The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Conclusions and Policy Implications

12/01/1999

As long as the economy remains strong, the nation's labor market will continue to absorb the influx of would-be-workers leaving the welfare rolls. The labor force activity of low-skilled women overall has been rising and employers in the current tight labor market are generally willing to hire welfare recipients. Historically, the labor market adapts to new supplies of workers as well as to new technology, industry shifts, and other structural changes in the economy; and it is very likely do so again in this era of welfare reform.

However, concerns about the situation facing low-wage workers, whether or not they are coming from welfare, remain. Opportunities for work will not be strong in some areas of the country, and some workers may have difficulty entering and remaining in the labor market. In large urban areas with high concentrations of poverty and welfare recipients, for example, disadvantaged workers may face increased competition for jobs, spatial mismatch between jobs and job seekers, and lack of adequate public transportation.

In addition, because of their low skills and low educational levels, most welfare recipients will qualify for jobs which are relatively low-paying, concentrated in the secondary labor market, and subject to high turnover. Some labor economists also suggest that a large influx of welfare recipients, by increasing competition among low-wage workers for jobs, may depress wages.

The authors put forward several policy options for improving the wage, employment, and economic self-sufficiency outcomes of former welfare recipients and other low-skilled workers:

  • Policies to increase wages and sustain income:

    • A modest increase in the minimum wage could increase the earnings of over one million parents (mostly single mothers).
    • Encouraging and simplifying the application of the EITC could increase the number of eligible families that use this tax credit. Also, retaining tax credits for hiring, such as the WOTC, could encourage some businesses to hire targeted worker populations, even though the overall effect on expanding employment is minimal.
  • Policies to improve labor market access and job retention

    • Continued funding and support for programs that provide labor market information, job networking, job retention counseling, and career planning may improve employment and job retention prospects for the poor who otherwise lack access to such information and assistance.
    • Low-income workers in general, and especially low-income working parents, tend to benefit from supports and services such as child care and transportation.
  • Policies to encourage or support occupational mobility/job advancement

    • Businesses and industries could be encouraged to delineate skill requirements and possible career ladders for workers who begin in entry level jobs. In addition, financial incentives could be used to encourage businesses to provide on-the-job training for career ladders.
    • The continuing development of information networks should help workers better understand possible career opportunities and make more informed employment decisions.
  • Policies to enhance employment security

    • Targeted public and community service employment strategies could complement the regular labor market. For example, combining part-time public service employment with part-time regular employment might help a disadvantaged worker achieve full-time status if full-time work cannot be found in the regular sector. If designed well, public service employment can also provide substantive occupational experience and improved job skills.
    • Providing workers access to short-term (even part-time) community service jobs can serve as a bridge between jobs, to provide safety net income to workers not eligible for unemployment insurance.

       

Low-skilled workers, including most persons leaving welfare, can and do work, but generally qualify initially only for low-wage jobs with high turnover and few benefits. Carefully designed public policies can help those workers remain continuously employed and thereby increase their incomes. Low-wage entry level jobs can serve as a first step up the occupational career ladder, but only if the worker has access to services, information, further skills development, and support networks. Meanwhile, there may also be a need to consider policies to ensure a basic income safety net for working poor parents, especially during periods when they are between jobs.