JOB SEPARATION OUTCOMES OF WELFARE HIRES: INSIGHT FROM LINKED PERSONNEL AND STATE ADMINISTRATIVE DATA

Abstract

1. INTRODUCTION AND BACKGROUND There is a voluminous literature documenting transitions of welfare recipients to the labor market and the success of those transitions. Welfare-to-work transitions are often found to be plagued by low pay. high turnover rates and welfare recidivism (e.g., Acs and Loprest, 2004; Holzer, Stoll. Wissoker, 2004; Hoynes, 2000; Lane and Stevens, 1995). Much of this literature is limited in that it includes only welfare recipients in the analyses. (1) The absence of similarly skilled nonwelfare recipients in an analysis of labor market outcomes introduces the potential of confounding the behavior of welfare recipients with the behavior of low-skilled workers in general. The purpose of the analysis in this article was to quantify the job separation experience of members of welfare families and to compare that experience to other similarly low-skilled workers. (2) Identifying similarities and differences in labor market outcomes between welfare and nonwelfare hires will allow us to identify what part of that experience is unique to former welfare recipients and what part is common among all low-skilled workers. If similar outcomes are identified, then policies aimed at improving labor market outcomes among welfare hires might be more effectively targeted at all low-skilled workers. To the degree that behavior or outcomes of welfare recipients differ from those of other low-skilled nonwelfare recipients, conclusions drawn from an analysis without the benefit of a control group may inaccurately ascribe those outcomes to the experience of welfare rather than to other characteristics that welfare recipients share with other low-skilled workers. One might expect former welfare recipients (or members of a family exposed to welfare) to have different separation outcomes because they may have different costs for different choices. Former welfare recipients may also face unique constraints such as transportation or childcare problems. However, if both welfare and nonwelfare recipients find another job after separating from practically identical employment experiences, it is not clear a priori that the quality (in terms of wages) of those jobs should be different. This article follows low-skilled workers (some of whom were members of welfare families) who separated from a single firm in the late 1990s. Personnel data from the firm provide demographic and job information for each worker. The personnel records are linked to administrative data from the Georgia Department of Labor (DOL) and the Georgia Department of Human Resources (DHR) to assess the postseparation outcome for each worker and, if employed, the relative quality of that outcome. II. MODELING POSTSEPARATION OUTCOMES The determination of the importance of having been on welfare for postseparation outcomes will be investigated through two analyses. The first analysis involves estimating a multinomial probit (MNP) model for three mutually exclusive outcomes dependent on having separated from the same firm. The outcomes are welfare, and The second analysis is the main focus of the article and will model the wage gain among those who found a job after separating, controlling for the probability of separating, to determine how welfare hires fare compared to nonwelfare hires in their next job after separating from the same firm. We might expect that the type of outcome (welfare, no job, and job) might differ between welfare and nonwelfare hires since former welfare recipients might face lower costs of welfare as a postseparation outcome. The lower costs may result from having previous experience maneuvering within the system and from being desensitized to the stigma associated with welfare. Controlling for human capital, demographic, and labor market characteristics, however, it is not clear that wage gains between welfare and nonwelfare hires having been employed by the same firm, doing the same job. …