Private sector adds jobs. You helped. Really!
Through September, taxpayer-funded jobs programs put 240,000 Americans back to work, often in the private sector. With unemployment stuck at 9.6 percent, should Congress subsidize more private-sector jobs?
Bristol, R.I. — For nine years, Arturo Santos found steady work as a carpenter. He had union benefits and a good salary. When the housing market crashed in 2008, he was quickly laid off.
"I looked for a job every day," said Mr. Santos, who traveled the Northeast for weeks at a time in search of construction work. "They just didn't need anybody."
As the jobless months dragged on, it grew harder to support his family, even with a $400 weekly unemployment check. Then, in June, his job search came to an abrupt end. Santos was offered a $26 per hour, full-time, carpentry job just days after completing an online application.
How did he snag a job after nearly two years of unemployment? Help from taxpayers. The private contractor who hired Santos wasn't paying his wages, the federal stimulus was, part of a subsidized jobs program that provided some 240,000 Americans in 37 states with employment.
But the $5 billion program, known as the Temporary Assistance for Needy Families (TANF) Emergency Fund, ended Sept. 30 when Republicans blocked Democratic attempts to extend it through the end of the year for an additional $500 million. With September's unemployment rate stuck at 9.6 percent, should Congress fund another jobs program?
As economists point out, government-subsidized jobs don't generally promote long-term economic growth. But as stimulus, targeted at a particularly vulnerable population, the subsidies represented a way to get unemployed people back to work and provided a quick way to boost the economy.
The chain of events that got Santos hired began in April, when independent contractor Bryan Menge won a contract to replace siding and windows for several housing units in Bristol, R.I. The contract was a lifeline in a moribund market. But he was reluctant to hire new people, having been forced to let all his workers go in the previous two years.
"I might have hired one worker. Maybe," he said. "Definitely not three."
In June, Mr. Menge found out that JobsNow, Rhode Island's job-subsidy program funded by the federal stimulus, had approved his application and would pay for three additional workers. According to the rules, which vary by state, the Rhode Island workers he could hire had to be unemployed or underemployed, have dependent children, and earn no more than 225 percent of the poverty level. JobsNow put Menge in touch with Santos and one other worker in similar straits. The third hire was a worker Menge knew and recommended to the program.
"[The additional workers] definitely allowed me to move fast," he said. "Now, I can present this job to other bidders."
Menge hopes his crew's quick work this summer will help him land two commercial contracts he's bid on. Menge says he'd like to keep his three new hires through January to complete the work, even if the subsidy was cut.
Helping small businesses overcome their skittishness about the economy has been an unexpected benefit of the program since most of the hires are in the private sector, say advocates.
"The focus has been on encouraging small businesses to take risks and hire people," said LaDonna Pavetti, a poverty and welfare expert at the Center on Budget and Policy Priorities, a Washington economic-policy think tank. "We hope those positions will lead to permanent jobs."
But government subsidized job programs don't have a particularly good track record for boosting long-term employment. For one thing, they're too small: Even the massive New Deal employment programs couldn't pull the United States out of the Depression. For another, they're not as effective as training and job-search programs in keeping people employed, according to a study by David Card, an economist at the University of California, Berkeley, and German economists Jochen Kluve and Andrea Weber.
"What causes a business to hire is when they can take advantage of a business opportunity," said James Sherk, senior policy analyst in labor economics for the American Heritage Institute, a Washington think tank. "A temporary subsidy is not enough to create expansion."
Even though the jobs programs do not significantly reduce unemployment, they do inject stimulus into communities.
"People who are unemployed or on [welfare] generally spend what they earn, and they spend it quickly," said Trent Rhorer, director of San Francisco's Department of Human Services.
Some $55 million in wages have been paid out to the 3,650 workers in San Francisco who've participated in the city's subsidized jobs program over the past 18 months. But the program, which Mr. Rhorer said has helped about 20 percent of its welfare caseload leave aid, stopped taking applications at the end of July, anticipating that funding could end in September.
"We figured two months of work was worthwhile for the company and employee," Rhorer said. "One month probably wasn't."
Back in Rhode Island, Arturo Santos is happy to be working, even if his job outlook is uncertain. "It just feels good to be out doing something again," he said.