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The effect of welfare reform and technological change on unemployment

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  • Jason L. Saving

Abstract

Unemployment has fallen to its lowest level in a generation. Some welcome this development because they believe it increases the average person's ability to achieve the American dream. Others view low unemployment as a precursor to dire economic consequences. Jason Saving examines the issue of unemployment and reaches three main conclusions. First, welfare reform can significantly reduce unemployment, and the empirical evidence to date suggests the recent American welfare reform effort has caused hundreds of thousands of Americans to leave the welfare rolls and enter the labor force. Second, welfare reform can increase the official unemployment rate, but it cannot increase the number of people who are out of work. Finally, technological change can help low-skilled or disabled individuals become productive members of the labor force, and there is reason to believe it has done so during the 1990s.

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Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (2000)
Issue (Month): Q2 ()
Pages: 26-34

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Handle: RePEc:fip:fedder:y:2000:i:q2:p:26-34

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  1. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  2. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 457-75, July.
  3. W. Michael Cox & Richard Alm, 1995. "By our own bootstraps: economic opportunity and the dynamics of income distribution," Annual Report, Federal Reserve Bank of Dallas, pages 2-24.
  4. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
  5. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  6. Rebecca M. Blank, 1989. "The Effect of Medical Need and Medicaid on AFDC Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 54-87.
  7. Hosek, James R, 1980. "Determinants of Family Participation in the AFDC-Unemployed Fathers Program," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 466-70, August.
  8. Jason Saving, 1998. "Is umemployment too low? How welfare reform and technology are creating a new employment standard," Southwest Economy, Federal Reserve Bank of Dallas, issue Nov, pages 5-8.
  9. Evan F. Koenig, 1998. "What's new about the new economy? : some lessons from the current expansion," Southwest Economy, Federal Reserve Bank of Dallas, issue Jul, pages 7-11.
  10. Robins, Philip K, 1986. "Child Support, Welfare Dependency, and Poverty," American Economic Review, American Economic Association, vol. 76(4), pages 768-88, September.
  11. Shroder, Mark, 1995. "Games the States Don't Play: Welfare Benefits and the Theory of Fiscal Federalism," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 183-91, February.
  12. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
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Cited by:
  1. Bharat Trehan, 2001. "Unemployment and productivity," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct12.

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