The Differential Impact of Welfare Reform in Non-metropolitan and Metropolitan Areas of Virginia

The state of Virginia has been a leader in the design and implementation of welfare reform measures. State welfare reforms were enacted in 1996 and federal reforms followed shortly after in 1996. Initial decreases in program caseloads and the movement of former recipients from unemployment to employment have led initial reform measures to be widely heralded as successes. Significant concerns remain, however, about the ability of non-metropolitan labor markets to absorb female household heads currently on welfare. This thesis addresses potential differences in the impact of welfare reform measures in non-metropolitan and metropolitan labor markets by estimating wage and reservation wage equations for female household heads in Northern and Southwest Virginia. The results suggest young children and lack of access to automobiles create significantly greater barriers to employment in non-metropolitan than metropolitan labor markets. Estimated potential earnings in Southwest Virginia were lower than in Northern Virginia and suggest that female household heads will have trouble escaping poverty through employment. In fact, initial reported earnings for both areas have fallen below estimates of living wages needed to escape poverty. The results also suggest traditional labor market characteristics do not explain all of the differences in earnings, particularly the differences in the observed wages of persons exiting welfare as compared to the general population. If this is the case, policies that only address child care and transportation costs may have little impact as to the ability of welfare recipients to get and keep jobs that enable them to become economically self-sufficient.