Can We Improve Job Retention and Advancement among Low-Income Working Parents?

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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In the past decade, employment rates among low-income parents have risen dramatically. This is particularly true for single mothers, and especially those who had previously been on welfare. The labor force participation rate of single mothers rose from about 67 percent in the early 1990s to 78 percent by the end of the decade. Among those who had been on welfare in the previous year, labor force activity rose from about 30 percent to nearly 60 percent (Blank and Schmidt 2001). These employment increases, along with declining welfare rolls, have been widely attributed to welfare reform, improved supports for working families (like the Earned Income Tax Credit and child care subsidies), and the strong economy of the late 1990s.

But, while their employment rates are now fairly high, the annual earnings and income of many parents remain low. Acs and Loprest (2004) find that, among those leaving welfare, average earnings remain below $3,000 per quarter and below $10,000 per year. More broadly, the annual earnings of parents with less than a high school diploma, weak skills, and limited or spotty work experience are similarly low (Acs and Loprest 2005). And, for single parents with weak earnings capacities, the prospects of providing stable incomes for their families are very limited.

At least two factors limit the annual earnings of less-skilled adults in the U.S. labor market today. First, at least some of these workers have high rates of job turnover, or low job retention; they lose or leave their jobs frequently, and sometimes spend lengthy periods between jobs. This joblessness directly reduces their annual earnings and inhibits their wage growth over time. Second, even when working steadily, the wages and benefits of these workers are very low. Prospects for earnings growth through advancement in their current jobs (or other jobs) are very limited.

What public policies at the federal, state, and local levels might help improve job retention and advancement among low-income workers? Are there strategies that heavily involve the private sector where the activities and interests of private employers might be better used to improve worker outcomes? What does the research and evaluation evidence show about the effectiveness of strategies explored to date? Are there promising models that have not yet been fully evaluated, but that deserve more attention? If so, what are the appropriate next steps?

We explore these questions below. In the next section, we provide more evidence on the worker and employer characteristics that affect retention or advancement outcomes. Then we review strategies for improving these outcomes. The strategies include financial incentives and supports, such as earnings subsidies and tax credits; case management strategies to link workers to services; skill development, particularly through education and training; and employer-focused strategies. In each case, we review what we know or don't know about the strategies' effectiveness. We conclude by suggesting next steps for policymakers and researchers.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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