The Impact of Welfare Reform on Labor Markets in Impoverished Rural Areas

Abstract

Labor markets became important to a discussion of welfare policy after the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA) changed the focus of federal welfare law to integration of welfare participants into the workforce. Economic analyses of labor markets suggest that the nature of job placement in labor markets should be important to the efficacy of welfare reform. Weak labor demand in impoverished rural areas makes job-placement-related issues especially important for welfare reform. The emphasis of PRWORA on employment would also be expected to alter the relationship between welfare participants, social services offices, and employers. Using interviews of current and former participants under PRWORA, this paper analyzes the nature of job placement for those participants on the Rosebud (Rosebud) and Pine Ridge (Pine Ridge) Indian reservations in South Dakota (the reservations) and the changes in labor market relationships wrought by PRWORA. The interviews suggest that old boys networks have historically worked to exclude welfare participants from labor markets on the reservations. The local social services office in Rosebud was able to reduce these barriers by changing its perceived role to that of job placement office. The result was that some participants who formerly had no expectation of employment obtained permanent jobs through greater ties to labor markets. Several participants viewed the social services offices as effective job banks. Because the social services offices in Pine Ridge were not as engaged in labor markets, they facilitated few