ReWORKing Welfare Technical Assistance for States and Localities. 30. Work Experience and Subsidized Employment

03/01/1997

Work experience and subsidized employment can provide work opportunities for those participants who are not able to get unsubsidized jobs. In work experience, participants generally work for public and nonprofit employers in exchange for welfare benefits. Participants in subsidized employment generally work for private employers, and the employer is partially reimbursed from diverted welfare funds. Because they receive a paycheck, individuals in subsidized jobs are generally eligible for the Earned Income Credit (see section 39) and other benefits for low-income workers. There are also variations on these structures, discussed below.

Work first administrators may consider large-scale work experience or subsidized employment programs as a means to meet federal work participation requirements (see Appendix A). Doing so can also satisfy public and political support for requiring recipients to work in exchange for their benefits. However, such large-scale programs may conflict with the goal of work first-that is, moving participants as quickly as possible into unsubsidized employment. Work experience and subsidized employment can be productive activities for participants whose lack of work history may have hindered success in job search. Used selectively and carefully designed, both approaches can teach participants basic work habits and give them skills and experience for their résumés. Ideally, these positions can lead to permanent, unsubsidized jobs. Both approaches may also count toward meeting the federal participation requirements.

Unpaid Work Experience

Unpaid work experience (also called community service employment or workfare) is usually structured so that participants work either a fixed number of hours per week or the number of hours equivalent to their grant divided by the minimum wage. Participants are not paid wages but may lose part of their welfare benefits if they fail to work the required hours.

Research on relatively small-scale workfare programs in the 1980s found that, by themselves, the programs did not increase either employment or earnings (although they did impose a mutual obligation, and participants generally performed work that had value to the community). Some argue that newer workfare models-which impose ongoing, full-time work requirements on a broader share of the caseload-will produce different results. However, large-scale work experience programs can be difficult to implement and expensive to administer (see section 21, on program costs).

Subsidized Employment and On-the-Job Training

Under work supplementation (also known as grant diversion), states use welfare grants as a source of wage subsidies for participants placed in jobs. Advocates of work supplementation believe that these subsidies act as an inducement for employers to hire participants, creating access to employment opportunities. On-the-job-training (OJT) operates similarly to work supplementation, but OJT is available to individuals who do or do not receive welfare and is funded through employment and training programs rather than diverted welfare grants. Evaluations of small-scale work supplementation programs in the 1980s found that they did not substantially increase the number of individuals who got jobs, but they did increase earnings-that is, they led to jobs that either paid higher wages or provided more hours than the jobs those individuals would have gotten in the absence of work supplementation. Moreover, the programs had these effects even after the individuals finished the subsidy period.

Like unpaid work experience, large-scale subsidized employment programs present major operational challenges. In addition, there is a danger that employers will simply receive a windfall for hiring someone they would have hired anyway. At the same time, there may be a stigma associated with subsidized employment. Employers may be reluctant to hire people on welfare, and participants may be reluctant to work in what they feel are not real jobs. Staff of Milwaukee's New Hope Project (described below) found a lower-than-expected takeup rate of paid community service jobs, and found they needed to spend more effort marketing those jobs to participants. Finally, past programs have found that the administrative hassles that work supplementation presents for employers limit its usefulness as a hiring incentive.

Other Approaches

Some programs have developed creative approaches that combine elements of unpaid work experience and subsidized employment. For example, Vermont has structured its post-time-limit community service employment so that participants receive paychecks (from a contracted payroll firm) rather than welfare checks, and are covered by worker compensation through the state. The New Hope Project in Milwaukee provides an income supplement (outside the welfare system) to low-wage workers and offers minimum-wage community service jobs with private and nonprofit employers to those who are unable to find unsubsidized employment. Because they receive wages, participants in both Vermont and New Hope are eligible for the Earned Income Credit. IndEx is a Tulsa, Oklahoma, program created by and administered through the Metropolitan Tulsa Chamber of Commerce. Welfare recipients are trained and work at IndEx's central facility, under contract with local private-sector industries, to produce goods that would otherwise have been produced offshore. Successful participants are hired for permanent positions with the private employers.

Guidelines for Work Experience and Subsidized Employment

The following are some ideas about how to make the most of work experience and subsidized employment as part of a work first program:

  • Help participants try to find unsubsidized employment first. Work experience and subsidized employment should be considered after job search and after assessment of a participant's needs. For some, these options may provide useful skills, experience, and a résumé item that can help them succeed in future job search. Try to take the time to develop work slots that teach participants marketable skills and fill the gaps in their strengths and experience.
  • Place time limits on work assignments. Work experience should be used only until unsubsidized employment can be found. Participants can become comfortable in work slots, and employers may not want to part with the extra help. To address these issues, work experience should either be combined with job search or be time-limited and followed by job search. In Vermont, community service jobs are limited to ten months, followed by two months of job search. Positions in New Hope are limited to six months. Techniques such as close supervision, peer support, and active job development can help participants make the transition from work experience into unsubsidized employment.
  • Maintain regular contact with both participants and employers. This is useful for getting feedback on how the placement is working out, reinforcing positive relations with employers, and discovering any job-related issues before they become major problems. To monitor participants' progress, the New Hope Project has added four simple questions to the biweekly time sheets that employers fill out. They ask employers to rate participants as excellent, good, fair, or poor in the following areas: attendance/punctuality; quality/quantity of work; cooperation with supervisor/co-workers; and listens/follows directions/rules. New Hope also asks employers to notify program staff the same day if participants miss work, so that they can follow up immediately rather than finding out about a problem only when time sheets are due.
  • Target participants for work with job developers. In one Los Angeles office, job developers work closely with the work experience participants assigned to the work first office. They monitor participants' performance, help participants identify job leads, and give personal references to employers regarding participants' work habits based on their performance in work experience. This can facilitate unsubsidized employment, but is labor-intensive and may not be possible on a large scale.
  • Use the opportunity to help participants work out personal and other issues. Work experience can provide a transition period during which participants can address transportation, family, and other issues that may have hindered their ability to get and keep unsubsidized jobs. With close supervision, program staff can also use the opportunity to identify and address any on-the-job problems that might jeopardize unsubsidized employment.
  • If possible, place participants with employers who have made a commitment to retaining successful employees after a trial period. In Fond du Lac, Wisconsin, work experience participants can be placed with private employers for up to 13 weeks (at no cost to the employer), with the expectation that they will be hired after that time.
  • In developing work slots, avoid substituting them for unsubsidized openings in the labor market. To avoid displacement, most programs ask employers to affirm that the position is a new one. Close interaction with the employer, to learn about the job description and whether anyone else in the organization is doing or has done those tasks, can also help identify situations where displacement might occur. In developing slots for work supplementation and OJT, employers are generally expected to hire participants who do not meet official job qualifications.
  • Find ways to simplify the administrative burden on employers. This might mean that the welfare department takes on some of the administrative functions typically left to employers. For example, programs might allow employers to submit wage information in whatever form is most convenient, and then convert it into the form required for payment of the subsidy. In Oregon, employers treat participants like any other employee, including sick leave and vacation time, then receive reimbursement for a portion of wages paid.
  • Facilitate payments to employers under subsidized employment. Processing and other delays can inconvenience employers and delay the start of work for participants. To avoid these problems, it can help to have "bridge" money available to cover the period before grant diversion is effective and to compensate for any shortfalls in monthly cash flow.