of effective subsidized employment programs that targeted workers with serious or intersecting barriers to employment, such as people facing racism, sexism, or discrimination based on their sexual orientation or gender identity, people experiencing challenges related to caregiving and health conditions or disabilities, people with criminal legal system involvement, or people without a high school credential or equivalent.
In March 2022, the Federal Reserve hiked the interest rate for the first time in more than three years—and has raised rates seven times since then—in the hope of reducing inflation. A typical consequence of the Federal Reserve’s actions is higher unemployment. Often the Federal Reserve’s interest-rate hikes lead to a recession.
It would be useful to have a targeted, automatically responsive, national subsidized employment program in place to support communities consistently left behind throughout the business cycle, and especially during times when the nation’s unemployment rate is decreasing. That way, when the Federal Reserve is increasing interest rates and unemployment, we could still preserve some level of employment through subsidized jobs. Since these jobs would be targeted to communities with the highest levels of unemployment, the jobs support would always benefit those who need it the most. And it would help mitigate the rise in unemployment and poverty that usually results from Federal Reserve interest rate hikes. In this way, a large-scale subsidized employment program could help disadvantaged communities in good economic times and bad.
1This includes the count of the individuals who are unemployed, the individuals who are working part-time but are unable to find full-time work, and the individuals who are not actively looking for work but would like a job.
2U.S. Bureau of Labor Statistics.
3Authors’ analysis of Current Population Survey data from the U.S. Bureau of Labor Statistics.
4Authors’ analysis of 11 months of data from the Local Area Unemployment Statistics data from the U.S. Bureau of Labor Statistics.