Building Human Capital and Economic Potential

Please note: This page describes activities that are part of a research project that began in late 2012 and runs through 2014. Visitors may wish to bookmark this page for future reference, as further detail will be provided as it becomes available.

In late 2012 IRP launched a major research initiative designed to enhance understanding of how policies and programs can build economic self-sufficiency by increasing employment, wages, labor market skills, and earnings. It is one of three such integrated research projects that extend over three-year periods with a range of activities that are focused on topics related to the three themes identified by IRP as key trends in poverty and policy: Economic Self-Sufficiency, Family Change and Poverty, and the Intergenerational Transmission of Poverty.

Taking the lead on the Building Human Capital and Economic Potential project are Timothy M. Smeeding, IRP Director and Arts and Sciences Distinguished Professor of Public Affairs; and Carolyn Heinrich, Sid Richardson Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs, Affiliated Professor of Economics, and the Director of the Center for Health and Social Policy at the University of Texas at Austin, and IRP Affiliate.

Why Study Human Capital and Economic Potential?

Employment is the primary pathway out of poverty for most non-elderly adults in the United States. But economic trends, both cyclical and structural, have reduced employment and wages in low- and middle-wage labor markets, which has in turn increased the proportion of poor households that are headed by working-age adults. Stagnating wages and increasing unemployment are also contributing to rising income inequality.

These changes in the labor market have coincided with a transformation of welfare benefits from income guarantees to a package of services and benefits designed to support the employment efforts of low-skill workers. Yet the volatility and instability of low-wage work, particularly during times of economic downturn, challenge such an approach.

Efforts to meet the twin goals of encouraging self-sufficiency and improving the well-being of vulnerable families confront a range of challenges. Despite agreement that work must be a central element of any strategy, important questions remain concerning the potential for low-income families to become self-sufficient and the role that policy can play in improving outcomes for adults and encouraging appropriate savings and asset building.

Research Agenda: Building Human Capital and Economic Potential

Each set of activities in IRP's Building Human Capital and Economic Potential research agenda is designed to be multidisciplinary, to foster interaction and collaboration among affiliates and other established and emerging scholars within the UW–Madison and across the nation, and to enhance productive interchange among researchers, policymakers, and practitioners. The three-year agenda comprises the activities described below.

Emerging Scholars Extramural Small Grants Program

The first activity in our Building Human Capital and Economic Potential research agenda was an extramural small grants program intended to seed new research in this area while targeting emerging social science scholars. Meet the Emerging Scholars.

A December 2012 request for proposals invited extramural research proposals from recent Ph.D. recipients (within the past eight years) that are responsive to the following types of questions in the following three areas:

1. The role of human capital in reducing disconnections from the labor market

  • How can disconnections from schooling and the labor force be prevented among youth/young adults? How can youth be engaged before they drop out?
  • How can human capital acquisition bolster labor market entry/re-entry for these groups? What types of human capital acquisition would be most effective?
  • What policies/programs are needed to better aid subgroups at high risk of disconnection and prolonged unemployment, e.g., the formerly incarcerated, disabled, immigrants, and minorities who lag in educational attainment?
  • How can promising interventions be effectively replicated and/or scaled up?

2. The role of formal education and training in increasing employment and wage/earnings growth

  • What school-based interventions are needed to increase high school graduation rates?
  • What types of interventions will increase college and/or career readiness, particularly for subgroups at high risk of disconnection, including dropouts and those with only a GED?
  • What strategies will reduce racial and socioeconomic gaps in completion rates for 2- and 4-year colleges?
  • What are the most promising public and/or private training initiatives that target growing jobs and bring together training providers, employers, workers, and community-based organizations in design and implementation (e.g., sector-focused programs, integrated basic and technical skills programs) to increase employment and wage/earnings growth?

3. The implications of changing demand for labor, job creation, and job quality

  • What new or tested approaches will work best to maintain or create jobs and promote upward job and wage mobility (e.g., temporary short-time work arrangements, wage subsidies, non-wage cost reductions, expansions in self-employment, profit-sharing)?
  • How are the processes of job search and job matching changing, and how can new approaches be harnessed to increase success for the hard-to-employ?
  • How is the quality of jobs changing, and what role should public and private sector entities/policies have in promoting/supporting job quality (stability, flexibility, benefits)?
  • What reforms to unemployment insurance (UI) can be undertaken to eliminate disincentives for work and stem the tide of workers shifting from UI to disability programs?
  • What macroeconomic efforts, such as state job growth policies, should be pursued to support the effectiveness of human capital investments?
  • What public/private (or "across silo") partnerships and strategies are needed to bring employers into partnerships and successfully expand the most promising interventions for the hard-to-employ?

Abstracts of Top Five Proposals

Mentoring Meeting and Workshop

At the completion of their work, the junior scholars who received small grants will be invited to attend a half-day workshop to present their research and receive feedback from Building Human Capital and Economic Potential project codirectors, Professors Heinrich and Smeeding. This workshop will precede a major research and policy conference, discussed below.

National Research and Policy Conference

IRP will hold a major multidisciplinary research and policy conference focused on Building Human Capital and Economic Potential in July 2014 (view the agenda). It will be jointly convened by IRP and the Center for Health and Social Policy and the Ray Marshall Center for the Study of Human Resources at the University of Texas at Austin.

The conference will consider evidence on cost-effective ways to build skills and earnings potential among low-wage/low-skill workers, addressing the following types of questions:

  • What factors influence earnings growth for low-skilled workers?
  • Are policymakers able to influence these factors?
  • What types of postsecondary training and education lead to job placement and wage growth?
  • Are partnerships between schools, training programs and employers an effective means for improving students' economic prospects?
  • What types of job search are most cost-effective for low-skill workers, and do these search mechanisms differ by race or ethnicity?
  • Do programs exist that are effective at building labor market participation among formerly incarcerated individuals?

Papers from the conference will be summarized in a set of policy briefs.

Policy Briefing

On October 15, 2014, in Washington, DC, the Institute for Research on Poverty (IRP) at the University of Wisconsin–Madison and the Center for Health and Social Policy (CHASP) at the University of Texas at Austin, will co-host with the Brookings Institution an engaging discussion of this pressing policy issue: How can we build economic self-sufficiency among working families and the disadvantaged, while simultaneously meeting the labor demand needs of employers, through policies and programs that increase labor market skills, employment, wages, and earnings?

Together with policymakers, researchers, and others who inform and shape public policy, we will discuss recent research findings and their policy implications from the Building Human Capital and Economic Potential initiative and conference undertaken by IRP and CHASP. A summary of the conference, now available in the latest issue of IRP's Fast Focus publication, is available here: Fast Focus No. 21-2014: "Building Human Capital and Economic Potential."

Two policy briefs designed to share the evidence-based policy ideas and recommendations from the conference are also included here and will be discussed at the October 15, 2014, policy briefing: Focus on Policy Brief No. 2: "Building Economic Self-Sufficiency"; and Focus on Policy Brief No. 3: "Helping the Hard-to-Employ and Their Families."

We hope you will join us!

Questions? Please contact Esmeralda Garcia Galvan esmegarcia@austin.utexas.edu.

Policy and Practice Briefs: Focus on Policy

Focus on Policy Brief No. 2: "Building Economic Self-Sufficiency"

This policy brief, the first of two drawn from the IRP and CHASP conference on Building Human Capital and Economic Potential, provides economic and labor market evidence along with policy ideas to address human capital and labor market challenges.

Focus on Policy Brief No. 3: "Helping the Hard-to-Employ and Their Families"

This policy brief, the second of two drawn from the IRP and CHASP conference on "Building Human Capital and Economic Potential," examines the special challenges of people with less than a high school diploma, ex-offenders, and young single mothers and policy options to address them.

Research Brief: Fast Focus

Fast Focus No. 21-2014: "Building Human Capital and Economic Potential"

This research brief describes the key themes and research undertakings in the initiative, the findings presented, and some of the policy ideas advanced at the July 2014 National Research and Policy Conference.

Seminar Series

Another activity on our Building Human Capital and Economic Potential research agenda is a thematic seminar series to take place in 2013 to 2014. Each speaker, to be drawn from a variety of disciplines, will be asked to assess current research and policy solutions and highlight key research and policy challenges for increasing economic self-sufficiency through building human capital and economic potential.

Human Capital and Economic Potential-Related IRP Publications

What follows below are links to select recent IRP publications on topics related to building human capital and economic potential. Search the IRP Publications Database or see IRP's Publications Search Instructions and Tips to learn how to conduct a search of all IRP publications by topic, date, author, and etcetera.

Focus Articles

Focus 27(2), Winter 2010: How Well Do We Understand Achievement Gaps?
Eric A. Hanushek

Focus 26(2), Fall 2009: Improving Educational Outcomes for Poor Children
Brian A. Jacob and Jens Ludwig

Focus 26(2), Fall 2009: Workforce Development as an Antipoverty Strategy: What Do We Know? What Should We Do?
Harry J. Holzer

Focus 26(1), Summer-Fall 2008: Improving Individual Success for Community College Students
Susan Scrivener

Focus 25(2), Fall-Winter 2007-2008: Pathways to Self-Sufficiency
Carolyn Heinrich and J. Karl Scholz

Focus 25(2), Fall-Winter 2007-2008: Improving Educational Outcomes for Disadvantaged Children
David N. Figlio

Focus 25(2), Fall-Winter 2007-2008: The Employment Prospects of Ex-Offenders

Focus 25(2), Fall-Winter 2007-2008: The Growing Problem of Disconnected Single Mothers
Rebecca Blank and Brian Kovak

Focus 25(1), Spring-Summer 2007: Parenting Practices, Teenage Lifestyles, and Academic Achievement among African American Children
Ronald Ferguson

Focus 25(1), Spring-Summer 2007: Hispanics at the Age Crossroads: Opportunities and Risks
Marta Tienda

Focus 24(3), Fall-Winter 2006: Does Temporary Agency Employment Offer a Way Out of Poverty?
(Based on work by David H. Autor and Susan N. Houseman)

Focus 24(2), Spring-Summer 2006: Can We Improve Job Retention and Advancement among Low-Income Working Parents?
Harry J. Holzer and Karin Martinson

Focus 24(1), Fall 2005: Inequality in Children's School Readiness and Public Funding
Katherine Magnuson, Marcia K. Meyers, Christopher J. Ruhm, and Jane Waldfogel

Focus 23(3), Spring 2005: Inequality in America: What Role for Human Capital Policies?
(Based on work by James Heckman)

Focus 23(3), Spring 2005: Economic Inequality and Educational Attainment across a Generation
Mary Campbell, Robert Haveman, Gary Sandefur, and Barbara Wolfe

Focus 23(3), Spring 2005: Equal Opportunities for Children: Social Welfare Expenditures in the English-Speaking Countries and Western Europe
Irwin Garfinkel, Lee Rainwater, and Timothy M. Smeeding

Focus 23(3), Spring 2005: Temporary Downturn? Temporary Staffing in the Recession and the Jobless Recovery
Jamie Peck and Nik Theodore

Fast Focus

Fast Focus No. 13-2012, January 2012: Boosting the Employment and Productivity of American Workers
Harry J. Holzer

This issue of Fast Focus introduces an award-winning proposal by Harry J. Holzer that takes on the challenge of connecting less-educated and less-skilled unemployed Americans to education and training programs, and ultimately to employers that need more-specialized workers. He shows that there are good-paying jobs that do not require a four-year college degree, but not enough skilled workers to fill them. His plan is to create more effective education and training systems to improve workers' success and connect employers to the skilled workforce they need in the global labor market. Holzer presented his proposal at a forum hosted by the Hamilton Project at the Brookings Institution on November 30, 2011, on training programs geared toward the needs of today's workforce. Holzer received the Hamilton Project’s 2011 Policy Innovation Prize for the best proposal to create jobs and enhance productivity. The broader proposal appears in Raising Job Quality and Skills for American Workers: Creating More-Effective Education and Workforce Development Systems in the States, The Hamilton Project, Brookings Institution, Washington, D.C.

Fast Focus No. 12-2011, October 2011: American Poverty and Inequality: Key Trends and Future Research Directions
Timothy M. Smeeding, Maria Cancian, John Karl Scholz, Barbara Wolfe, Robert Haveman, and Colleagues

In this brief, IRP researchers assess poverty and inequality in the United States. They examine key trends over the decades since the War on Poverty was launched in the 1960s, review past research, and look ahead to how poverty may continue to change and require new approaches to mitigate its effects on individuals and families. They evaluate the policies and programs devised to improve opportunities for the disadvantaged and to help them on the path to self-sufficiency. Finally, they look ahead to project what researchers, policymakers, and practitioners will need to know to improve the life chances of all Americans and what research evidence is needed to inform and improve antipoverty efforts.

Fast Focus No. 10-2011, June 2011: Jobs, Skills, and Policy for Lower-Wage Workers
Robert H. Haveman, Carolyn J. Heinrich, and Timothy M. Smeeding

This issue of Fast Focus is based on the presentations made by a group of economists, sociologists, and public policy and education experts at a national working conference hosted by IRP in March 2011. The "Employment Prospects for Lower-Wage Workers: Easing the Implications of a Slow Recovery" conference, which was organized by Robert Haveman, Carolyn Heinrich, and Timothy Smeeding, featured presentations by leading researchers on the sources of U.S. labor market polarization and its impacts  on workers with varying types and levels of skills. Issues of technological change, job-outsourcing, the decline of trade unions, and the effect of minimum wages were assessed. Conference participants explored the consequences of these developments on a variety of economic and social phenomena, including the growth of wage and income inequality, the demand for public transfers, and the health and well-being of displaced workers and their families. To view the conference PowerPoint presentations, visit IRP’s Web site at www.irp.wisc.edu and search for "employment conference."

Fast Focus No. 9-2011, March 2011: Unmarried Parents in College: Pathways to Success
Sara Goldrick-Rab and Kia Sorensen

The authors examine unmarried parents in college at a time when postsecondary education and training have become increasingly important to workers' success in the U.S. labor market and therefore to families' economic security. Noting that access to higher education has dramatically expanded in the past several decades, Goldrick-Rab and Sorensen focus on how unmarried parents fare once they enter college. They argue that, contrary to the expectation that college access consistently promotes family stability and economic security, deficiencies in current policy lead to adverse consequences for some families headed by unmarried parents. And although rates of college attendance have substantially increased among unmarried parents, their college completion rates are low. The authors examine their barriers to success, and the effects of their studies on family life, describing empirically tested supports that have helped more unmarried parenting students attain a degree and thus find better employment at higher wages.

Fast Focus No. 5-2010, May 2010: Early Findings from New York City's Conditional Cash Transfer Program
James A. Riccio

In 2007, New York City's Center for Economic Opportunity launched Opportunity NYC: Family Rewards, an experimental, privately funded, conditional cash transfer (CCT) program to help families break the cycle of poverty. CCT programs offer cash assistance to reduce immediate hardship, but condition these transfers on families' efforts to build up their "human capital," often by developing the education and skills that may reduce their poverty over the longer term. Family Rewards is the first comprehensive CCT program in a developed country. The program is being evaluated by MDRC through a randomized control trial involving approximately 4,800 families and 11,000 children. This brief summarizes an MDRC report on initial findings during the program's early operating period.

Fast Focus No. 2-2009, March 2009: President Obama and Antipoverty Policy: What Does the Stimulus Bill Do to Fight Poverty, Educate Citizens, and Improve Public Health?
Timothy M. Smeeding, Daniel R. Meyer, Sara Goldrick-Rab, Pamela Herd, and Andrew Reschovsky

This brief summarizes an IRP panel discussion about the Obama administration's economic stimulus bill. Daniel R. Meyer, commented on the bill's cash and noncash transfer programs, indicating that the stimulus bill represents both a continuation of thirty-year trends in policies affecting low-income families and some nontrivial increases in existing benefit-program outlays. Sara Goldrick-Rab spoke about aid to education in the bill, lauding the administration's new emphasis on higher education as essential to escaping poverty, but also noting that more than half of the $100 billion earmarked for new education funding will go to keeping schools open. Pamela Herd talked about health and health care support, noting that about one-fifth of the stimulus is for broadly construed health and health care, about half of which is to keep the public health insurance system going, mainly through increased Medicaid funding. Andrew Reschovsky presented a synopsis of how the federal stimulus bill influenced the State of Wisconsin's education budget, noting that federal stimulus funds will support poverty-related programs and special education, and that this budget has no increase in equalization aid, unlike in past years.

IRP Discussion Papers

Discussion Paper No. 1400-12, 2012: A Very Uneven Road: U.S. Labor Markets in the Past 30 Years
Harry J. Holzer and Marek Hlavac

In this paper we use data from the Current Population Survey to summarize labor market trends in the U.S. over the past 30 years. First we focus on secular trends over the four years (and three cycles) that constitute labor market peaks during this period: 1979, 1989, 2000, and 2007. Then we consider peak-to-trough changes in employment outcomes for each of the four recessions that have occurred in this period, including the Great Recession. Overall we find great unevenness in labor market performance across cycles and across demographic groups. Inequality has widened dramatically and important structural changes have occurred. Women and/or more-educated workers have gained substantially relative to men and/or the less-educated, while high earners within each group gained relative to others. The Great Recession has hurt all groups but especially young and less-educated men, whose outcomes had already deteriorated over time.

Discussion Paper No. 1394-11, 2011: Creating Effective Education and Workforce Policies for Metropolitan Labor Markets in the United States
Harry J. Holzer

How well do our education policies prepare America's youth for the labor market? What challenges limit our success, and what opportunities do we have for improvements? Can public policy play a greater role in encouraging more success? In this paper, I provide a summary of what we know on these issues. In addition, I consider these questions as they apply to the unique characteristics of metropolitan areas in the United States. I consider demand for both middle- and high-skill jobs, where the former are defined as those requiring some postsecondary education or training (broadly defined) beyond a high school diploma but less than a bachelor's degree, and the latter are defined as those requiring a bachelor's or higher. I then review the challenges limiting so many young Americans as they prepare for the labor market, as well as what we know about programs and policies that might improve observed outcomes. Finally, I review the characteristics of U.S. metropolitan areas that exacerbate the challenges we face—especially the uneven distribution of people and jobs within and across those areas.

Discussion Paper No. 1393-11, 2011: Conditional Cash Transfers and College Persistence: Evidence from a Randomized Need-Based Grant Program
Sara Goldrick-Rab, Douglas N. Harris, James Benson, and Robert Kelchen

We use the random assignment of a private Wisconsin need-based grant to estimate the impacts of financial aid on college persistence among Pell Grant recipients at 13 public universities over three years. For equity and efficiency reasons, governments use conditional cash transfers to reduce the relationship between family income and college attainment, but prior research suggests that financial aid generates only modest positive effects. This is the first experimental study of a program resembling the longstanding federal Pell Grant program, but with fewer paperwork requirements and an award process that facilitates the identification of effects on college persistence, independent of initial college choice. We find that on average the grant increased neither enrollment nor credit attainment; the only notable positive average treatment effect was a 28 percent increase in the proportion of students completing 60 credits over two years but this was offset by a reduction in credits among other students. Results from this experimental study suggest that the modest effects of conditional cash transfers for low-income university students primarily operate on credits rather than enrollment, and these could be enhanced with better targeting. More generally, we find that students respond to formal cash incentives in unexpected ways.

Discussion Paper No. 1391-11, 2011: Unequal Pathways through American Universities
Fabian T. Pfeffer and Sara Goldrick-Rab

Student pathways through the American higher education system are complex and entail more than the choice between continuation and dropout. This project overcomes the simplistic view of discrete choices between enrollment and nonenrollment and takes a close look at the cumulative nature of the attainment of U.S. students at four-year colleges and the social inequalities arising in this process. Transitions through college are also found to be strongly related to students' socioeconomic backgrounds. By fully appreciating the cumulative nature of educational pathways through college, we provide an important new view on the complex routes to college completion and trace an important source of the socioeconomic gap in college completion. The relatively rigid structure of the U.S. four-year college system appears to produce strong path-dependent and status-dependent cumulative advantages for high-status students.

Discussion Paper No. 1390-11, 2011: Immigration Policy and Less-Skilled Workers in the United States: Reflections on Future Directions for Reform
Harry J. Holzer

This paper reviews the evidence on the effects of less-skilled immigration to the United States and their implications for immigration reform. It begins with a review of the costs of less-skilled immigration, in terms of competition to native-born American workers; and the benefits of such immigration in the form of lower consumer prices, higher employer profits, and greater efficiency for the U.S. economy. Effects of different legal categories of immigrants and of immigrant integration over time are considered. The paper then reviews various reform proposals and other ideas that might raise the net benefits associated with less-skilled immigration to the United States.

Discussion Paper No. 1388-10, 2010: Have Welfare-to-Work Programs Improved Over Time in Putting Welfare Recipients to Work?
David H. Greenberg and Philip K. Robins

Data from 76 experimental welfare-to-work programs conducted in the United States between 1983 and 1998 are used to investigate whether the impacts of such programs on employment had been improving over time and whether specific program features influencing such changes can be identified. Over the period, an increasing percentage of control group members received services similar to those offered to program group members. As a result, differential participation in program service activities between program and control group members decreased steadily over time. This reduction in the net receipt of program services tended to reduce the impact of these programs on employment. However, the negative influence of the reduced incremental services was offset by other factors that resulted in program impacts remaining essentially constant from 1983 to 1998. Suggestions are made for possibly improving program impacts in future experiments.

Discussion Paper No. 1386-10, 2010: The Earned Income Tax Credit and Expected Social Security Benefits among Low-Income Mothers
Molly Dahl, Thomas DeLeire, Jonathan Schwabish, and Timothy Smeeding

The Earned Income Tax Credit (EITC) has been found to lead to increases in employment and earnings growth for low-educated women. That increased employment and earnings may result in a greater fraction of those women qualifying for Social Security benefits and their receiving a higher benefit in the event they do qualify. In this study, we determine the extent to which the labor supply responses to the EITC will improve the financial security of low-income women when they near retirement age. We use data from the 1993 and 1996 SIPP-SSA matched data files and the CWHS to estimate the impact of EITC expansions on employment, quarters of coverage, and earnings growth. Earlier research exploited the differential expansions in the credit for single mothers with two or more qualifying children and for single mothers with only one child. Those results, consistent with our earlier work, show that the EITC increased both employment and earnings growth of single mothers in the five years following expansion. We then simulate the impact of EITC expansion on the Average Indexed Monthly Earnings (AIME) amount and the Primary Insurance Amount (PIA) of a sample of low-educated women. The results show that the EITC increases the share of women who are eligible for Social Security retirement benefits by between 2 percent and 3 percent. Further, we find that lifetime earnings increase by between 6 percent and 17 percent and the AIME by a similar amount.

Discussion Paper No. 1381-10, 2010: Government Programs Can Improve Local Labor Markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Communities
John C. Ham, Charles Swenson, Ayse Imrohoroglu, and Heonjae Song

Federal and state governments spend well over a billion dollars a year on programs that encourage employment development in disadvantaged labor markets through the use of subsidies and tax credits. In this paper we use an estimation approach that is valid under relatively weak assumptions to measure the impact of State Enterprise Zones (ENTZs), Federal Empowerment Zones (EMPZs), and Federal Enterprise Community (ENTC) programs on local labor markets. We find that all three programs have positive, statistically significant impacts on local labor markets in terms of the unemployment rate, the poverty rate, the fraction with wage and salary income, and employment. Further, the effects of EMPZ and ENTC designation are considerably larger than the impact of ENTZ designation. We find that our estimates are robust to allowing for a regression to the mean effect. We also find that there are positive, but statistically insignificant, spillover effects to neighboring census tracts of each of these programs. Thus our positive estimates of these program impacts do not simply represent a transfer from the nearest non-treated census tract to the treated census tract.

Discussion Paper No. 1379-10, 2010: Explaining Racial/Ethnic Gaps in Spatial Mismatch: The Primacy of Racial Segregation
Michael A. Stoll and Kenya L. Covington

Despite declines in racial segregation across most U.S. metropolitan areas in recent years, racial and ethnic minorities still display uneven geographic access to jobs. In this article, we provide a detailed analysis of the factors driving racial and ethnic gaps in spatial mismatch conditions across U.S. metropolitan areas. Using data primarily from the 1990 and 2000 U.S. Censuses, and the 1994 and 1999 Economic Censuses, and the Zip Code Business Pattern files, we generate descriptive, multivariate, and decompositional evidence to address why blacks and to a lesser extent Latinos display greater degrees of spatial mismatch than whites. The results indicate that racial segregation in housing markets, among many other factors including job sprawl, is the most important factor. The authors' models indicate that racial differences in spatial mismatch conditions, particularly between blacks and whites, should be eliminated in 45 to 50 years should racial segregation levels continue to decline in the future at similar rates observed over the 1990s.

Discussion Paper No. 1366-09, 2009: Does Debt Discourage Employment and Payment of Child Support? Evidence from a Natural Experiment
Maria Cancian, Carolyn Heinrich, and Yiyoon Chung

Despite substantial technological improvements to the child support enforcement program, many single parents do not receive child support. Particularly for families whose incomes are below the poverty level, child support is frequently a vital financial resource. The federal government's primary motivation for establishing the federal Child Support Enforcement (CSE) program was to recover the costs associated with public assistance payments to poor single-parent families by collecting payments from the noncustodial parents. In this study, we use variation in the birthing costs over time and across counties in Wisconsin to identify the effect of child support debt on nonresident fathers' child support payments and formal earnings. Our results suggest that higher arrears, in themselves, substantially reduce both child support payments and formal earnings for the fathers and families that already likely struggle in securing steady employment and coping with economic disadvantage, a serious unintended consequence of child support policy.

Discussion Paper No. 1365-09, 2009: Stepping Stone or Dead End? The Effect of the EITC on Earnings Growth
Molly Dahl, Thomas DeLeire, and Jonathan Schwabish

While many studies have found that the EITC increases the employment rates of single mothers, no study to date has examined whether the jobs taken by single mothers as a result of the EITC incentives are "dead-end" jobs or jobs that have the potential for earnings growth. Using a panel of administrative earnings data linked to nationally representative survey data, we find no evidence that the EITC expansions between 1994 and 1996 induced single mothers to take "dead-end" jobs. If anything, the increase in earnings growth during the mid-to-late 1990s for single mothers who were particularly affected by the EITC expansion was higher than it was for other similar women. The EITC encourages work among single mothers, and that work continues to pay off through future increases in earnings.

Discussion Paper No. 1363-09, 2009: Long-Term Effects of Public Low-Income Housing Vouchers on Labor Market Outcomes
Deven Carlson, Robert Haveman, Tom Kaplan, and Barbara Wolfe

The federal Housing Choice Voucher (Section 8) Program provides eligible low-income families with an income-conditioned voucher that pays for a portion of rental costs in privately owned, affordable housing units. This paper extends prior research on the effectiveness of rental support programs in several ways. The analysis employs a unique longitudinal dataset created by combining administrative records maintained by the State of Wisconsin with census block group data. We use a propensity score matching approach coupled with difference-in-differences regression analysis to estimate the effect of housing voucher receipt on the employment and earnings of voucher recipients; we track these effects for five years following voucher receipt. Our results indicate that voucher receipt has a generally positive effect on employment, but a negative impact on earnings. The negative earnings effect is largest in the years following initial receipt of the rental voucher, and dissipates over time. We find that the pattern of recipient labor market responses to voucher receipt differs substantially among demographic subgroups.

Discussion Paper No. 1361-09, 2009: The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
Gordon Dahl and Lance Lochner

Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use two simulated instrumental variables strategies to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100. Using a panel of almost 5,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. The gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications. We find little evidence of long-run income effects, with most of the effects disappearing after one year.

Discussion Paper No. 1358-08, 2008: Living Wage Laws: How Much Do (Can) They Matter?
Harry J. Holzer

In this paper I review what we have learned about living wage laws and their impacts on the wages, employment, and poverty rates of low-wage workers. I review the characteristics of these laws and where they have been implemented to date, and what economic theory tells us about their likely effects in more and less competitive labor markets. I then review two bodies of empirical evidence: (1) studies across cities or metropolitan areas that have and have not implemented these laws, using data from the Current Population Survey pooled over many years; and (2) studies within particular cities, based on comparisons of covered and uncovered workers before and after the laws are passed. I conclude that living wage laws have modestly raised wage levels of low-wage workers and have reduced their employment at covered firms, but that the magnitudes of both effects are likely quite small, given how few workers are usually covered by these ordinances.

Discussion Paper No. 1357-08, 2008: Measuring Job Content: Skills, Technology, and Management Practices
Michael J. Handel

The conceptualization and measurement of key job characteristics has not changed greatly for most social scientists since the Dictionary of Occupational Titles and Quality of Employment surveys were created, despite their recognized limitations. However, debates over the roles of job skill requirements, technology, and new management practices in the growth of inequality have led to renewed interest in better data that directly addresses current research questions. This paper reviews the paradigms that frame current debates, introduces new measures of job content designed specifically to address the issues they raise from the survey of Skills, Technology, and Management Practices (STAMP), and presents evidence on validity and reliability of the new measures.

Discussion Paper No. 1342-08, 2008: The Association between Children's Earnings and Fathers' Lifetime Earnings: Estimates Using Administrative Data
Molly Dahl and Thomas DeLeire

Knowledge of the degree of intergenerational mobility in an economy is essential for assessing the fairness of the earnings distribution. In this paper, we provide estimates of the degree of intergenerational mobility in the United States using administrative earnings data from the Social Security Administration's records. These data contain nearly career-long earnings histories for a large sample of U.S. fathers, and their children's earnings around an age that is likely to be a good proxy for lifetime earnings. We examine two different measures of mobility: (1) the association between fathers' and children's log earnings (the intergenerational elasticity or IGE) and (2) the association between fathers' and children's relative positions in their respective earnings distributions (or the intergenerational rank association or IRA). We show that estimates of the IGE are quite sensitive to choice of specification and sample and range from 0.26 to 0.63 for sons and from 0 to 0.27 for daughters. That is, a 10 percent increase in fathers' earnings is associated with a 3 percent to 6 percent increase in sons' earnings and a 0 percent to 3 percent increase in daughters' earnings. By contrast, our estimates of the IRA are robust to both specification and sample choices and show that a 10 percentile increase in a father's relative position is associated with roughly a 3 percentile increase in his son's and roughly a 1 percentile increase in his daughter's relative earnings positions. Nonparametric estimates of the IRA show relatively more immobility among the children of men below the 10th percentile and above the 80th percentile of lifetime earnings.

Discussion Paper No. 1341-08, 2008: Expanding New York State's Earned Income Tax Credit Program: The Effect on Work, Income, and Poverty
Maximilian D. Schmeiser

Given its favorable employment incentives and ability to target the working poor, the Earned Income Tax Credit (EITC) has become the primary antipoverty program at both the federal and state levels. However, when evaluating the effect of EITC programs on income and poverty, governments generally calculate the effect using simple accounting, where the value of the state or federal EITC benefit is added to a person's income. These calculations omit the behavioral incentives created by the existence of these programs, the corresponding effect on labor supply and hours worked, and therefore the actual effect on income and poverty. This paper simulates the full effect of an expansion of the New York State EITC benefit on employment, hours worked, income, poverty, and program expenditures. These results are then compared to those omitting labor supply effects. Relative to estimates excluding labor supply effects, the preferred behavioral results show that an expansion of the New York State EITC increases employment by an additional 14,244 persons, labor earnings by an additional $95.8 million, family income by an additional $84.5 million, decreases poverty by an additional 56,576 persons, and increases costs to the state by $29.7 million. These results emphasize the importance of modeling labor supply behavior when analyzing the impact of the EITC.

Discussion Paper No. 1337-08, 2008: On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework
Christopher Flinn and James Mabli

We look at the impact of a binding minimum wage on labor market outcomes and welfare distributions in a partial equilibrium model of matching and bargaining in the presence of on-the-job search. We use two different specifications of the Nash bargaining problem. In one, firms engage in a Bertrand competition for the services of an individual, as in Postel-Vinay and Robin (2002). In the other, firms do not engage in such competitions, and the outside option used in bargaining is always the value of unemployed search. We estimate both bargaining specifications using a Method of Simulated Moments estimator applied to data from a recent wave of the Survey of Income and Program Participation. Even though individuals will be paid the minimum wage for a small proportion of their labor market careers, we find significant effects of the minimum wage on the ex ante value of labor market careers, particularly in the case of Bertrand competition between firms. An important futures goal of this research agenda is to develop tests capable of determining which bargaining framework is more consistent with observed patterns of turnover and wage change at the individual level.

Discussion Paper No. 1335-08, 2008: Temporary Help Service Firms' Use of Employer Tax Credits: Implications for Disadvantaged Workers' Labor Market Outcomes
Sarah Hamersma and Carolyn Heinrich

Temporary Help Services (THS) firms are increasing their hiring of disadvantaged individuals and claiming more subsidies for doing so. Do these subsidies—the Work Opportunity Tax Credit (WOTC) and Welfare-to-Work Tax Credit (WtW)—create incentives that improve employment outcomes for THS workers? We examine the distinct effects of THS employment and WOTC/WtW subsidies using administrative and survey data. Results indicate that WOTC/WtW-certified THS workers have higher earnings than WOTC-eligible but uncertified THS workers. However, these workers have shorter job tenure and lower earnings than WOTC/WtW-certified workers in non-THS industries. Panel estimates suggest that these effects do not persist over time.

Discussion Paper No. 1332-07, 2007: Temporary Help Agencies and the Advancement Prospects of Low Earners
Fredrik Andersson, Harry J. Holzer, and Julia Lane

In this paper we use a very large matched database on firms and employees to analyze the use of temporary agencies by low earners, and to estimate the impact of temporary employment on subsequent employment outcomes for these workers. Our results show that, while temporary workers have lower earnings than others while working at these agencies, their subsequent earnings are often higher—but only if they manage to gain stable work with other employers. Furthermore, the positive effects seem mostly to occur because those working for temporary agencies subsequently gain access to higher-wage firms than do comparable low earners who do not work for temporary agencies. The positive effects we find seem to persist for up to six years beyond the period during which the temporary employment occurred.

Discussion Paper No. 1331-07, 2007: Collateral Costs: The Effects of Incarceration on Employment and Earnings among Young Men
Harry J. Holzer

The enormous increases in incarceration that have occurred in the U.S. over the past few decades have no doubt generated major societal benefits-such as a likely reduction in crime—as well as major costs—such as the huge public expense of building and operating prisons. In addition, there are a range of "collateral" benefits and costs to the individuals who are incarcerated, their families/communities, and others that need to be considered. In this paper, the author reviews what is known about the collateral costs and benefits of incarceration on earnings and employment. He then explores the different studies on this topic, focusing on the data sources and empirical methods used, and on the magnitudes of the effects generated. The author argues that, while the credible empirical evidence is quite mixed, the preponderance of it points to negative effects of incarceration on the subsequent employment and earnings of offenders. He concludes the paper by asserting that the large costs on employment associated with current levels of incarceration need to be acknowledged and addressed through remedial policy and programmatic activity.

Discussion Paper No. 1327-07, 2007: The Economic Costs of Poverty in the United States: Subsequent Effects of Children Growing Up Poor
Harry J. Holzer, Diane Whitmore Schanzenbach, Greg J. Duncan, and Jens Ludwig

In this paper, we review a range of rigorous research studies that estimate the average statistical relationships between children growing up in poverty and their earnings, propensity to commit crime, and quality of health later in life. We also review estimates of the costs that crime and poor health per person impose on the economy. Then we aggregate all of these average costs per poor child across the total number of children growing up in poverty in the United States to estimate the aggregate costs of child poverty to the U.S. economy. Our results suggest that the costs to the United States associated with childhood poverty total about $500 billion per year, or the equivalent of nearly 4 percent of GDP.

Discussion Paper No. 1326-07, 2007: The Effect of Criminal Background Checks on Hiring Ex-Offenders
Michael A. Stoll and Shawn D. Bushway

The rapid rise in the nation's incarceration rate over the past decade has raised questions about how to successfully reintegrate a growing number of ex-offenders. Employment has been shown to be an important factor in reintegration, especially for men over the age of 27, who represent the majority of individuals released from prison. At the same time, there is substantial evidence that employers discriminate against ex-prisoners. One policy response that has received considerable attention is to deny employers access to criminal history record information, including movements to "ban the box" asking about criminal history information on job applications. This paper explores this issue using unique establishment-level data collected in Los Angeles in 2001. On average, we replicate the now common finding that employer-initiated criminal background checks are negatively related to the hiring of ex-offenders. However, this negative effect is less than complete. The effect is strongly negative for those employers that are legally required to check. But some employers appear to check to gain additional information about ex-offenders (and thus hire more ex-offenders than other employers), while checking appears to have no effect on hiring ex-offenders for those employers not legally required to check. Therefore, initiatives aimed at restricting background checks for those firms not legally required to check may not have the desired consequences of increasing ex-offender employment.

Discussion Paper No. 1322-07, 2007: Family Capital: How First-Generation Higher-Education Students Break the Intergenerational Cycle
Anat Gofen

The first children in a family to attain a higher education, referred to as "first-generation students," embody the realization of social mobility. Previous analysis has often portrayed them as succeeding despite their family background. This research suggests that although they face many material challenges, their families are often a key resource, rather than a constraint. This research attempts to reveal what enabled the intergenerational cycle of disadvantage to be broken. In-depth, semi-structured interviews were used to collect data from Israeli families in which intergenerational mobility took place (N = 50). Employing a grounded theory approach, the analysis reveals that breaking the intergenerational cycle mostly concerns family day-to-day life, and that it reflects three main components: time horizon, interpersonal relationships, and family values.

Discussion Paper No. 1319-06, 2006: Labor Market Experiences and Transitions to Adulthood
Carolyn J. Hill and Harry J. Holzer

This paper analyzes labor market behaviors of young adults, their changing patterns among two cohorts that are twenty years apart, and their associations with transitions to adulthood as measured by living with parents, being married, or cohabiting. We analyze these issues using data from the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth (NLSY), specifically focusing on young people ages 20 to 22 in 1984 and 2002. Consistent with data from other sources, we find that youth in the later cohort tend to live at home or cohabit with greater frequency, but to marry less frequently, than those in the earlier cohort. These findings can be observed among youth in all education/enrollment groups and all race/gender groups. Regression analyses show evidence of some link between contemporaneous labor market outcomes and living arrangements, but these effects are too small to account for changes over time in these behaviors. We also find some relationships between academic and labor market outcomes as well as risky behaviors of youth during high school, on the one hand, and later labor market outcomes and living arrangements, on the other. These suggest the presence of unmeasured characteristics (such as independence, maturity, and the like) that help to account for differences across individuals in their living arrangements as young adults.

Discussion Paper No. 1314-06, 2006: Affirmative Action: What Do We Know?
Harry J. Holzer and David Neumark

In this paper we review the research evidence on the effects of affirmative action in employment, university admissions, and government procurement. We consider effects on both equity (or distribution) as well as efficiency. Overall, we find that affirmative action does redistribute jobs, university admissions, and government contracts away from white males toward minorities and females, though the overall magnitudes of these shifts are relatively modest. We also find that affirmative action shifts jobs and university admissions to minorities who have weaker credentials, but there is little solid evidence to date of weaker labor market performance among its beneficiaries. While those students admitted to universities under affirmative action have weaker grades and higher dropout rates than their white counterparts at selective schools, they seem to benefit overall in terms of higher graduation rates and later salaries. Affirmative action also generates positive externalities for minority and low-income communities (in terms of better medical services and labor market contacts), and perhaps for employers and universities as well.

Discussion Paper No. 1313-05, 2005: Examining the Effect of the Earned Income Tax Credit on the Labor Market Participation of Families on Welfare
V. Joseph Hotz, Charles H. Mullin, and John Karl Scholz

This paper uses a unique dataset to study the employment effects of the earned income tax credit (EITC). At the core of our empirical analysis is a set of four tests that we use to assess the causal effects of the EITC on employment. The first test is based on the intuition that if the EITC alters employment, all else being equal, employment rates for two-or-more child families should grow relative to the employment rates of one-child families. The second test examines whether people eligible for the EITC actually file tax returns and claim it. The third test is based on the intuition that, if the EITC is causing employment differences between families with two or more children relative to those with one child, we should expect to see no employment differences between families with two children and families with three or more children, since the EITC did not change differentially for the latter two groups. The fourth test conditions the sample on those who do not file tax returns and again examines employment changes in the 1990s for families with two or more children relative to families with one child. Using fixed-effects empirical employment models estimated on a sample of single-parent families, our coefficient estimates are consistent with the EITC having a substantial, positive effect on the employment of families who have used or will use welfare.

Discussion Paper No. 1307-05, 2005: Can We Improve Job Retention and Advancement among Low-Income Working Parents?
Harry J. Holzer and Karin Martinson

In this paper we review the evidence on four approaches to improving job retention and advancement among low-income working adults: (1) financial incentives and supports; (2) case management and service provision, often by labor market intermediaries; (3) skill development strategies; and (4) employer-focused efforts, such as sectoral strategies and career ladder development at private firms. Within each category, we find at least some evidence of positive effects on retention or advancement. Among the most promising approaches are the use of labor market intermediaries for job placements, the use of community colleges for training, and a variety of efforts that involve local employers. Mixed strategies that combine strong financial incentives and supports with labor market services and training also show promise.

Discussion Paper No. 1304-05, 2005: Job Sprawl, Spatial Mismatch, and Black Employment Disadvantage
Michael A. Stoll

This paper examines the relationship between job sprawl and the spatial mismatch between blacks and jobs. Using data from a variety of sources including the U.S. Census and the ZIP Code Business Patterns of the U.S. Department of Commerce, I control extensively for metropolitan area characteristics and other factors. In addition, I use metropolitan area physical geography characteristics as instruments for job sprawl to address the problem of simultaneity bias. I find a significant and positive effect of job sprawl on mismatch conditions faced by blacks that remains evident across a variety of model specifications. This effect is particularly important in the Midwest and West, and in metropolitan areas where blacks' share of the population is not large and where blacks' population growth rate is relatively low. The results also indicate that the measure of mismatch used in this analysis is highly correlated across metropolitan areas, with blacks’ employment outcomes in the expected direction.

Discussion Paper No. 1303-05, 2005: The Effects of an Employer Subsidy on Employment Outcomes: A Study of the Work Opportunity and Welfare-to-Work Tax Credits
Sarah Hamersma

Recent changes in American public assistance programs have emphasized the role of work. Employer subsidies such as the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WtW) are designed to encourage employment by reimbursing employers for a portion of wages paid to certain welfare and food stamp recipients, among other groups. In this paper I develop a simple dynamic search model of employment subsidies and then test the model's implications for the employment outcomes of WOTC- and WtW-subsidized workers. My model predicts that subsidized workers will have higher rates of employment and higher wages than equally productive unsubsidized workers, and it highlights some possible effects of the subsidy on job tenure. I test these predictions using a unique administrative data set from the State of Wisconsin. These data provide information on demographic characteristics, employment histories, and WOTC and WtW participation for all welfare and food stamp recipients in the state for the years 1998–2001. My ability to precisely identify the workers who are subsidized allows me to distinguish the effects of program participation from those of eligibility. I estimate the employment, wage, and job tenure effects of the WOTC and WtW using propensity score matching estimation, which allows me to control for selection into the programs while maintaining fewer functional form assumptions than typical methods. I find that the WOTC and WtW have limited effects on the labor market outcomes of the disadvantaged population. While the programs may modestly increase employment and wages in the short run, these gains do not persist over time.

Discussion Paper No. 1295-05, 2005: The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes
Andrew Dyke, Carolyn J. Heinrich, Peter R. Mueser, and Kenneth R. Troske

Studies examining the effectiveness of welfare-to-work programs present findings that are mixed and sometimes at odds, in part due to research design, data, and methodological limitations of the studies. We aim to substantially improve on past approaches to estimate program effectiveness by using administrative data on welfare recipients in Missouri and North Carolina to obtain separate estimates of the effects of participating in sub-programs of each state's welfare-to-work program. Using data on all women who entered welfare between the second quarter of 1997 and fourth quarter of 1999 in these states, we follow recipients for sixteen quarters and model their quarterly earnings as a function of demographic characteristics, prior welfare and work experience, the specific types of welfare-to-work programs in which they participate, and time since participation. We focus primarily on three types of subprograms-assessment, job readiness and job search assistance, and more intensive programs designed to augment human capital skills-and use a variety of methods that allow us to compare how common assumptions influence results. In general, we find that the impacts of program participation are negative in the quarters immediately following participation but improve over time, in most cases turning positive in the second year after participation. The results also show that more intensive training is associated with greater initial earnings losses but also greater earnings gains in the long run.

Discussion Paper No. 1294-05, 2005: Taking a Couples Rather than an Individual Approach to Employment Assistance
Rachel A. Gordon and Carolyn J. Heinrich

In contrast to the standard individualistic approach to employment services delivery, we present evaluation results for an employment program in which both partners in a couple relationship simultaneously participate. We find that participating mothers had larger gains in employment and earnings and decreases in TANF receipt immediately upon program exit relative to mothers who participated as individuals. These gains eroded in the two years following program completion. Fathers show similar though weaker results. We suggest directions for future couples-oriented employment programs based on couples interventions in other fields and encourage program developers to consider the range of mechanisms associated with a focus on couples, including potential unintended consequences.

Additional IRP Resources

IRP Conference Volume: "Young Disadvantaged Men: Fathers, Families, Poverty, and Policy"
Special issue of The Annals of the American Academy of Political and Social Science 635 (May 2011)
Special Editors: Timothy M. Smeeding, Irwin Garfinkel, and Ronald B. Mincy

This special issue of The Annals introduces the major themes associated with young disadvantaged men, including low educational achievement, joblessness, out-of-wedlock childbearing, and incarceration, that were introduced at an IRP working conference held in September 2009. By age 30, between 68 percent and 75 percent of young men with a high school degree or less are fathers (NLSY). Half of them are married when their first child is born and far fewer continue their education post-high school. This volume provides practical, policy-driven strategies to address the national epidemic of disadvantaged young fathers, focusing on four major forces that help shape social and economic outcomes for young men who are fathers and for their partners and children: employment and earnings prospects; multiple-partner fertility; incarceration; and finally public policy, especially as it is reflected in the income support system and the child support system.

IRP Conference Volume: Changing Poverty, Changing Policies (Russell Sage Foundation 2009)
Edited by Maria Cancian and Sheldon Danziger

Based on papers presented at a 2008 IRP conference, Changing Poverty, Changing Policies continues IRP's seminal book series on poverty policy and research. Chapter authors are: Maria Cancian and Sheldon Danziger; Daniel R. Meyer and Geoffrey L. Wallace; Rebecca M. Blank; Maria Cancian and Deborah Reed; Steven Raphael and Eugene Smolensky; Markus Jäntti; John Karl Scholz, Robert Moffitt, and Benjamin Cowan; Jane Waldfogel; Brian A. Jacob and Jens Ludwig; Harry J. Holzer; Katherine Swartz; Mary Jo Bane; Robert Haveman.

In Changing Poverty, Changing Policies leading antipoverty scholars review a wide range of public policy reforms aimed at increasing the employment and earnings of low-income individuals, helping parents better balance their work and family obligations, and raising the educational attainment and skills of the next generation. The authors' focus on pragmatic measures that have real possibilities of being implemented in the United States not only provides vital knowledge about what works but real hope for change.