The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Low-Wage Labor Markets: The Business Cycle and Regional Differences . Regional Differences in Jobs and Unemployment Rates

12/01/1999

There has been concern that former welfare recipients will have greater difficulty finding jobs in some regions than in others.  In light of this concern, it is important to ask how low-wage labor markets vary by region.  In this section, regional differences over the past decade are examined using three labor market indicators:

  • The growth of paid jobs;
  • The mix of low-wage, near low-wage, and higher-wage jobs; and
  • The unemployment rate facing women with high school only or less than high school.

Figure 6 displays data on the first two of these indicators.  The job prospects of former welfare recipients depend both on the overall growth of jobs in a regional economy and on the mix of low-wage, near low-wage, and higher-wage jobs in a region.  Where overall job growth is good, and where the mix of jobs is shifting toward higher-wage jobs, labor markets tend to be tighter.  In such labor markets, former welfare recipients are likely to face good job prospects and opportunities to upgrade their skills and to qualify for jobs that pay well above the minimum wage.

Figure 6.  Hourly paid jobs by wage level and region, 1988, 1992, 1997.

Figure 6. Hourly paid jobs by wage level and region, 1988,</p>
<p>1992, 1997.

Figure 7 displays data on the third indicator — the unemployment rate for women with high school only or less than high school in each major region.  These unemployment rates should be related inversely to the employment prospects of former welfare recipients in each region.

Figure 7.  Unemployment rate for women with high school or less by region, 1988, 1992, 1997.

Figure 7. Unemployment rate for women with high school or less by region, 1988,</p>
<p>1992, 1997.

The data in figures 6 and 7 are used to examine the job prospects of former welfare recipients in each of the four major regions of the United States.

Slack Labor Markets in the Northeast

In the Northeast, the total number of hourly jobs grew only modestly between 1988 and 1997 — by less than 9 percent (see figure 6), compared with nearly 19 percent nationally.  Also, the mix of hourly jobs shifted toward low-wage and near low-wage jobs — whereas low-wage and near low-wage jobs accounted for about 28 percent of all hourly jobs in 1988, they were 36 percent of all hourly jobs by 1997.  The growth of low-wage jobs in the Northeast was especially strong following the recession of the early 1990s.  Relatively slow job growth and the shift toward lower-paying jobs suggest that labor markets in the Northeast are relatively slack.

A look at the unemployment rate for women with high school or less tends to confirm the view that the labor market is slack in the Northeast.  Figure 7 shows that the unemployment rate for women with high school or less rose dramatically in the Northeast during the last recession (that is, between 1988 and 1992).  Moreover, the Northeast has struggled to recover since 1992:  The 1997 unemployment rate for women with high school or less was 7 percent, well above its pre-recession (1988) level.

Tight Labor Markets in the Midwest

In the Midwest, the total number of hourly jobs grew by 18 percent between 1988 and 1997, roughly the national average (see figure 6).  In the Midwest, low-wage and near low-wage jobs together accounted for 37 percent of all hourly jobs in both 1988 and 1997.  However, the mix of low-wage and near low-wage jobs shifted:  The number of low-wage jobs fell while the number of near low-wage jobs grew rapidly (by over 36 percent).  Good job growth and the shift toward higher-paying jobs suggest that labor markets in the Midwest are relatively tight.

As can be seen in figure 7, the Midwest experienced only a mild recession in the early 1990s:  The unemployment rate for women with high school or less barely budged between 1988 and 1992.  Moreover, the unemployment rate for women with high school or less fell significantly between 1992 and 1997, and stood at just under 6 percent in 1997.  The evidence is strong that labor markets in the Midwest are tight and favorable for former welfare recipients to both enter the job market and move up to better jobs.

A Shift Toward Low-Wage Jobs in the South

In the South, the total number of hourly jobs grew at just below the national average between 1988 and 1997 — by 16 percent (see figure 6).  However, in the South, the mix of hourly jobs shifted toward low-wage and near low-wage jobs.  While low-wage and near low-wage jobs accounted for 42 percent of all hourly jobs in 1988, they were 49 percent of all hourly jobs by 1997.  (Low-wage and near low-wage jobs grew at about the same rate.)  Overall job growth in the South has been good, but the shift toward low-paying jobs suggests that labor markets in the South are weaker than those in the Midwest, with fewer options for moving into better jobs.

Like the Midwest, the South experienced only a mild recession in the early 1990s, and the unemployment rate for women with high school or less barely rose between 1988 and 1992 (see figure 7).  In the South, though, the unemployment rate for women with high school or less fell very little following the recession and stood at about 8.4 percent in 1997.

Overall, the data in figures 6 and 7 suggest that, although jobs in the South have grown at roughly the national average rate, the pace of job growth in the South has not been enough to keep up with the number of new job seekers.  In other words, labor markets in the South appear to be rather slack.

High Unemployment in the West

Of the four major regions, the West had the strongest growth of hourly jobs overall between 1988 and 1997 — the total number of hourly jobs grew by over 26 percent (see figure 6).  However, a disproportionate amount of this growth was concentrated in low-wage and near low-wage jobs.  Whereas low-wage and near low-wage jobs accounted for 33 percent of all hourly jobs in 1988, they were 41 percent of all hourly jobs by 1997.  That is, job growth in the West has been good, but there has been a strong shift toward low-paying jobs, suggesting slack in the labor market.

Like the Northeast, the West experienced a severe recession in the early 1990s.  This is reflected in the dramatic rise in the unemployment rate for women with high school or less between 1998 and 1992 (see figure 7).  Also like the Northeast, the West has struggled to recover since 1992, and the 1997 unemployment rate for women with high school or less was nearly 9 percent — the highest of any region and well above the pre-recession level.

Summary

Of the four major regions of the United States, only the Midwest has a labor market that could be characterized as highly favorable to former welfare recipients.  In the Midwest, hourly job growth has been rapid, the mix of jobs has shifted toward higher-paying jobs (suggesting growing demand for labor), and the unemployment rate has dropped to a level well below that preceding the recession of the early 1990s.

In the other three major regions, while former welfare recipients may find jobs, many may face difficulties in remaining employed and moving up in the job market.  In the Northeast, job growth has been slow and skewed toward low-wage jobs, and the 1997 unemployment rate for women with high school or less was still above its 1988 level.  In the South, job growth has also been skewed toward low-wage jobs, and, there, too, the unemployment rate for women with high school or less has been persistently high — almost 8.5 percent in 1997.  In the West, job growth has been concentrated in low-wage jobs, and the unemployment rate for women with high school or less, although it has fallen from over 10 percent in 1992, was still nearly 9 percent in 1997.