As many of the chapters in this volume emphasize, labor force participation and real wage rates among less-skilled men have fallen since the late 1970s.¹ A substantial literature has investigated the declining returns to less-skilled jobs and the growing wage inequality between more- and less-skilled workers in the U.S. labor market (Autor and Katz 1999; Autor, Katz, and Kearney 2004). Most of this literature, however, has focused on men. The research on the effects of welfare reform has recognized growing labor force participation among less-skilled women, but rarely does it directly compare the very different trends among less-skilled men and...

The resurgence of large-scale immigration in recent decades fundamentally altered the racial and ethnic composition of the disadvantaged population in the United States.¹ In 1960, 21.3 percent of working men in the bottom 20 percent of the wage distribution were African American and only 3.6 percent were foreign-born. By 2000, the black share in this low-wage workforce had fallen to 13.1 percent, but the immigrant share had risen to 17.4 percent.

It is well known that the ″new immigration″ contains a very large number of low-skilled workers (Borjas 1999). In fact, the data reveal that, at least through the mid-1990s,...

Poverty is a condition with multiple causes, but every analysis agrees on the importance of the earnings of less-skilled workers.¹ Macroeconomic—that is, economywide—influences determine average earnings. This chapter looks at data from the U.S. economy through the lens of macroeconomics. Some of the key questions I consider are: How much have wages in general risen over the past fifty years in terms of the value of what workers produce and what workers consume? How has productivity growth and rising stocks of plant and equipment contributed to wage growth in general? How have wages of workers at the bottom...

The relationship between technological change and the earnings of less-skilled workers is one of the oldest issues in economics (Berg 1984).¹ Renewed interest in the link was spawned by labor market trends in the 1980s, including the decline in real wages for younger and less-educated workers and the sharp increase in the wage gap between college- and high school–educated workers. At the same time, the introduction of the microcomputer was hailed as a revolutionary event that promised to change the nature of work. Two prominent studies written at the close of the decade (Bound and Johnson 1992; Katz and...

One of the fundamental facts in labor economics is that, on average, wages tend to rise rapidly early in a worker′s career.¹ Since wage growth during the early stages of one′s career provides a potential pathway out of poverty, it is important to understand what causes this wage progression and how it is affected by changes in the overall economy. In this chapter, we focus on the key components that determine an individual′s early career wage growth and how these factors have changed for less-skilled workers over the last twenty years. In particular, we examine the relative importance of accumulating...

The years from 1988 to 2000 spanned large changes in the macroeconomy. There was a sharp economic downturn in the early 1990s, a long and robust expansion in the mid to later parts of the decade, and an economic slowdown at decade′s end.¹ How did these macroeconomic fluctuations affect the well-being of American families? Were the effects similar across households at different positions in the income distribution, or were households with low or modest income affected disproportionately? In this chapter, we investigate how recent macroeconomic changes and the changes in income and unemployment associated with them affected theleveland...

During the 1990s, the U.S. economy experienced sustained economic growth with low levels of unemployment and high levels of wage growth accruing across the skill distribution.¹ Along with this robust economic performance, there were substantial changes in economic and social policies: the minimum wage was raised for the first time in fifteen years, the Earned Income Tax Credit (EITC) was expanded, and cash welfare assistance was changed from an entitlement to a temporary assistance program that imposes strict work requirements and lifetime limits on benefits.

Many of these changes would be expected to have had large effects on the incomes...

Household and family living arrangements have become increasingly visible in public policy discussions, especially with the passage of the landmark Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA).¹ The legislation—a response to a trend of rising rates of childbirth outside of marriage—emphasizes the reinforcement of marriage as the preferred arrangement for families with children. PRWORA also attempts to influence children′s living arrangements in another way—by mandating multigenerational households for teen parents who have not completed high school. Although the population of teen parents receiving welfare is small, the focus on their living arrangements signals policymakers′...

The study of tax incidence under the U.S. tax system has a long and impressive history that has proceeded along many different complementary paths.¹ Arnold Harberger (1962) laid the groundwork for distributing the burden of taxes. Beginning with the pioneering work of Joseph Pechman and Benjamin Okner (1974), scholars have explored the impact of a wide array of taxes on the distribution of income. Theoretical work has subsequently incorporated distributive objectives into optimal tax design (see Auerbach 1985). Other work has explored the direct and indirect impacts of various tax reform proposals and also identified the effects that different tax...

The passage in 1996 of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) brought about a major change in the way the federal government and the states share financial responsibility for cash assistance and related welfare programs.¹ Prior to PRWORA, the federal government provided a matching grant program, Aid to Families with Dependent Children (AFDC), and was responsible for an average of fifty-five cents out of every dollar of AFDC spending. Since the passage of PRWORA, the federal government has given an annual block grant to the states for funding the AFDC replacement program, Temporary Assistance for Needy Families...

One in eight Americans and one in five children under the age of six lived in poverty in 2003, according to official U.S. Census Bureau statistics.¹ Poverty is strongly associated with lack of full-time, year-round employment. Government programs such as welfare-to-work and the Workforce Investment Act (WIA) try to help the poor find stable employment and thereby escape poverty. As one strategy to facilitate such transitions, several researchers have recently proposed the use of labor market intermediaries, including temporary help agencies, for the poor (Andersson, Holzer, and Lane 2005; Holzer 2004; Lane et al. 2003). Drawing on a unique policy...

As the proportion of children living with both parents has fallen and as public support for sole-parent families has been reduced, child support has become a crucial source of income for single-parent families.¹ In this chapter, we describe the logic and outcomes of the child support system and consider the relationship between economic conditions, child support, and poverty.

We show that child support is an important, if often unreliable, source of income for the poor single-mother families who receive it. But mothers with limited earnings potential often have had children with men who also have limited economic resources. This constrains...

The unemployment insurance (UI) system is one of the primary ways that the government seeks to alleviate the hardship associated with an economic downturn.¹ It was first introduced in the United States at the national level as part of the 1935 Social Security Act to provide financial support for the millions of workers who lost their jobs during the Great Depression.

The system is still designed to provide greater relief at times of economic hardship. Workers are more likely to receive benefits in a recession, since benefits are paid only to those who lose their jobs through no fault of...

In 1992, 38.6 million Americans were uninsured (DeNavas-Walt, Proctor, and Mills 2004). Eight years later, at the end of the longest economic expansion in the United States since World War II, the number of uninsured had increased to nearly 40 million (DeNavas-Walt et al. 2004). Why did the booming economy not translate into gains in insurance coverage? This puzzle is even more pronounced when we look at trends by education level, since low-skilled individuals experienced both the largest gains in employment and the largest declines in insurance coverage. Among high school dropouts between the ages of twenty-five and fifty-four, the...