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Category_ID - 21
Doc_Title - Dynamic Economic Returns to Workforce Investments
Doc_Author - David S. Kraybill, Bruce A. Weber
Doc_Number - AEDE-WP-0004-01
Doc_Start_Date - 06/13/2001
Doc_End_Date - 06/13/2002
Doc_URL_AddLocal - C:\WINNT\ACF1554.tmp
Tag_Functional - AED Econ Working Paper
Tag_SubUnit - Development Economics,Regional and Community Economics
Tag_Program - NULL
Tag_Industry - Government
Tag_Misc - NULL
Tag_Resources - NULL
Tag_Practice - Community,Income,Policy,Welfare Reform

A dynamic economic simulation model is used to assess the potential for job readiness programs (which bring the unemployed into the labor force) and job training programs (which upgrade the skills of low-wage workers) to reduce household poverty at the state level in Oregon. For individuals, participation in these programs tends to increase their earnings, but when the programs are administered to large numbers of persons under welfare-for-work programs, we find that the aggregate effect in the labor market is to increase the supply of labor and lower wages slightly. While wage decline is not good for the currently employed, lower wages reduce the cost of production and stimulate exports to the rest of the nation and the rest of the world, an effect which increases the demand for labor and leads to an increase in wages. The simulation model is used to assess the strength of these competing influences on the poverty rate at the state level. The net effect on poverty depends on the number of new workers brought into the labor force, the responsiveness of exports to changes in the cost of production, and the responsiveness of the poverty rate to changes in the wage rate. Under the assumptions built into the model, job readiness programs are projected to lower the poverty rate more than job training programs over a ten-year period. Keywords: poverty, welfare reform, workforce investment, dynamic simulation