Another worker they profile had a job cleaning foreclosed homes for the city of Chicago. Clean water is necessary for cleaning houses, but the city had shut the water off in many of these properties. So the woman and her co-workers come up with various crafty schemes to get and transport water from neighbors, gas stations, and restaurants. In other words, we’re talking about some people who are willing to do some hard work for not a lot of money.
Fortunately for those with jobs, work-based, time-limited welfare reform was accompanied by some real gains in the way of work supports, particularly through the expansion of the Earned Income Tax Credit, a wage subsidy that can add over $5,000 dollars to the annual income of a full-time working parent with two kids, though the average is a bit less. Unfortunately, policy makers completely dropped the ball on the jobs part of the equation. Essentially, and amazingly, to anyone who knows the market failures that pepper the low-wage labor market, the new welfare law assumed the jobs would be there.
Edin and Shaefer argue that “although the 1996 welfare reform pushed millions of low-income single moms into the workforce, it did nothing to improve the conditions of low-wage jobs.” They further note that the EITC expansion partially exacerbate the problem, by further increasing the supply of labor, thus putting downward pressure on wages.
But they miss the other critical development of those years, one that many of us who raised these labor-supply concerns didn’t see coming: the strong increase in labor demand, as the late 1990s ultimately became a unique period of truly full employment. For the first time in decades, real low-wages grew at the rate of productivity. In the early 1990s, poverty among black mother-only families with kids was around 60 percent. By the end of the 1990s it was around 40 percent, a massive decline over such a short time period.
That’s still far too high, of course—the lasting disadvantages to children growing up in poverty are a key theme in $2 a Day—but it is a telling guidepost of what it will take to address a huge flaw in welfare reform, i.e., the insistence on work without regard to job availability. In the latter 1990s, the increased supply of low-wage workers, many of whom were poor single moms, was induced by welfare reform. But this supply shock was met with an even sharper increase in quantity and quality of low-wage jobs, the likes of which we haven’t seen since.
And what happened? Many of these women went to work, their earnings rose, and their poverty rates fell. But this period of a welcoming low-wage labor market turned out to be but a brief oasis in what, as $2 a Day reveals, is once again a desert of diminished opportunity, especially for the least advantaged with little in the way of work supports, most notably, child care.