Poster Paper: Better Things to Do? Welfare Reform and Young, Low-Skilled Male Labor Crowd-Out

Saturday, November 9, 2013
West End Ballroom A (Washington Marriott)

*Names in bold indicate Presenter

Lincoln H. Groves, Syracuse University
Coinciding with the decline of manufacturing and the stagnation of real wages for low-skilled male laborers since the 1970s, the U.S. has seen a marked increase in incarceration rates for its young, undereducated males and a corresponding decline in the two-parent, nuclear family tradition within low-income families.  Since social welfare policy in the states has primarily concentrated on single women with children, I question whether this singular focus has exacerbated existing trends and has helped to facilitate conditions where significantly more low-skilled men are now unsuitable for both the marriage and labor markets.  In this paper, I revisit a well-established topic in the literature – welfare reform – and examine whether waivers and TANF implementation during the course of the 1990s may have had the unintended consequence of crowding-out young, low-skilled male labor.  After President Clinton’s vow to “end welfare as we know it,” states incentivized low-skilled women with children to enter the labor force through their enactment of work requirements, time limits, and work incentives.  Given the comparatively weaker labor market attachment of young, undereducated men relative to other groups of working men, my research examines whether a sufficient number of males at the margin left the legitimate labor market because of crowd-out facilitated by government reform policies. 

While social policy scholars have devoted an enormous amount of attention to the legislative changes of the 1990s, the question of whether welfare reform policies facilitated crowd-out of low-skilled male labor has been understudied.  Using Bartik (2002) and Blank and Gelbach (2006) as guides to my modeling, I use two-stage least squares regression, a wider set of instrumental variables characterizing the components of state-level AFDC/TANF programs, and data from the Current Population Survey to more precisely estimate crowd-out of young, low-skilled male labor.  More specifically, my first-stage analysis exploits the timing of AFDC waivers and TANF implementation – as well as the state-level characteristics of these programs – to estimate increases in labor force participation (LFP) for single-mothers with education levels at or below a high school level.  Then, I examine crowd-out by using these predicted values in my second-stage equation, which evaluates LFP rates for young, undereducated single males aged 16-29 over the time period 1989 to 2002.  Under the presumption that older males are a suitable counterfactual for the younger ones, I also estimate a second model where my left-hand-side variable is the difference in LFP between “older” (30-49) and “younger” (e.g. 16-29) undereducated, single workers.  Preliminary findings indicate a statistically significant 1.2 percentage point (pp) decrease in the LFP rate for single males aged 16-29 for each 10 pp increase in LFP for single mothers.  Moreover, I find that as the LFP for single females increases 10 pp, the LFP gap between older and younger, undereducated single male workers grows by approximately 2.5 percentage points.  Findings of crowd-out are slightly larger and more statistically significant for single white males and, more importantly, not found in groups expected to be unaffected by welfare reform (e.g. college educated males).