The health of the entry-level or low-wage labor market is central to the success of efforts to move welfare recipients into employment. With the unemployment rate near its lowest level in 30 years, the labor market currently appears to be relatively favorable to welfare-to-work efforts. However, there are reasonable concerns that when the next recession hits, many low-skilled jobs will vanish and the gains achieved by former welfare recipients who have made the transition to work will disappear.
This paper addresses four questions that concern low-wage labor markets and the prospects of former welfare recipients. First, how has the labor market for low-skilled workers fluctuated over the last business cycle? The unemployment, employment, and labor force participation of workers with different levels of education during the last decade are addressed in the first section.
Second, what happened to the number of low-wage and near low-wage jobs over the last business cycle, and what is the occupational mix of low-wage and near low-wage jobs? These questions are addressed in the second section.
Third, are there differences across regions of the U.S. in the health of the labor market and, in particular, in employment prospects of former welfare recipients? These questions are addressed in the third section.
Fourth, are there differences among central cities, suburbs, and nonurban areas in the health of the labor market and the employment prospects of former welfare recipients? These questions are addressed in the fourth section.
Although much has been written on the low-wage labor market in relation to minimum wage laws, there is a notable dearth of literature addressing the health of the low-wage labor market over the business cycle, and especially the question of how former welfare recipients might fare. The likely reason is that, until relatively recently, little serious consideration was given to the idea of moving welfare recipients into the labor market. The general view was that most welfare recipients are relatively low-skilled women with young children whose time is better spent in child care activities than in the formal labor market. Of course, this may be a correct view, but policy has moved in another direction.
The paper relies on tabulations of the Current Population Survey (CPS) from 1988, 1992, and 1997 (see the appendix for a discussion of our use of the data). These three years were chosen to reflect the state of the labor market near the peak of the last economic expansion (1988), at the trough of the last recession (1992), and at a point well into the current economic expansion (1997). In other words, these three years, at roughly four-year intervals, correspond to good times, recession, and (again) good times.