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Press Release · January 25, 2001

Multi State Employer Survey Finds Robust Demand For Welfare Recipients That Could Disappear In Downturn

Many Welfare Workers Earning Above Minimum Wage, Rated Highly As Employees; But Other Recipients Face Difficulties Finding, Keeping Jobs

SAN FRANCISCO, California, January 25, 2001 –In recent years, welfare recipients across the nation have left the rolls in droves, but where have they gone? A new study released today by the Public Policy Institute of California (PPIC) finds that many employers have hired welfare workers into positions that pay above the minimum wage and provide health benefits. At the same time, the willingness of employers to hire these workers appears to be closely tied to today’s tight labor market. And even in these good times, substantial numbers of welfare recipients – many of them minorities – may still face an uphill battle finding employment.

In Employers and Welfare Recipients: The Effects of Welfare Reform in the Workplace, authors Harry Holzer and Michael Stoll analyze the results of a detailed survey conducted in 1998 and 1999 of over 3,000 employers in four major metropolitan areas: Los Angeles, Chicago, Cleveland, and Milwaukee. They find that virtually all employers express a willingness to hire welfare recipients. Between 30 and 40 percent of the employers surveyed say they have hired welfare recipients over the past two years, most frequently in clerical and service positions.

“The good news is that employer demand for welfare recipients is strong. Given the solid hiring rates for these workers on the whole, we think that the labor market can handle the number of recipients seeking employment now and in the near future,” says Holzer, a professor of public policy at Georgetown University. “What concerns us is the fact that much of this demand may disappear in the next economic downturn. And, as recent economic data indicate, this could be a problem sooner rather than later.”

Indeed, employer interest in welfare workers appears closely linked to the currently tight job market. Demand for welfare recipients is five times greater in establishments with higher proportions of unfilled positions than in those with fewer vacancies. This result suggests that employer demand for these workers will diminish significantly during an economic downturn as employment opportunities shrink.

Overall, the study finds many positive employment results for welfare recipients. For all four cities, the jobs filled by welfare recipients pay an average of $7 per hour and generally provide 40 hours of work per week; employers are willing to contribute to health care coverage in two-thirds of the jobs. However, a significant portion of the jobs filled by welfare recipients still pay low wages, provide few working hours, or offer no health insurance.

Once welfare recipients are hired, how well do they succeed? Surprisingly, employers rate welfare workers as being as good or better than other workers in similar positions. Roughly half are considered comparable to other workers in each metropolitan area, and 25 to 40 percent are viewed as better than the typical employee; just 10 to 20 percent are considered worse. Furthermore, the turnover rate for these workers is no higher than the national average, with durations of employment averaging eight months.

“Although many people have expressed concerns about job performance and turnover as welfare recipients transition into work, many of our results are quite encouraging,” says Holzer. “The majority of these workers are keeping pace with – or even outperforming – other workers in these jobs. However, there are still large numbers of welfare recipients who lack the skills or the personal circumstances to keep jobs once they find them.” High turnover and weak performance are significant problems for one-fourth to one-third of welfare recipients hired in all four cities. Absenteeism is particularly problematic and often linked to child care and transportation issues.

The study also finds that race and education play a role in employment opportunities for welfare recipients. Minority recipients are hired less frequently than whites, perhaps in part because of their limited access to jobs in suburban areas. High school dropouts are hired less frequently than high school graduates, reflecting the levels of cognitive and social skills demanded in many of the jobs filled by welfare recipients.

Finally, hiring patterns differ among employers in Los Angeles and those in the Midwest, particularly Milwaukee. Employers in Los Angeles report hiring fewer recipients, but rate the average quality of welfare workers higher than employers in other regions. Jobs in Los Angeles also pay better than average ($7.83 per hour), but a smaller percentage of these jobs (59%) provide employer contributions to health benefits.

The authors offer a number of policy recommendations based on their findings. Given the relatively strong economy and tight job market, they suggest investing in training and support services – such as child care and transportation – that will enable more recipients to experience employment security and wage growth. In the next economic slowdown, former welfare recipients who do not qualify for Unemployment Insurance and cannot return to welfare (TANF) are likely to require other forms of public assistance or services, and local welfare agencies will need to help identify and increase access to jobs in suburban areas. In addition, policymakers must consider developing other employment options – such as community service jobs – as the least employable portion of the welfare caseload approaches time limits.

PPIC is a private, nonprofit organization dedicated to objective, nonpartisan research on economic, social, and political issues that affect the lives of Californians. The Institute was established in 1994 with an endowment from William R. Hewlett.