Policy Initiative Spotlight: Michigan’s Leg Up for Long-term Unemployed

One of the more serious and lasting consequences of the Great Recession and its aftermath has been the sharp rise in the number of long-term unemployed.  Nearly 45  percent of the unemployed –or more than five million people -- have now been out of work for six months or more.  That is up from less than 20 percent in 2007. Persistent joblessness atrophies skills and discourages risk adverse employers who are unlikely to take a chance on someone out of work for so long.  Few federal programs provide help for the long-term unemployed, though the recent growth in social security disability insurance may be a response to persistent joblessness.

Some interesting initiatives are under way at state and local levels, however.  In March 2012, Michigan Governor Rick Snyder announced Community Ventures (CV), a program aimed at encouraging employers to hire and retain the long term unemployed.  The program is administered by the Michigan Economic Development Corporation (MEDC), which also markets the state to expanding companies, talented workers, and tourists.

MEDC President and CEO Michael A. Finney said in an interview that CV is part of the governor’s public safety program, so the initiative targets those with limited training and opportunities who are often most susceptible to crime, including ex-offenders and the teenage children of unemployed single parents.  Military veterans are also a focus.

The approach starts with employers rather than with the unemployed. CV first approaches potential employers to get them to make a commitment to hire new workers from the program's pool if the state assists in preparing them for the job. Finney said that “most programs trying to get job opportunities for the least employable tend to start with getting people up to speed with high school degrees, GEDs, or other skills training.  When you do all those things and there’s not an employer that’s committed to taking them and creating a sustainable job for them, it’s a bigger lift to get it done.” Instead, the state “decided to go to employers and do a deep dive on the challenges employers have in taking on our targeted audience.”

One example.  At one firm, only 10 percent of applicants from CV’s target population were able to pass a mechanical aptitude test. CV instituted job coaching and raised that to 40 to 50 percent, dramatically increasing the hiring pool.

To retain hired workers, CV is also planning to assist in child care and will give generous reimbursements to those with cars who pick up fellow workers, to prevent otherwise good workers from arriving late to their jobs due to Detroit’s unreliable bus system.  Uniforms are another hidden issue that CV uncovered.  One firm requires employees to wear a simple uniform, a company t-shirt and dark slacks, but the cost is a high burden for these new workers.  CV will simply purchase a week’s worth the uniforms for new employees.

Michigan’s 2013 budget allocated $10 million to CV, starting in October.  CV has discretion over the ultimate use of the funds, something that Finney recommends that federal policymakers consider: “We would love to have more block grant, fungible money, from the federal government with a primary metric being an outcome that we have to deliver. Design a program at a high level without too much detail—like CV—and allow us to get it done without a lot of restrictions.”

This flexibility distinguishes CV from programs such as Georgia Works and Platform to Employment that continue to pay unemployment insurance benefits to workers while they attend company training programs for up to eight weeks.  While employers can thoroughly evaluate and train applicants, and workers learn new skills, hiring commitments are not made. There is controversy over the merits of these “bridge to work” programs, with some critics saying they are subsidies that offer employers free labor, and others saying that the federal guidelines for the program are too onerous for states  No states have accepted federal aid to try similar programs.

The Community Ventures initiative, while still in its early stages, has some modest gains to show. Three months in, MEDC has already received—or is negotiating final numbers for—commitments for 600 new jobs, well along the way to a 14-month goal of 1,000 jobs.  A Detroit automotive supplier has already begun hiring local workers with CV’s help.

Steven J. Markovich is a contributor to CFR.org.