How does welfare reform affect rural labor markets?
While rural welfare recipients have an immediate need to find employment, their entry into the labor force can have a longer term effect on local employment and earnings levels. The increase in labor supply associated with welfare recipients entry into the workforce, for example, could decrease wages not only for former recipients but also for others competing for the same limited-skill types of jobs. The size of this effect will depend on how the demand for labor responds to changes in wages. If small wage declines stimulate the creation of more jobs, then the impact of welfare reform on wages should be small. If job creation is sluggish, however, then larger declines in wages will be needed to match the demand for labor with the increased labor supply. Because welfare reform has been in place for less than a decade, data on its effects on the labor market are limited. Earlier studies of the aggregate labor market suggest that effects will be small because welfare recipients constitut
