How Well Have Rural and Small Metropolitan Labor Markets Absorbed Welfare Recipients?. Other Factors

04/01/2001

Factors other than the economy and welfare reform undoubtedly changed labor supply and demand. The EITC and increases in the minimum wage may have increased the incentive for work among low-income individuals, although the full extent of the effect of these two factors is largely unknown. Increasing the minimum wage could also result in a loss of jobs if employers are unwilling to pay the higher wage. In addition, changes in the population resulted in shifts of the supply curve. Finally, the recession in the early 1990s affected unemployment due to the fact that wages were slow to respond to the decline in the demand for labor. Each factor is discussed in more detail below.