Private Employers and TANF Recipients

05/01/2004

Content

 

This report presents the findings from the "Private Employers and TANF Recipients" research project. The study team conducted an extensive review of the research literature related to employers and recipients of Temporary Assistance for Needy Families (TANF) to assess current knowledge about pertinent employer attitudes and practices. Drawing on this review, and on the contributions of the project's expert panel, we have developed options for future research in this area.

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Findings from Existing Research

The success of welfare policy depends in part on the performance of the labor market. We know a great deal about the supply side of this market  that is, the characteristics of employees and jobseekers  as a result of extensive research on TANF recipients' attitudes, barriers to employment, job search activities, and employment and earnings. We know less about important aspects of the demand side  that is, employers  particularly employers' outlook, perceptions, and practices regarding TANF recipients. Most of the research on employers and TANF recipients consists of qualitative data on a small number of employers. These studies, while not definitive, offer numerous insights.

This extensive qualitative research is bolstered by a small number of studies utilizing quantitative data. Two sources of quantitative data on employers are especially noteworthy. One dataset is based on employer surveys, directed in the late 1990s by expert panel member Harry Holzer, that addressed employers' views of and experience with TANF recipients in four U.S. cities. The other source includes administrative records from the Unemployment Insurance and Work Investment Act programs linked to U.S. Census data on groups of TANF recipients. For example, the Census Bureau's Longitudinal Employer- Household Dynamics (LEHD) database matches individual-level Unemployment Insurance, Current Population Survey (CPS), and Survey of Income and Program Participation (SIPP) records for a large sample of individuals from around the country.

Four conclusions can be drawn from this qualitative and quantitative research. First, employer demand for labor from TANF recipients, which has been strong in recent years, is concentrated in specific types of firms. This demand comes disproportionately from the service sector and from relatively large companies with urban locations. Much of the demand for employees is to fill jobs with irregular work hours, low pay and benefits, and nonstandard job arrangements.

Second, employers who hire welfare recipients do so primarily to meet business objectives, not to provide a public service. Consequently, they are concerned about the same issues as for other employees, notably work attitudes, dependability, and job turnover. In addition, employer decisions to hire and retain welfare recipients are strongly influenced by labor market conditions.

Third, many potential employers are skeptical of TANF recipients' "soft skills"  qualities such as positive outlook, conscientiousness, teamwork, and the ability to adapt to workplace norms. This is particularly true of firms with little or no experience employing welfare recipients. Employers also worry that recipients face significant barriers-such as poor academic preparation, transportation and child care problems, and mental illness and substance abuse  that limit their on-the-job effectiveness and increase the chance of job turnover.

Finally, employers rely heavily on screening tools in hiring TANF recipients. In recruiting recipients, employers use a variety of methods, but rely most on "word of mouth" and advertising. Individuals who are recruited are then screened. For hard skills such as academic preparation and occupational competencies, employers use tests and evaluate individuals' work experience. Assessment of soft skills is typically more informal, leading some researchers to conclude that it may disadvantage minority groups.

It is hard to draw conclusions about employer practices once welfare recipients have begun jobs. Limited evidence suggests that employers find it difficult to provide the support and services often needed by welfare recipients. It also appears that few employers devote substantial resources to training low-skill workers and most of this training is concentrated in a few skill areas. The evidence regarding employer practices such as mentoring, counseling, communication, and job performance assessment is limited and inconclusive.

Two additional limitations of the existing research evidence are noteworthy. One is that, while many studies have identified and described employer practices, none has systematically assessed their effectiveness. A number of studies offer clues about how certain approaches and practices might be related to desired outcomes in particular settings. However, neither the characteristics nor the outcomes of various practices have been systematically compared to one another or to well-defined benchmarks.

The other limitation is that little attention has been paid to the role of labor market intermediaries  the public agencies, private companies, and community organizations that perform recruitment, hiring, and employee support and management functions for employers  in determining employer attitudes and practices. Research interest in intermediaries has grown, but most of this interest has focused on a few specific organizations. To date, only one survey, covering two cities, has examined the full range of intermediaries identified as working with TANF recipients. Moreover, none of the existing research has documented the exact functions served by intermediaries for a particular group of employers.

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Options for Future Research

This project synthesizes evidence on employer perceptions and practices from the best and most pertinent research studies now available. This evidence is substantial and consistent for some topics, but much weaker for many others. However, even in those areas in which the research evidence is relatively strong, it has not been collected using consistent definitions for various practices and outcomes, and it is not nationally representative. The best available data on many employer topics come from Holzers surveys, which were limited to four cities in the Midwest and West. The most systematically collected data on intermediaries come from Abt Associates surveys, conducted in only two Southern cities.

As a result, one important option for future research is a survey of a nationally representative sample of employers and the labor market intermediaries with whom they partner. Such a survey would provide a far more complete picture of the demand side of the labor market for TANF recipients than is currently available. In addition, it would inform decision making by government agencies, employers, and other institutions for years to come.

In embarking on a national survey, a number of survey design questions would arise, such as:

  • What should the sample frame be? Should it cover all employers or be limited to the private sector? Should the survey cover labor market intermediaries as well as employers?
  • How large should the survey sample be? How precise should the estimates of key variables be? To what extent should the survey provide estimates for subgroups of employers, such as companies in the manufacturing sector or companies with fewer than 20 employees, as well as estimates for all employers?
  • How should the survey(s) be administered? Should the survey be limited to a brief telephone interview, administered to a single respondent at each employer (or intermediary) at one point in time? Or, should it involve further and different forms of interviewing?
  • What would be the content of the employer survey? Should the surveys questions focus on employers experience with their most recent hires or attempt to cover a longer period of hiring and employment experience? To what extent should the survey address attitudes and perceptions rather than particular types of practices?
  • What would be the content of the intermediary survey? How much of the survey should be devoted to services provided to employers? How much should be devoted to intermediaries relationships with particular employers?

The cost of a national survey of employers would range between several hundred thousand dollars and several million. The lower cost would cover the design and administration of a high-quality basic telephone survey of 1,000 employers and a brief report that describes the surveys findings. For several million, a comprehensive survey could be undertaken, including (1) a core employer survey administered to 3,000 establishments, with a higher completion rate and more open-ended questions than in the basic survey; (2) an intermediary survey administered to 300 organizations with which employers in the core survey sample work; (3) follow-up on-site and telephone interviews with selected employers and intermediaries; and (4) a thorough report on this research effort. Between these endpoints on the cost spectrum are other options. For example, eliminating the on-site interviews with intermediaries and employers and in-depth analysis of employer practices associated with them would reduce the cost of the comprehensive survey option by half.

The other priority for future research is evaluation of the effectiveness of different recruitment, hiring, support, and management approaches used by employers and intermediaries. Both the findings of this study and the advice of the projects expert panel indicate that rigorous impact research is needed to evaluate the effectiveness of these practices. However, it also is clear that several preliminary research steps must be taken before embarking on a study of employers and intermediaries that entails an experimental or quasi-experimental research design. First, it is important to establish the characteristics and prevalence of (1) particular employer practices in recruiting, hiring, supporting, and managing employees; and (2) the outsourcing of these functions to different types of intermediaries. Second, it is critical to develop testable hypotheses for alternative employer practices and employer partnerships with intermediaries.

A national survey appears to be the most viable means for taking the first of these two steps. It also would help with the second step, especially if the survey involves in-depth data collection on particular practices and intermediaries. Other research efforts, notably systematic qualitative research on innovative practices and further analysis of existing quantitative datasets, also would make important contributions to our general understanding and knowledge.