Private Employers and TANF Recipients. 2.2  Employers and TANF Recipients


2.2.1 Employer Interest in TANF Recipients

What types of employers are most likely to hire or to be interested in hiring TANF recipients?

Many research studies have addressed the first of these two questions using straightforward analyses of survey or administrative records data. As a result, this is one of the questions that can be answered well.

In general, employer interest in hiring and retaining TANF recipients has been high in recent years. Based on evidence from a large survey of employers in four cities, expert panel member Harry Holzer recently concluded that aggregate demand for their labor is more than enough to absorb all TANF recipients who have entered the labor force (Holzer, 2002). While demand is strong, panel member Timothy Bartik concluded that there still is not enough employment for at least one person in all poor households to hold a full-time, year-round job (Bartik, 2001a).

Employer interest in TANF recipients has been concentrated in specific types of companies. The research evidence consistently indicates that the employers who most often hire TANF recipients share several attributes. First, the vast majority of these employers are service providers. The service sectors most likely to employ welfare recipients include retail, eating and drinking establishments, business services, and health services (Lane, Mikelson, Sharkey, and Wissoker, 2001; Lane, Mikelson, Sharkey, and Wissoker, 2002; Mills and Kazis, 1999; and Roberts and Padden, 1998a). Current and former welfare recipients are hired less frequently by manufacturers.(5)

Second, TANF employers tend to be larger companies and located in cities. Company size is positively correlated with firms' propensity to hire welfare recipients (Mills and Kazis, 1999; Roberts and Padden, 1998a). Companies above a threshold of about 100 employees appear to be more receptive to the welfare population; however, the additional effect of firm size above this threshold is less clear. The association between firm size and TANF recipient hiring results from readily discernable factors such as the industries and locations of larger firms, as well as more subtle factors such as the attitudes of small business owners toward soft skills (see discussion below).

In general, suburban firms appear to be more willing than inner-city firms to consider hiring welfare recipients, but less likely to actually hire these individuals. Employers in central cities have filled about three percent of their jobs with welfare recipients, compared to two percent for suburban employers (Holzer, 2002a). Much of this discrepancy between intentions and practices results from the fact that most TANF recipients live in cities and are closer to urban employers. There is also evidence that race and ethnicity play a role in hiring decisions (see Moss and Tilly, 2001).

Third, employers interested in hiring TANF recipients are more likely to be offering jobs with irregular work hours, low pay, and/or alternative job arrangements. The inferior hours, wages, and fringe benefits given to TANF recipients are well documented in the literature (Hotz, Mullen, and Schulz, 2002; Rangarajan, 1997). Very often these are the attributes of entry-level positions requiring few skills, as welfare recipients are one of the groups of potential workers possessing limited skills and willing to accept low-paying jobs with minimal benefits.

Welfare recipients, and individuals with characteristics indicating they are at risk of welfare receipt, are twice as likely as other workers to work in "alternative" job arrangements (Lane et al., 2002).(6) Such alternative arrangements, as defined by the Bureau of Labor Statistics, include independent contractors, on-call workers, temporary help agency workers, and workers provided by contract firms. These arrangements are common in many service sectors in which welfare recipients find employment.

Temporary help agencies are especially important for the TANF population. These organizations employ a large proportion of welfare recipients and their level of contact with recipients is said to be greater than any other employment-related institution outside of public agencies (Autor and Houseman, 2002). Welfare recipients and people at risk of welfare receipt appear to have had worse employment outcomes in temporary jobs than have other workers (Lane et al., 2002). However, the causal connection is unclear, because we do not know how welfare recipients with temporary-help jobs would have fared without those jobs (see Autor and Houseman, 2002).

At the meeting of this project's expert panel, one of the panelists emphasized that it is important to distinguish between different types of employers. While giant corporations and small businesses are both employers, they have very different needs. Even when labor market conditions are favorable for employers  that is, when there are many unemployed people looking for work  small employers report they have a hard time finding workers with the skills they need. Half of the employers surveyed a year ago by the U.S. Chamber of Commerce expressed concern about their ability to find skilled workers, and the Chamber believes that in the past year this number has risen to about 70 percent.

2.2.2 Employer Targeting of TANF Recipients

To what extent do employers target TANF recipients when trying to hire low-skill and entry-level workers?

This question is harder to answer conclusively. In part this results from the fact that "target" has multiple meanings. It may refer, for example, to an employer's public commitment to hiring TANF recipients, its close involvement with a labor market intermediary that targets TANF recipients, or the fact that its workforce includes a high percentage of TANF recipients. However, none of these measures necessarily indicates that an employer gives hiring preference to TANF recipients over other low-wage or entry-level applicants or is more inclined to retain recipients after they have been hired. Indeed, researchers such as Holzer (2002a) have focused on factors affecting employer willingness to hire welfare recipients.

At the project's expert panel meeting, several panel members expressed skepticism regarding employers' ability to target TANF recipients. "Employers," said one panelist, "just need someone to do the job, regardless of whether or not he is a TANF recipient." However, targeting may be feasible under better economic conditions. As one expert panel member commented, "Hiring TANF recipients is not the flavor of the month," but was more in vogue three years ago, due to a tight labor market. "Welfare-to-work momentum," continued the panel member, "was lost when the economy slowed." This is consistent with research evidence that labor demand for welfare recipients is very sensitive to business cycle conditions (Holzer and Stoll, 2000).

On the other hand, de facto targeting may occur when employers work with labor market intermediaries that focus on TANF recipients. Pavetti and her colleagues (Pavetti, Derr, Anderson, Trippe, and Pashal, 2000) conducted a substantial qualitative study of such intermediaries, defining them as "brokers between the welfare system and employers." When employers establish working relationships with organizations that train and place only welfare recipients, they signal their intention to hire TANF recipients.

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