Why Transitional Jobs Need to be a Component of Our COVID-19 Recovery Strategy

Last week, another 3 million workers filed for unemployment insurance, bringing the total number to 36.5 million in the last two months. Yet, these unemployment numbers fail to capture the full impact COVID-19 has had on the American workforce. By some estimates, more than half of working adults who applied for unemployment support in recent weeks were unsuccessful. Furthermore, the number of people reporting involuntary part-time employment rose by 6.6 million last month.

And an examination of who is out of work reveals that economic disruption caused by COVID-19 is not distributed equally. Women, low-wage workers, and those with lower levels of education are more likely to be unemployed.

U.S. employers are unlikely to scale their workforces to pre-COVID levels immediately after the public health crisis ends. While some dislocated workers will be able to resume their old jobs, millions of working-age adults will struggle to regain their footing in a sluggish labor market. If the Great Recession is any indication, the people who have been hardest hit by our economic downturn are likely to be the ones left behind during our economic recovery. As such, we need a strategy to quickly get vulnerable populations back to work.

Transitional jobs are a form of temporary, subsidized employment that provides individuals with work that pays a living wage and allows them to gain valuable work experience, strengthen their resume, and build social and professional networks. Participants also have access to support services designed to help them transition into a stable, unsubsidized job, often but not always, with the same employer. Typically, public, private, or non-profit employers receive a subsidy for up to 100 percent of the wages they pay to workers in transitional jobs. Subsidized employment is not a new concept. The New Deal’s Works Progress Administration (WPA) is perhaps the best known and largest national jobs program, but federal and state governments have often turned to forms of subsidized or transitional employment to help workers recover from recessions. In response to the Great Recession, the American Reinvestment and Recovery Act (ARRA) appropriated $1.3 billion to create 260,000 subsidized jobs for Temporary Assistance for Needy Families (TANF) recipients and justice-involved populations, which had a significant positive impact on the employment and earnings of jobseekers. Transitional jobs are a proven strategy for building pipelines into careers during cyclical periods of high unemploy­ment, as well as when the labor market is relatively strong.

Under the Workforce Innovation and Opportunity Act (WIOA), the public workforce system can use up to 10 percent of federal funding for transitional jobs in the public, private, or nonprofit sectors for disadvantaged individuals who are chronically unemployed or have an inconsistent work history. Given the economic crisis that confronts us, a greater federal investment is needed. The House Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act released this week would appropriate $485 million for Adult Employment and Training Activities and $597 million for grants to States for Dislocated Worker Employment and Training Activities, up to 40 percent of which could be used for transitional jobs for individuals with barriers to employment.

While a step in the right direction, the scale of our current unemployment and underemployment crisis, which is only expected to get worse, warrants greater action. Getting people back into jobs, once it is safe to do so, is critical for the recovery. And without a significant federal investment, many employers will struggle to bring back jobs lost in the last few months or create new ones to restart the economy.

This latest round of proposed stimulus funding wouldn’t guarantee greater access to subsidized employment, which is needed to incentivize the rehiring of long-term employed, justice-involved, low-income, and other populations that have been historically overlooked by employers. Nor would it support the reemployment of other workers displaced by the pandemic who need more than anything a family-sustaining wage and access to benefits like health care.

Congress has taken bold action to expand coverage of unemployment insurance and it needs to continue. But digging out of this hole will also require a reemployment strategy. While the Coronavirus Aid, Relief, and Economic Security (CARES) Act made some much-needed improvements to our unemployment insurance system, like temporarily increasing the weekly the UI compensation amount and making independent contractors and gig workers eligible for UI benefits for the first time, this system was never designed to sustain workers for a crisis of this magnitude. Unemployment insurance was not intended to fully replace a worker’s wage, nor are state systems solvent enough to accommodate the millions of dislocated workers seeking benefits. Indeed, unemployment insurance partly mitigates the effect of job loss but is a poor substitute for paid, full-time work. Research suggests that those who are long-term unemployed, meaning out of work for six months or longer, are more likely to earn less when they finally find another job, experience a loss in lifetime earning potential, and suffer physical and emotional harm.

A comprehensive subsidized employment program could help mitigate the negative effects of long-term unemployment while reducing dependence on state unemployment compensation and other assistance programs. Furthermore, with state and local governments facing significant budget shortfalls and austerity measures to balance their budgets, public sector transitional jobs could help prevent or lessen cuts to critical services that residents depend on. But job quality also matters. This pandemic has exposed just how vulnerable low-wage workers and those without access to healthcare, paid sick and family leave and other benefits are. A transitional jobs policy should not replicate these same inequities.

As we saw with both the Great Depression and Great Recession, economic recovery takes time. Transitional jobs are certainly not the panacea - we will likely need a multi-pronged policy and investment strategy that also increases access to postsecondary training, apprenticeships, and workforce preparation programs for youth and adults who need reskilling. But subsidizing employment for displaced workers could help accelerate what might otherwise be a slow, painful, and inequitable recovery.

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