This study evaluates an experiment done on subsidized employment. This experiment uses a random assignment design to evaluate two approaches to subsidized employment for TANF recipients. The first model studied, Paid Work Experience, subsidizes the wages of individuals placed at employers in the nonprofit or public sector for up to six months. The second, On-the-Job Training, offers wage subsidies to for-profit employers who add employees to the payroll after the trial.

Securing employment in a competitive labor market can be difficult for job seekers with limited education or work experience, especially if they are single parents or caring for young children. Subsidized employment, or temporary jobs subsidized with public funds, can be designed to teach participants basic work skills, provide them with work experience that they can use on future résumés, and help them get a foot in the door with employers. This report presents the final findings from the impact study at 30 months after study enrollment as well as the cost analysis as part of a random assignment evaluation of a subsidized employment program for TANF recipients in Los Angeles County.

The implementation study described the design of the Paid Work Experience (PWE) and On-the-Job (OJT) models and assessed how they operated. Data sources for the implementation study include staff interviews, observations, and participation data. The impact study randomly assigned participants to a PWE program group, an OJT program group, or a control group that did not have access to either of these subsidized employment models but was required to participate in other welfare-to-work activities.

PWE involves a six-month, fully subsidized placement in a position in the public or nonprofit sector. OJT is a private sector wage subsidy approach. Participants are placed in jobs with for-profit, private employers. The two models differ considerably in their philosophy and ease of implementation. PWE works by providing participants with work experience that enhances their résumés and bolsters their soft skills. The program model aims to increase participants' attractiveness to future employers. Also, OJT attempts to mitigate the hiring risk that employers take and to overcome a persistent challenge of subsidized employment programs: successfully transitioning participants from subsidized to unsubsidized employment.

The results provide important insights into the viability and effectiveness of subsidized employment as a welfare-to-work strategy for people receiving TANF in a large county welfare program.

Major Findings & Recommendations

On average, PWE achieved higher subsidized job placement rates, faster placement into subsidized jobs, and longer placement durations compared with OJT. However, in the first year after random assignment, both PWE and OJT group members were:

  • More likely to work,
  • Worked more quarters on average, and
  • Had higher average earnings than control group members.

These findings are consistent with recent research that has found that more traditional subsidized employment models that place participants in the public or nonprofit sector are easier to implement and have higher participation rates than models that place participants in the private sector and take a wage subsidy approach. Importantly, both models’ placement rates compare favorably with recent research on similar types of subsidized employment models.

Evidence suggests that:

  • PWE likely had a small impact on employment during the last year of the follow-up period and may have improved the quality of group members’ employment at the end of the follow-up period.
  • OJT did not have any significant long-term impacts on employment or earnings aside from a small increase in the number of quarters the OJT group was employed in the last year of follow-up compared with the control group.
  • There were no long-term employment differences between PWE and OJT group members.

Key Findings:

  • The two models differed substantially in terms of their subsidized employment placement rates and the duration of those placements, and there was considerable variation in the quality of implementation across service providers.
  • As expected, both models led to large increases in employment and earnings during the first year of follow-up.
  • There is some evidence that PWE led to a small positive impact on employment in the last year of follow-up and that this effect was concentrated among those with little recent work experience.
  • PWE’s small impact on employment in the last year of follow-up was not large enough to significantly reduce TANF receipt rates or increase income in the long term.
  • The government spent more on the PWE and OJT groups than it spent on the control group, and more on the PWE group than on the OJT group.