Jobs for the Poor: Can Labor-Demand Policies Help?
By Timothy J. Bartik
Current anti-poverty policies emphasize labor-supply efforts - educating or training or regulating the poor to increase the quantity or quality of their work or raise their pay. Largely ignored are labor-demand policies - those that induce employers to provide more or better jobs. These include public-service job programs, wage subsidies and economic development efforts.
This book argues that greater use of carefully designed labor-demand policies would make U.S. anti-poverty programs more effective. This greater effectiveness includes greater long-run effects on the employment and earnings of the poor, and fewer negative side-effects.
- Job training and other labor-supply policies work best when they are closely tied to employers and when demand for labor is strong. Without these conditions, a job training program may help participants be hired but may displace others from job opportunities.
- Labor-demand policies such as temporary subsidies for employers produce jobs in the short term and can also have long-term benefits by increasing the participants' job skills, including "soft" skills such as reliably reporting for work and relating to co-workers and supervisors.
- To reduce displacement of other workers, and avoid increased inflation, targeted demand programs should emphasize creation of new and productive but temporary jobs aimed at the unemployed. Counseling and training can be useful supplements.
- To reduce political opposition, these programs should subsidize nonprofit and small-business employers, and be adapted to local labor market conditions and institutions.
Over time, the job and earnings of low-wage Americans could be significantly improved with a two-part labor-demand program: wage subsidies to all employers who increase their overall employment, and short-term subsidies to selected small business and nonprofit employers for newly created jobs that go to selected people in needy target groups.
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Timothy J. Bartik (bartik@we.upjohninst.org) is senior economist at the W.E. Upjohn Institute for Employment Research.
