Having condemned housing subsidies, export subsidies, agricultural subsidies, and many other subsidies besides, I find that I still have a soft spot for employment subsidies. The case is fairly straightforward: even in a robust economy, there are many people — ex-offenders, less-skilled workers, etc. — who are on the margins of the labor market. The wages they command in the formal economy are low enough to make work in the informal economy, or indeed non-work, a relatively attractive proposition.

Yet as the University of Chicago economist James Heckman has observed, “skills beget skills and capabilities beget capabilities.” A long period of non-employment can become self-reinforcing. There is thus a strong case for using public policy levers to guarantee that work in the formal sector is more attractive than the alternatives. And that’s where subsidies come in.

Catherine Rampell of the New York Times has noted the apparent success of a small number of subsidized job programs. We don’t have enough data to draw rock-solid conclusions, so keep that in mind when you read the article:

The opportunity to simultaneously benefit struggling workers and small businesses has helped these job subsidies gain support from liberals and conservatives. Congress is now considering whether to extend the subsidy, which would expire in September, for an additional year. A House vote is expected on Thursday or Friday.
Despite questions about whether the programs displace existing workers, many economists have argued that direct job creation programs are a more cost-effective way to put some of the nation’s 14.6 million unemployed back to work than indirect alternatives like tax credits and construction projects.

A sustainable wage subsidy program would look very different from the model Rampell describes. But if we really are looking at an era of persistently high unemployment, we need to think about alternatives to a massive expansion of number of people living on public assistance.