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The Labor Market Effects of Welfare Reform

Author

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  • Darren H. Lubotsky

    (University of California, Berkeley)

Abstract

The recent reform of the federal welfare system is meant to encourage recipients to leave welfare and enter the workforce. If the reform is successful there are likely to be effects felt throughout the low-- skilled end of the labor market. As former welfare recipients enter the labor market, they may exert downward pressure on wages or displace employment of others already in the labor market. Since there has been limited changes in eligibility for federal welfare programs from which to draw inferences, the magnitude of these labor market effects are open to debate. This study considers these issues in general and evaluates how labor markets in Michigan were affected when the General Assistance program in that state was eliminated in 1991. General Assistance was a large-- scale, state--administered program that provided benefits to people who fell through the cracks in federal anti--poverty programs. In all, about eighty to one--hundred thousand able--bodied adults lost benefits. Increased labor force participation among these people resulted in a decline in weekly hours among high school drop--outs of 1.2 to 2.4 percent. There is little evidence of declines in hourly earnings, except in the Detroit area, where wages fell by about five percent.

Suggested Citation

  • Darren H. Lubotsky, 1999. "The Labor Market Effects of Welfare Reform," Labor and Demography 9904001, EconWPA.
  • Handle: RePEc:wpa:wuwpla:9904001
    Note: Type of Document - ; prepared on UNIX Sparc TeX; to print on PostScript; pages: 45; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/9904/9904001.pdf
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    References listed on IDEAS

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    1. David Card, 1990. "The Impact of the Mariel Boatlift on the Miami Labor Market," ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
    2. 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.
    3. Timothy J. Bartik, 2000. "Displacement and Wage Effects of Welfare Reform," Book chapters authored by Upjohn Institute researchers,in: David E. Card & Rebecca M. Blank (ed.), Finding Jobs: Work and Welfare Reform, pages 72-122 W.E. Upjohn Institute for Employment 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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    Cited by:

    1. Divounguy Nding, Orphe, 2015. "Welfare Spending in the Long Run," MPRA Paper 68446, University Library of Munich, Germany.
    2. Brian C. Hill & Matthew N. Murray, 2008. "Interactions Between Welfare Caseloads And Local Labor Markets," Contemporary Economic Policy, Western Economic Association International, vol. 26(4), pages 539-554, October.
    3. Timothy J. Bartik, 2002. "Instrumental Variable Estimates of the Labor Market Spillover Effects of Welfare Reform," Upjohn Working Papers and Journal Articles 02-78, W.E. Upjohn Institute for Employment Research.

    More about this item

    Keywords

    Welfare reform; General Assistance; labor markets;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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