Welfare Reform

The Jobs Aren't There
December 1997

By Mark Weisbrot

Executive Summary

The avowed objective of welfare reform has been to lift welfare recipients out of poverty by moving them into paid employment. However, a wealth of evidence has now accumulated which demonstrates that this is impossible under current law and policy. There is a severe shortage of jobs, nationwide and particularly in the sector of the labor market in which most former welfare recipients participate. Even more importantly, the vast majority of the available jobs do not pay enough to support a typical family leaving the welfare rolls. Furthermore, the overall effect of pushing millions of people into competition for low-wage jobs will be to further depress wages in this sector of the labor market. The evidence includes the following:

Scarcity of Jobs:

• Nationally, the economy is projected to create only about half as many net new low-skill jobs as there are welfare recipients targeted to enter the labor market, for 1997-98.
• If the normal growth in the labor force is factored in, the ratio of job seekers to jobs nationally is nearly three to one.
• The ratio of job seekers to jobs is much greater in particular states, exceeding eight to one in New York.

Living-Wage Jobs Even More Scarce:

• The odds against a typical welfare recipient landing a job that pays a living wage are about 97 to 1 for the Midwestern states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. These states compare favorably to the rest of the country, so it is reasonable to conclude that these odds are not significantly better, on average, in the national economy as a whole.
• Most women who leave the welfare rolls for work can be expected to earn wages that are far below the poverty line, even after five years of working.

Welfare Reform Will Lower Wages:

• The influx of former welfare recipients into the low-wage labor market is projected to lower these workers' wages by nearly 12%.
• These workers, who make up the bottom 30% of wage earners (with wages less than $7.19 per hour), will lose an estimated $36 billion dollars a year in income. This is $8.5 billion more than the total of federal and state spending on AFDC in 1994.
• These losses follow a disastrous decline in wages for unmarried mothers, including a 25% drop for women between the ages of 25 and 34, from 1979-93. This has already pushed many working mothers below the poverty line. The wage-depressing effects of welfare reform will therefore cause not only an increase in poverty among welfare recipients, but also an increase in the numbers of the working poor.

December 10, 1997

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