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The labor market effects of welfare reform

  • Darren Lubotsky

A major goal of the 1996 federal welfare reform was to increase the labor market participation of welfare recipients. Some analysts have speculated that if the reform is successful, this increase in labor supply may exert downward pressure on wages and reduce the employment rate of other low-skilled workers in the labor market. The magnitude of these hypothetical labor market effects is uncertain because there have not been large changes in eligibility for federal welfare programs from which to draw inferences. This study treats the 1991 elimination of the General Assistance program in Michigan as a rough analog to the 1996 federal reform. In all, about 82,000 able-bodied adults lost benefits. Comparisons with other states indicate that employment in Michigan increased by two to four percentage points among high school dropouts, which corresponds to 25-50% of the original GA caseload. There is little evidence of wage or employment declines. (Author's abstract.) (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 57 (2004)
Issue (Month): 2 (January)
Pages: 249-266

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Handle: RePEc:ilr:articl:v:57:y:2004:i:2:p:249-266
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  1. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1992. "On the Labor Market Effects of Immigration and Trade," NBER Chapters, in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 213-244 National Bureau of Economic Research, Inc.
  2. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
  3. Timothy J. Bartik, 1999. "Displacement and Wage Effects of Welfare Reform," JCPR Working Papers 66, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Rebecca M. Blank, 2001. "What Causes Public Assistance Caseloads to Grow?," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 85-118.
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