Workforce Investments and Poverty Dynamics

David S Kraybill,Bruce A Weber

doi:10.52324/001c.8530

Abstract

A dynamic economic simulation model is developed to assess the potential for a workforce investment program to reduce household poverty. The program provides income to previously unemployed individuals, but when the program is administered to large numbers of persons, the aggregate effect is to increase the supply of labor and lower wages of currently employed workers slightly. The net effect on poverty depends on the number of new workers, the responsiveness of exports to changes in costs of production, and the responsiveness of the poverty rate to wage rate changes. The model results suggest that workforce investment strategies, by themselves, have only a modest impact on the poverty rate.

Highlights

The focus of policies to reduce poverty in the United States has shifted from providing cash assistance for single-mother families to supporting work activity for poor adults
This transition was occasioned by the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which ended the entitlement of low-income single mothers to cash assistance, conditioned receipt of cash on work activity and imposed time limits on cash assistance
As caseloads have declined and the amount spent on cash assistance has declined, states have shifted funding to work support programs, including child care, work training, education, and retention programs (Haskins and Blank 2001)

Summary

INTRODUCTION

The focus of policies to reduce poverty in the United States has shifted from providing cash assistance for single-mother families to supporting work activity for poor adults (usually single mothers). The social safety net in the United States is not a single welfare program, but rather a variety of state (and in many cases, local) programs, each with its own set of incentives and regulations This change increases the importance of analysis of workforce and social support policies at the state level: it is necessary to analyze the impact of each state's programs on the state's particular working-age population in order to understand how welfare-related workforce programs affect earnings and poverty. A concluding section discusses the limitations of job readiness programs in achieving a reduction in the poverty rate

MODELING POVERTY DYNAMICS

A STATE-LEVEL POVERTY DYNAMICS SIMULATION MODEL

AN OREGON EXAMPLE

WORKFORCE INVESTMENT POLICY FOR THE TRANSITIONAL

Results