Labor Market and Policy Constraints on the Work Disincentive Effect of Welfare

Abstract

Abstract The popular image of U.S. welfare assistance is that it reduces the motivation to work by offering an alternative to employment. This study examines the work disincentive effect of welfare under spatially variant conditions in the labor market and in the public assistance system. The contention is that the decision between work and welfare, and therefore the work disincentive effect of welfare, is constrained by variable opportunities for employment and for obtaining public assistance in different parts of the country. This proposition is examined, using a model of the response of welfare participation to work disincentives, across different labor market and public assistance contexts. Results of an analysis of AFDC recipiency in the states indicate that welfare participation is most responsive to work disincentives in the upper Midwest, lower New England, and on the West Coast, where welfare provision is relatively liberal and the employment structure is not oriented toward the needs of the AFDC population. The work disincentive effect is lowest in the deep South, where low-skill jobs are more readily available and welfare is restrictive.