Our approach began by comparing estimates of the number of welfare recipients entering the labor market to changes in the low-skill labor force in each of the regions. Were there enough jobs to absorb the increase of welfare recipients who left for work or who combined welfare and work?
We then attempted to estimate the effect of the welfare push on employment and wages in each of the regions. As discussed above, distinguishing between the effects of welfare push and demand pull is difficult for several reasons. One is that, for the most part, the economies of our 12 study regions still had not recovered fully from the 1991 recession (e.g., they had historically high unemployment rates in 1993). Hence, they could be reasonably characterized as having an excess supply of labor at going wage rates, which makes application of the demand/supply analysis problematic. In addition, factors other than welfare reform and economic expansion had impacts on some of these areas low-skill labor markets during this period. As noted above, three such factors are the expansion of the EITC, population growth, and increases in the minimum wage.