How Well Have Rural and Small Metropolitan Labor Markets Absorbed Welfare Recipients?. Welfare Recipients' Participation in the Labor Force

04/01/2001

We first estimated the number of current and former welfare recipients who entered the labor force between 1993 and 1996, and between 1996 and 1998, and then compared these estimates to the increase in low-skill employment presented in Section I.A above. A region where the number of welfare recipients entering the labor force is significantly smaller than the increase in low-skill employment implies that the growth in jobs could accommodate the inflow of welfare recipients. Note that welfare recipients may have entered the labor force because of welfare reform or the improved economy. Conversely, a large number of recipients entering the labor market relative to the increase in low-skill jobs would lead us to believe that unemployment would increase and/or wages would decline.

Using the estimates presented in Exhibit 5.3 and the methodology outlined in Chapter 4, we estimated the increase of welfare recipients in the labor force and compared them to the increase in low-skill employment. The increase of welfare recipients included former recipients and current recipients and netted out the number who were in the labor force in the earlier year. As Exhibit 5.3 shows, the increase in low-skill employment exceeded the increase in welfare recipients entering the labor force for all regions, except North Country in the 1993 to 1996 period. North Country experienced a reduction in low-skill employment in the 1993 to 1996 period, which coincided with a decline in the total population. Employed welfare recipients as a percent of new low-skill employment ranged from 2.5 percent in Joplin, Missouri to 89 percent in Jamestown, New York between 1993 and 1996 and from 8 percent in Central Oregon to 52 percent in Southeast Missouri between 1996 and 1998.

Exhibit 5.3
Comparing Welfare Recipient Entrants and Increases in Low-Skill Employment
Region 1993-1996 1996-1998
Increase of Welfare Recipients in Labor Force (a) Increase in Low-Skill Employment (b) Recipients Employed/ Low-Skill Employment (%) (a/b) Increase of Welfare Recipients in Labor Force (c) Increase in Low-Skill Employment (d) Recipients Employed/ Low-Skill Employment (%) (c/d)

Decatur and Florence, Alabama

203 3,877 5.2 361 1,118 32.3

Rural Mississippi

3,235 38,716 8.4 9,129 21,729 42.0

Joplin, Missouri

82 3,271 2.5 428 2,644 16.2

Southeast Missouri

1,275 6,766 18.8 1,934 3,737 51.8

Jamestown, New York

387 436 88.8 259 590 44.0

North Country, New York

762 -155 n/a 936 2,732 34.3

Medford-Ashland, Oregon

253 3,633 7.0 383 2,544 15.1

Central Oregon

109 3,152 3.5 142 1,874 7.6

Florence, South Carolina

139 1,865 7.5 528 1,573 33.6

Vermont

1,355 8,213 16.5 586 5,836 10.0

Eau Claire, Wisconsin

197 4,360 4.5 227 1,378 16.4

Wausau, Wisconsin

109 2,046 5.3 192 1,895 10.1

Average

    15.3     26.1

United States

255,443 4,090,284 6.2 846,346 3,585,571 23.6

Source: Lewin calculations using ES-202, NISP, BLS education and training requirements data, and data provided by state welfare agencies.

During the 1993 and 1996 period, the increase in low-skill employment dwarfed the increase of welfare recipients in the labor market in all but the New York regions. Thus, it appears that the low-skill labor market could absorb the inflow of welfare recipients during this period without a serious effect on employment or wages.

For most regions, the share of recipients as a percent of low-skill employment also increased in the 1996 and 1998 period. This was due, in part, to the fact that caseloads declined significantly during this period and a higher percent of welfare recipients were combining work and welfare than from 1993 to 1996. However, even between 1996 and 1998, welfare recipients accounted for only about one quarter of new low-skill employment. Coupled with the fact that unemployment declined in each of these regions between 1996 and 1998, it appears that the regions could accommodate the inflow of welfare recipients.

The average share of welfare recipients as a percent of low-skill employment in the 12 regions is slightly higher than the national average. This indicates that rural areas had a higher percentage of welfare recipients in the low-skill labor market than urban areas. However, it is not clear whether wages declined. Nor is it clear how the dual effects  welfare reform and the improved economy  impact the employment and wage results. These are discussed below.