HATTIESBURG, Miss. » Scott Phillips had to close his small plumbing company after the housing bubble burst and his business dried up. Roshonda Bolton lost her job when the garment and uniform factory where she had worked for 16 years shut down last August.

Hunting for work just as the nation's economy was shedding more than 8 million jobs, they found little besides discouragement.

“;I applied for everything, found nothing,”; said Bolton, 37.

That finally changed when the two were hired by a paper-napkin factory here last month, placing them in the vanguard of a new approach that Mississippi and a growing number of states are taking to get people working again. Their salaries will initially be paid by the state of Mississippi, which is tapping into a relatively small pot of welfare money in last year's stimulus package that can be used to subsidize jobs directly.

Now they are being trained on the machines here at the Hattiesburg Paper Co., learning to turn mammoth rolls of paper into folded dinner napkins and toilet paper. The general manager, Steve Swiggum, said the state's offer to subsidize the salaries helped push the company to accelerate its hiring.

“;We kind of held back a little bit in the midpart of the fall,”; he said, “;just to wait to really see what the economy was going to do.”;

The debate over a new jobs bill in Congress—where the Senate is considering a wavering agreement supported by the Obama administration—largely centers on other approaches, like modest payroll tax breaks for businesses that hire and more spending on infrastructure.

Lately, however, with the unemployment rate stubbornly hovering near 10 percent, some liberal economists have urged the Obama administration to take a more direct tack: They want the government to spend money directly to create jobs, much as it did during the New Deal. Some call it the most cost-effective way for the government to create jobs.

The idea has gained little traction in Washington. But on a small scale, some states are already taking the direct approach, using a sliver of the $5 billion in welfare money in last year's stimulus act that can be used to pay governments and private employers to hire people.

Florida recently announced that it would use up to $200 million to create thousands of jobs in the public and private sectors. Los Angeles County set itself a goal of putting 10,000 people to work with its money. Tennessee focused its initial efforts on Perry County, a small rural county where the unemployment rate rose above 25 percent after an auto parts plant closed.

After Perry County paid for roughly 400 jobs, as varied as road workers and pie bakers, the unemployment rate dropped to 18 percent. But local officials worry about what will happen when the subsidies end.

Here in Mississippi, state officials have come up with a novel approach that they hope will improve the chances that the jobs they create will outlast the subsidies. Labor experts say the experiment is being watched with interest by other states.

The Steps program, as Mississippi calls it, focuses on private-sector jobs. There are limits as to what kinds of work can qualify—no strippers or bartenders need apply. And the program is set up to reduce the subsidy for each new worker over time: Employers will be reimbursed for each new worker's full salary for the first two months of work, and then the monthly reimbursement will be scaled back gradually until it drops to just a quarter of the salary in the sixth month. After that, the employer must pay the full salary.

The program is basically open to almost all for-profit businesses and nonprofit groups, as well as public hospitals, that are in good standing with the state. To increase small-business participation, officials said they were giving priority to employers with 25 employees or fewer, and barring companies where the work force has gone on strike or been locked out. No more than half of a business' work force can participate.

For now, stimulus money is paying the salary of Edgar Herring, a 49-year-old who lost his job of 18 years when a local lumber company shut down last fall, at his new job on the housekeeping staff at King's Daughters Medical Center in Brookhaven.

It is also paying the salary of Roger Thomas, 36, who lost his job as a car salesman, at his new sales job with National Collection Systems, a locally owned waste management company in Jackson.

And it is paying Johnny B. McGowan, 59, Curtis R. Williams, 43, and John McCoy, 46, to install metal studs and Sheetrock in the old Standard Life building in downtown Jackson, an Art Deco tower being converted to apartments.

The challenge with subsidized work programs is to make sure that the government does not wind up paying for jobs that would have been created without public money, said Richard A. Hobbie, the chief executive officer of the National Association of State Workforce Agencies, which represents state labor departments.

The last big federal subsidized jobs program, signed into law by President Richard M. Nixon, ended during the Reagan administration after critics charged that it was paying local governments for jobs they would have filled in any case.

If the idea of subsidized jobs is seen as liberal in some circles, it seems to have bipartisan appeal at the state level. Gov. Haley Barbour of Mississippi, one of the nation's most prominent Republicans, said he saw the state's program as being in the spirit of the welfare overhaul.

“;It's welfare to work,”; he said.

The state can spend up to $43 million on the program, which officials estimate could create as many as 3,500 jobs—the equivalent of several factory openings, but only a small dent in the problem for a state that had 133,000 unemployed residents in December. Only a few dozen workers have been hired since the program began last month after receiving federal approval.

Mississippi's decision to pay for jobs in the private sector means that the public is paying to create jobs that will provide little public benefit. But Barbour said he believed it to be the best way to improve the economy.

“;The real economy that generates jobs generates private-sector jobs, from whence come taxes and quality of life for people,”; he said in an interview in his office in Jackson. He added that he believed it would be self-defeating to try to spur economic development by using taxpayer money to create more public-sector jobs. “;That's like a dog chasing its tail, except sooner or later there's no tail left,”; Barbour said.

Now the problem facing Mississippi and other states is the calendar: The welfare money in the stimulus bill must be in the process of being spent by the end of September. Barbour said he hoped the program would be extended so more jobs could be created.

For the workers, there is another deadline: six months from now, when the subsidies wind down. But Wanda Lindsey, 39, who was hired to help a Jackson construction firm, Garrett Enterprises, manage projects and bid on new ones, said she expected to more than pay for herself.

“;I fully intend to make them a lot more than that in the first six months,”; she said.