Can Targeting Industries Improve Earnings for Welfare Recipients Moving from Welfare-to-Work?

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TABLE OF CONTENTS

SUMMARY

A. Background

Since passage of the Personal Responsibility and Work Opportunity Act (PRWORA) by the Congress in 1996, the focus of the nation's welfare reform efforts have been on moving welfare recipients from welfare to work. The focus on rapid attachment to the labor market, or "work first" has encouraged welfare recipients to move directly into employment rather than to training or education. By most accounts, this strategy has been remarkably successful at moving recipients off the welfare rolls. Employment rates among those leaving welfare appear to have improved substantially over pre-PRWORA welfare to work efforts despite fears that the labor market could not absorb the influx of new low-skilled job seekers.

However, available research suggests that welfare recipients disproportionately find work in low-wage, industries and occupations. As Congress is preparing to re-authorize PRWORA, the question many are now asking is whether long-term economic self-sufficiency can be enhanced by paying more attention to the quality of work available to those leaving welfare.

B. Research Study

This paper presents preliminary findings from a larger study that examines whether targeted industry employment and workforce development interventions—such as, sector employment initiatives—might improve the quality of employment for welfare recipients. The study explores the link between pre and post-PRWORA employment in certain industries and the quality of jobs held by former welfare recipients. The goal is to determine if the economic well being of former welfare recipients might be improved if welfare to work efforts targeted specific industries for employment initiatives for welfare recipients.

Such a study appears timely for several reasons. First, the Congress and Administration are currently in the process of reauthorization of the 1996 PRWORA. Second, all the existing research indicates that simply moving non-working welfare recipients into the labor market does not lead to significant improvements in their level of economic self-sufficiency. On average, former welfare recipients' earnings tend to hover around the poverty level. This suggests that their long-term economic prospects may be uncertain at best. Third, there is an existing infrastructure of targeted industry workforce development projects known as Sector Employment Initiatives (SEI) operating in different parts of the country. SEIs are aimed at connecting low-income job seekers to quality employment in growing economic sectors in local regional economies. These projects might serve as models for how state and local government can improve the quality of job placements for welfare recipients' transitioning from welfare-to-work.

C. Findings

• First, it appears that job characteristics, such as industry and occupation, are associated with higher average annual earnings and greater job quality for single mothers, including single mothers on welfare. The paper finds that there are several sectors where single mothers earn more than average after controlling for their education and labor market experience. The data seems to suggest that there may be a number of industries where less educated single mothers can obtain above average annual earnings. This is a useful finding given that the vast majority of women on welfare are less educated.
• Second, that certain industries might provide not only higher average entry-level annual earnings, but also in addition may present the potential for upward wage progression and career advancement. For less educated single mothers, sectors such as manufacturing and health services appear to have provided above average earnings for low-income and high-income single mothers as well as women on welfare. That is, there is evidence that in some industries greater labor market experience translates into higher average annual earnings for less educated single mothers. One interpretation is that labor market experience (i.e., job experience) indicates job and occupational skills that employers are willing to pay extra for.
• Third, this sample of employed single mothers tends to be concentrated in those sectors where earnings are below average.

A major implication of these findings is that if the public and policymakers are concerned about improving long-term economic self-sufficiency as well as reducing welfare dependency designing welfare-to-work efforts that explicitly focus on job characteristics, such as industry, may be an effective strategy. In practice this would mean designing employment interventions that target specific industries because they offer relatively high annual earnings and advancement opportunities, and have relatively low access barriers to employment for less educated single women.

Acknowledgements

This paper was prepared with support from the Rockefeller Foundation. We would like to acknowledge the helpful comments from Cindy Marano and others.

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