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The Limits to Wage Growth: Measuring the Growth Rate of Wages For Recent Welfare Leavers

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  • David Card
  • Charles Michalopoulos
  • Philip K. Robins

Abstract

We study the rate of wage growth among welfare leavers in the Self Sufficiency Program (SSP), an experimental earnings subsidy offered to long-term welfare recipients in Canada. Single parents who started working in response to the SSP incentive are younger, less educated, and have more young children than those who would have been working regardless of the program. They also earn relatively low wages in their first few months of work: typically within $1 of the minimum wage. Despite these differences, their rate of wage growth is similar to other welfare leavers. We estimate that people who were induced to work by SSP experienced real wage growth of about 2.5 - 3 percent per year - a rate consistent with conventional measures of the return to experience for similar workers.

Suggested Citation

  • David Card & Charles Michalopoulos & Philip K. Robins, 2001. "The Limits to Wage Growth: Measuring the Growth Rate of Wages For Recent Welfare Leavers," NBER Working Papers 8444, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8444
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    References listed on IDEAS

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    1. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
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    5. Timothy J. Bartik, 1997. "Short-Term Employment Persistence for Welfare Recipients: The "Effects" of Wages, Industry, Occupation and Firm," Upjohn Working Papers 97-46, W.E. Upjohn Institute for Employment Research.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jeffrey Zabel & Saul Schwartz & Stephen Donald, 2010. "The impact of the Self-Sufficiency Project on the employment behaviour of former welfare recipients," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 882-918, August.
    2. Zabel, Jeffrey & Schwartz, Saul & Donald, Stephen, 2006. "An Econometric Analysis of the Impact of the Self-Sufficiency Project on the Employment Behaviour of Former Welfare Recipients," IZA Discussion Papers 2122, Institute of Labor Economics (IZA).
    3. Immervoll, Herwig, 2009. "Minimum-Income Benefits in OECD Countries: Policy Design, Effectiveness and Challenges," IZA Discussion Papers 4627, Institute of Labor Economics (IZA).
    4. Helen Connolly & Peter Gottschalk, 2001. "Do Earnings Subsidies Affect Job Choice? The Impact of SSP Subsidies on Wage Growth," Boston College Working Papers in Economics 498, Boston College Department of Economics, revised 26 Aug 2006.
    5. Jeffrey Zabel & Saul Schwartz & Stephen Donald, 2013. "An analysis of the impact of the self-sufficiency project on wages," Empirical Economics, Springer, vol. 44(1), pages 231-259, February.
    6. Bitler, Marianne P. & Gelbach, Jonah B. & Hoynes, Hilary W., 2008. "Distributional impacts of the Self-Sufficiency Project," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 748-765, April.
    7. Darrell J. Glaser & Ahmed S. Rahman, 2017. "Development and Retention of Human Capital in Large Bureaucracies," Departmental Working Papers 60, United States Naval Academy Department of Economics.
    8. Jeffrey Grogger & Lynn A. Karoly, 2005. "Welfare Reform, Work and Wages: A Summary of the US Experience," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(2), pages 08-12, 07.
    9. repec:ces:ifodic:v:3:y:2005:i:2:p:14567644 is not listed on IDEAS
    10. Jeffrey Grogger, 2009. "Welfare Reform, Returns to Experience, and Wages: Using Reservation Wages to Account for Sample Selection Bias," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 490-502, August.
    11. Jeffrey Grogger & Lynn A. Karoly, 2005. "Welfare Reform, Work and Wages: A Summary of the US Experience," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(02), pages 08-12, July.
    12. Bitler, Marianne P. & Gelbach, Jonah B. & Hoynes, Hilary W., 2008. "Distributional impacts of the Self-Sufficiency Project," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 748-765, April.
    13. V. Joseph Hotz & Charles H. Mullin & John Karl Scholz, 2002. "Welfare, Employment, and Income: Evidence on the Effects of Benefit Reductions from California," American Economic Review, American Economic Association, vol. 92(2), pages 380-384, May.
    14. Reamonn Lydon & Ian Walker, 2005. "Welfare to work, wages and wage growth," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 335-370, September.
    15. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    16. Glaser, Darrell & Rahman, Ahmed, 2015. "Human Capital on the High Seas - Job Mobility and Returns to Technical Skill During Industrialization," MPRA Paper 68351, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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