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Working and Poor

Working and Poor: How Economic and Policy Changes Are Affecting Low-Wage Workers

Rebecca M. Blank
Sheldon H. Danziger
Robert F. Schoeni
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    Working and Poor
    Book Description:

    Over the last three decades, large-scale economic developments, such as technological change, the decline in unionization, and changing skill requirements, have exacted their biggest toll on low-wage workers. These workers often possess few marketable skills and few resources with which to support themselves during periods of economic transition. In Working and Poor, a distinguished group of economists and policy experts, headlined by editors Rebecca Blank, Sheldon Danziger, and Robert Schoeni, examine how economic and policy changes over the last twenty-five years have affected the well-being of low-wage workers and their families. Working and Poor examines every facet of the economic well-being of less-skilled workers, from employment and earnings opportunities to consumption behavior and social assistance policies. Rebecca Blank and Heidi Schierholz document the different trends in work and wages among less-skilled women and men. Between 1979 and 2003, labor force participation rose rapidly for these women, along with more modest increases in wages, while among the men both employment and wages fell. David Card and John DiNardo review the evidence on how technological changes have affected less-skilled workers and conclude that the effect has been smaller than many observers claim. Philip Levine examines the effectiveness of the Unemployment Insurance program during recessions. He finds that the program’s eligibility rules, which deny benefits to workers who have not met minimum earnings requirements, exclude the very people who require help most and should be adjusted to provide for those with the highest need. On the other hand, Therese J. McGuire and David F. Merriman show that government help remains a valuable source of support during economic downturns. They find that during the most recent recession in 2001, when state budgets were stretched thin, legislatures resisted political pressure to cut spending for the poor. Working and Poor provides a valuable analysis of the role that public policy changes can play in improving the plight of the working poor. A comprehensive analysis of trends over the last twenty-five years, this book provides an invaluable reference for the public discussion of work and poverty in America.

    eISBN: 978-1-61044-057-8
    Subjects: Business, Sociology, Economics

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Contributors
    (pp. vii-x)
  4. Introduction Work and Poverty During the Past Quarter-Century
    (pp. 1-20)
    Rebecca M. Blank, Sheldon H. Danziger and Robert F. Schoeni

    Fluctuations in the economy have a strong effect on the extent of poverty and well-being among low-income families.¹ Reduced economic demand during recessions can significantly increase the unemployment rate, as was the case in the early 1980s. A sustained economic expansion can substantially reduce the unemployment rate and contribute to increased experience on the job and in wage growth, as occurred in the late 1990s. The employment of less-skilled workers has tended to fluctuate more across the business cycle than the employment of other workers.

    Longer-run developments in the economy, such as labor-saving technological changes, the globalization of the economy,...


    • Chapter 1 Exploring Gender Differences in Employment and Wage Trends Among Less-Skilled Workers
      (pp. 23-58)
      Rebecca M. Blank and Heidi Shierholz

      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...

    • Chapter 2 Wage Trends Among Disadvantaged Minorities
      (pp. 59-86)
      George J. Borjas

      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,...


    • Chapter 3 The Macroeconomy and Determinants of the Earnings of Less-Skilled Workers
      (pp. 89-112)
      Robert E. Hall

      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...

    • Chapter 4 The Impact of Technological Change on Low-Wage Workers: A Review
      (pp. 113-140)
      David Card and John DiNardo

      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...

    • Chapter 5 The Changing Pattern of Wage Growth for Low-Skilled Workers
      (pp. 141-172)
      Eric French, Bhashkar Mazumder and Christopher Taber

      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...


    • Chapter 6 The Level and Composition of Consumption over the Business Cycle: The Role of “Quasi-Fixed” Expenditures
      (pp. 175-204)
      Kerwin Kofi Charles and Melvin Stephens Jr.

      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...

    • Chapter 7 Recent Trends in Resource Sharing Among the Poor
      (pp. 205-232)
      Steven J. Haider and Kathleen McGarry

      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...

    • Chapter 8 Economic Conditions and Children′s Living Arrangements
      (pp. 233-262)
      Rebecca A. London and Robert W. Fairlie

      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′...


    • Chapter 9 How Do Tax Policies Affect Low-Income Workers?
      (pp. 265-288)
      Kevin A. Hassett and Anne Moore

      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...

    • Chapter 10 State Spending on Social Assistance Programs over the Business Cycle
      (pp. 289-311)
      Therese J. McGuire and David F. Merriman

      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...

    • Chapter 11 Temporary Agency Employment: A Way Out of Poverty?
      (pp. 312-337)
      David Autor and Susan Houseman

      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...

    • Chapter 12 Child Support and the Economy
      (pp. 338-365)
      Maria Cancian and Daniel R. Meyer

      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...

    • Chapter 13 Unemployment Insurance over the Business Cycle: Does It Meet the Needs of Less-Skilled Workers?
      (pp. 366-395)
      Phillip B. Levine

      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...

    • Chapter 14 How Is Health Insurance Affected by the Economy? Public and Private Coverage Among Low-Skilled Adults in the 1990s
      (pp. 396-426)
      Helen Levy

      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...

  9. Index
    (pp. 427-438)