The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Can the Labor Market Absorb Three Million Welfare Recipients?. Conclusion

12/01/1999

The recent job finding success of welfare recipients, both in Wisconsin and in the nation as a whole, suggests that when employer demand is high and unemployment low most recipients who diligently seek work will eventually find it.  The experience in Wisconsin and elsewhere also suggests, however, that the jobs they find will not be well paid and may not last long.  The queuing model offers a reasonable model of local labor markets in the very short run, but is a poor approximation of the market over periods of a year or more.  Few welfare recipients find themselves permanently stuck at the end of a long job queue.  The great majority of unskilled workers, with intense effort, can eventually find a job of some kind.  Because of the nature of the jobs they find and the poor preparation they bring to those jobs, however, unskilled single parents will usually find low-wage jobs and jobs that end quickly.  The supply-and-demand model accurately predicts that in the long run, as the supply of unskilled workers increases, the wages they earn will tend to fall, encouraging employers to create jobs that exploit the availability of a cheaper workforce.

The architects of welfare reform can point to two notable achievements so far.  Reform has boosted the fraction of time that single mothers devote to paid work.  It has also increased the percentage of family income that single mothers derive from a weekly paycheck.  These achievements are likely to endure, even when employer demand slackens and overall unemployment rises.  The proportion of time that an individual parent spends in employment may fall when the economy weakens, but only in rare cases (or in severe recessions) will it fall to zero for years at a time.  The success of welfare reform has been aided by a strong labor market.  The rapid decline in the rolls and sharp increase in the employment rate of single mothers has also been helped by the fact that the most-employable mothers have been the first to leave the rolls.  States where the caseload has fallen by 50 percent or more will find it harder to place remaining, less-skilled recipients in private-sector jobs. But many states have a long way to go before they fully implement a comprehensive welfare-to-work strategy.  In those states, many parents remain on the rolls who can be expected to land jobs quickly if they are pushed to find work.

State and federal reform has so far been successful in boosting the employment rate of single mothers.  Whether it has increased poor families' net incomes is less certain.  For single mothers forced to accept a series of temporary, poorly paid jobs, the idea that reform has improved their standard of living may seem strange.  But tougher welfare rules have pushed more of these mothers to seek jobs  and in most cases to find them.