Can the Labor Market Absorb Three Million Welfare Recipients?

Abstract

This paper considers an important question about the new limits on welfare benefits: Is the labor market capable of providing enough jobs so that welfare recipients leaving the rolls will be able to find employment? <>

Evidence through 1999 suggests that for most recipients the answer is "yes." Between 1994 and June 1999 the welfare caseload fell 50 percent, or about 2.5 million cases. Over the same period unpublished BLS tabulations show that the number of separated, divorced, and never-married mothers who hold jobs increased by more than 1.2 million (22 percent). It is likely that many of the mothers who found new jobs would have been collecting public assistance if they had not been working. Whether the U.S. labor market can continue to absorb such large numbers of single mothers remains an open question. The women who have left the rolls so far undoubtedly have job qualifications that on average are better than those of parents who continue to collect benefits. Mothers who remain dependent will probably find it harder to land jobs. In addition, the surge in employment has been helped by extraordinarily high employer demand, reflected in the lowest unemployment rate in a quarter century. When employer demand weakens, single parents will face tougher obstacles in finding and keeping jobs. It is also plain, however, that the surge in single mothers' employment can continue. Many states, including some of the largest ones, have not fully implemented a comprehensive welfare-to-work strategy. When they do, we should expect to see drops in their rolls and increases in the proportion of single mothers who look for and hold jobs.

State and federal reform has so far been successful in boosting the employment rate of single mothers. Whether it has increased most poor families' net incomes is less certain. For single mothers forced to accept a series of temporary, poorly paid jobs, the idea that reform has improved their standard of living may seem strange. But tougher welfare rules have pushed more of these mothers to seek jobs - and in most cases to find them.