October 2003, Vol. 126, No. 10
Job problems of the poor
Book reviews from past issues
Job problems of the poor
Jobs for the Poor: Can Labor Demand Policies Help? By Timothy J. Bartik. New York, Russell Sage Foundation, and Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2001. 473 pp. $17.95/paperback.
Although the author poses the subtitle of his work as a question, he is clearly convinced that the employment problem of poor persons and families cannot be solved without a labor demand policy of, as it turns out, massive proportions. In adapting the working-age population to the requirements of the labor market, the United States has chiefly relied on supply-side policies, such as training, education, the earned income tax credit, and job development services at the local level. These policies have not been ineffective so much as expensive, and, more importantly, they have not contributed very much to resolving the poor’s employment problem. The author’s only precedent for the magnitude of a demand-side labor-market policy is the Works Progress Administration, which was created during the Great Depression of the 1930s, and at its peak gave jobs to 3 million persons. In arguing for a large-scale labor demand program, Bartik cites or develops some disturbing facts about the employment situation of the poor, basing himself mainly upon data on unemployment and rates of labor force participation.
Although the average unemployment rate declined to about 4 percent during the boom years of the 1990s, unemployment among poor Americans barely diminished (if Bartik’s approach is followed). Labor force participation, which does not include working-age persons neither employed nor looking for a job, generally remained lower among poor persons than among their non-poor peers. They are less likely than the latter to hold full-time, year-round jobs. They also account for a relatively large proportion of high school dropouts or high school graduates who do not go to college.
In figuring the employment needs of poor persons 25-54 years old (the most active working-age range), Bartik begins by calculating the changes between 1979 and 1998 in the employment-population rates of high school dropouts and high school graduates without a college degree—classified by gender, race, and marital status. For males, these rates sharply decreased between the 2 years; for females, the rates generally rose somewhat, but they remained well below those for white (non-Hispanic) males in 1979 at the indicated educational levels. Bartik’s norm for job creation of the poor are these 1979 employment rates—which, if attained again, would spell about 5.2 million additional jobs for male and unmarried female poor persons in their prime working age. Yet, this would not exhaust the employment needs of poor families: if every such (non-elderly) family had one breadwinner holding a full-time, year-round job, altogether more than 8 million additional jobs for the poor would be required at the indicated educational levels. The figure may be viewed as a measure of underemployment in the United States.
It is bolstered by such statistics as the unemployment rate among former welfare benefit recipients—31.4 percent in 1998; among blacks, the official rate was 8.9 percent, nearly twice the overall rate; and in 50 of the Nation’s 329 metropolitan areas it was 6 percent or higher.
Moreover, Bartik reports, a large proportion of workers found themselves disadvantaged by an inability to match their low skills or lack of education to available jobs. Thirty-five to 45 percent of high school dropouts are estimated to have such "mismatch" problems. It is not clear, however, if jobs can be adapted to overcome these problems—unless unceasing efforts are made on the supply side of the labor market (as Bartik defines it). Be it noted that he does not by any means dismiss such efforts.
Jobs for the poor are jobs in the low-wage sectors of the economy. Will low wages lift poor workers out of poverty? To the extent that they do not, Bartik would supplement them by the refundable (earned income) tax credit; he also counts food-stamp entitlements and, for former clients of the welfare system, earnings disregards (which allow phase-ins of partial benefits to supplement earnings).
Yet, the threshold at which persons or families are considered no longer poor is defined meagerly. It was originally based on the lowest cost "nutritionally adequate" diet, as calculated by the Department of Agriculture; that cost was then multiplied by three, on the assumption that two-thirds of a person’s or family’s income would go for nonfood goods and services. After 1968, however, the threshold was determined simply by the annual change in the Consumer Price Index (as revealed subsequently).
In 1998, the poverty threshold for a family of three—for example, a mother and two children—was around $13,000. The expenditure budgets of poor families suggest that the official poverty thresholds "underestimate [their] needs by roughly 25 percent" (according to Christopher Jencks in Making Ends Meet, by Kathryn Edin and Laura Klein). Edin and Klein have calculated (from a limited survey) that expenditures of "wage-reliant" mothers in the early 1990s exceed their (low) wages by one-third. However these extra expenditures are covered, they are not covered by a "living wage"—also discussed briefly by Bartik, and praised by the message it conveys that "working people should not live in poverty." But he dismisses the living-wage movement (confined by urban legislators to the employees of local contractors doing business in relatively few cities) as limited—causing firms subject to such ordinances to move to other locations within metropolitan areas.
And the earned income tax credit, stressed by Bartik as an important low-wage supplement, and unquestionably of importance to recipients, covers but a small part of the excess of needful expenditures over income (judging by the relevant data published in the Green Book 2000 by the U.S. House of Representatives). Bartik may be somewhat too optimistic in asserting that, together with (low) earnings, earnings supplements would be "surprisingly effective in bringing poor families out of poverty." Two considerations may be advanced regarding this statement. One is that the reservation wage of unemployed or nonemployed persons may often be calculated against needs rather than poverty thresholds plus supplements. More important perhaps is the consideration that the escape from poverty of which Bartik speaks depends on full-time, full-year jobs. Yet, he also notes that a large proportion of unemployed as well as nonemployed persons in their prime working age hold jobs but half the year. They are evidently unable to find steady work. He reports that, in 1995, 14 Harlem residents applied at every fast-food restaurant opening; three-quarters of them were still unemployed a year later, despite their willingness to accept minimum-wage jobs. He writes that "high unemployment rates appear to reflect a shortage of available jobs and lead to lengthy unemployment and nonemployment spells for some workers."
Bartik advocates a two-tier labor-demand policy—one to increase aggregate labor demand so as to ensure full employment, the other consisting of programs targeted on labor demand for poor persons. As to the first tier, he would subsidize employers for hiring new workers, regardless of such workers’ economic status. He would give priority to high-unemployment local labor markets. The subsidies he proposes would especially favor small businesses and public and nonprofit employers.
As to the second tier, he would particularly address the employment problems of persons who tend to be outside the labor force, offering them supply-side services, such as training or mental healthcare. He would design subsidized job slots to encourage such workers to enter the regular job market, paying them below-market wages until they do so. There are other relevant proposals, including how to overcome political opposition, which need not detain us here.
Bartik’s work is thoroughly researched, evidenced by numerous appendices and notes. It is definitive in its discussion of the numerous programs conducted since the 1970s to deal with the predicament of poor person’s and families’ employment problems. It is indispensable for anyone concerned with relieving poverty in America by creating truly full employment. It attests the devotion of the author to help resolve this great social problem.
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