We investigate the role of targeted subsidies in France for regional labor market outcomes. In many developed economies, the structural decline of manufacturing sectors left formerly flourishing regions in distress. In contrast to previous work that has focused on the level of local subsidies, we are interested in how local subsidies are spent. Therefore, we study a policy that created regional variation in the freedom to allocate subsidies within a region while keeping the overall amount of subsidies constant for each region. When regional authorities have more discretion on how to spend their funds, would they finance projects that have either immediate employment benefits for the current population or a higher potential for future employment growth? We find that regional authorities shift allocations to sectors with stronger growth in value added. Furthermore, employment and hours of work increase persistently driven by low-skilled manufacturing labor. In contrast, low-skill services take a negative hit. Hence, granting regional authorities more freedom to choose how to subsidize firms with a given budget stems against the general trend of decreasing low-skilled manufacturing employment. But it also hinders a transition to services and mid-skill jobs.