The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Job Creation for Low-Wage Workers: An Assessment of Public Service Jobs, Tax Credits, and Empowerment Zones. Public Job Creation Programs


Public service employment (PSE) programs in the United States have had a checkered history, and interest in their use for countercyclical and structural purposes has had cycles as well. This section provides a review of the U.S. experience with these programs, emphasizing the use of PSE for disadvantaged groups rather than for the general population.

A public service employment program is defined here as a program where government funds are used to hire individuals with certain characteristics on a temporary, time­limited basis with the goals of providing income maintenance and/or human capital development for the participants and valuable services for the community that would not have been produced in the absence of the program. Although somewhat lengthy, this definition captures the key aspects of PSE programs and distinguishes PSE from related programs with similar means and objectives. The specific aspects of the definition and their implications are discussed below.

Eligibility Requirements. PSE programs are sometimes intended to serve as countercyclical programs, and thus provide employment opportunities to individuals who are unemployed because of business cycle conditions. They have also been used as structural programs, and thus serve individuals in need of additional human capital. Appropriate eligibility requirements for structural programs include such factors as unemployment, income, and receipt of transfer payments. In practice, identifying cyclically unemployed workers that can be helped by the program is not a simple matter, and proxies must be used.(4) 

Temporary Positions. PSE jobs are temporary in nature. Time limits can be imposed on the length of time individuals may participate, the length of time that a particular job can exist, or both. Any inclination by the units of government operating the program to use PSE funds to substitute for regular funds will be reduced by limitations on the service of participants or the time the position can be filled.

Salaries. Although the definition of PSE programs used here is restricted to programs that pay a wage, this has been done primarily because unpaid work is generally not classified as employment. Thus, the definition used here excludes "workfare" or community work experience programs (CWEP) operated under the Family Support Act and other welfare programs where welfare recipients were required to "work off their grants," but did not receive salaries for doing so.

Emphasis on Production of Services of Value. This component of the definition is important because it distinguishes PSE programs from public works programs and work experience programs. Public works programs, particularly those operated during the Great Depression of the 1930s, are generally similar to PSE programs in that they are based on the temporary employment of unemployed workers, but unlike PSE programs the primary objective of public works programs is building infrastructure; with that said, defining the precise cutoff between public works and public service employment is somewhat arbitrary, particularly if the state and local governments operating the programs are allowed to supplement the federal funds that are provided.

Employment by Government or a Nonprofit Organization. A PSE program that did not require employment by a government or nonprofit organization would obviously be misnamed. In the traditional Keynsian macroeconomic framework, any expansion in government procurement would generate additional employment, but the program would not be a PSE program.

Production of Services that Would Not Have Been Produced in the Absence of the Program. To have an impact on aggregate employment, a program must lead to an expansion in the government employment beyond what would have occurred in the absence of the program. When program funds are used to substitute for state or local funds that would have been spent in any case, "fiscal substitution" is said to take place.