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I
I
73-12,831
SUPALLA, Raymond Joseph, 1944THE POTENTIAL FOR INCREASING EARNED INCOME
OF WELFARE RECIPIENTS IN RURAL AREAS:
A CASE STUDY OF ALLEGAN COUNTY, MICHIGAN.

Michigan State University, Ph.D., 1972
Economics, agricultural

University Microfilms, A XEROX Company, Ann Arbor, Michigan

THE POTENTIAL FOR INCREASING EARNED
INCOME OF WELFARE RECIPIENTS IN
RURAL AREAS:
A CASE STUDY OF
ALLEGAN COUNTY, MICHIGAN
By
Raymond Joseph Supalla

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
DOCTOR OF PHILOSOPHY
Department of Agricultural Economics
1972

PLEASE NOTE:

Some pages may have
In distinct p rin t.
Fi Imed as r e c e i v e d .

U n i v e r s i t y M i c r o f i l m s , A X erox E d u ca ti o n Company

ABSTRACT
THE POTENTIAL FOR INCREASING EARNED
INCOME OF WELFARE RECIPIENTS IN
RURAL AREAS:
A CASE STUDY OF
ALLEGAN COUNTY, MICHIGAN
By
Raymond Joseph Supalla

Welfare costs and caseloads have risen to unprece­
dented levels both nationally and in Michigan and continue
to increase rapidly, with the largest increases a result of
the Aid to Families with Dependent Children (ADC) program.
During the five years ending in January, 1972, the number
of ADC recipients increased from two to six per cent of
Michigan's total population, while total payments to
recipients increased five and one-half times.
If welfare costs are to be reduced without
relinquishing responsibility for society's poor, one must
necessarily focus on increasing the earned income of the
welfare prone population.

The overriding question thus

becomes, what is the potential for increasing earned income
of welfare recipients and what is the best way to exploit
that potential?

Specifically, this study concerns the

earned income potential for ADC recipients in rural areas.

Raymond J . Supalla
A case analysis of a single rural Michigan county
was the approach used in the study.
ponents included:

The procedural com­

a detailed description of the Allegan

County ADC clientele, with special focus on those variables
believed to be important to employability? a description of
the Allegan County labor market, including a survey and
analysis of available job vacancies? and multiple regression
analysis for explaining differences in length of time on
assistance, level of earned income, and the probability of
being employed.

The results of the regression analysis are

used as a means of identifying the client characteristics
and other factors which are important determinants of e m ­
ployability.

With the information regarding ADC client

characteristics, available job vacancies, and the signifi­
cance of each of the employability variables, inferences
were drawn regarding the potential for increasing earned
income of ADC recipients and the types of policy action
needed.
For the most part, the Allegan County ADC adult
recipients are relatively young

(30.0 per cent less than

age twenty-five), have 8-11 years education, are healthy,
and have some work experience.

The young tend to be better

educated, are less likely to own an automobile, have better
health and less work experience.

Males have more work

experience, but tend to be younger and have less education
than females.

The ADC population of rural Allegan differed

Raymond J. Supalla
from that of the more urban parts of Michigan in that the
Allegan caseload included nearly three times the proportionate number of unemployed father cases.

Also, Allegan ADC

clients are better educated and possess more and better work
experience than is characteristics of urban Michigan.
The survey and analysis of available job vacancies
revealed that there were very few job vacancies in the
county relative to need, but a large number of those which
were available had entry requirements within the range of
skills possessed by ADC clients.

The greatest need was for

operatives, followed in descending order by service w o r k e r s ,
nonfarm laborers, and craftsmen or foremen.

Job entry r e ­

quirements established by employers in terms of education,
training, and work experience did not appear to be excessive
and there was an expressed willingness to make special
provisions for disadvantaged people.
With respect to the client characteristics that
influence earned income potential, health, age, and work
experience emerged as significant.

The absence of an auto­

mobile and the presence of young children appeared to be
significant barriers to joining the work force.

Years of

education was not significant.
Consideration of policy alternatives indicated
that job creation was most needed and that, in this context,
public service employment had considerable potential.

Of

the other policy alternatives considered, elimination of

Raymond J. Supalla
the 100-hour rule for ADC-U fathers and a program to ease
the difficulty of acquiring an automobile appeared to hold
the greatest potential for increasing earned income of
welfare clients and, accordingly, reducing welfare costs.

TO MY PARENTS
to whom I owe
my interest in rural life
and my concern for the
welfare of others

ACKNOWLEDGMENTS

This dissertation represents to me not what I have
done, but what others have done for me.
From my parents, I received a love of rural life
and a concern for the welfare of man that has been my source
of motivation for this study and all that came before it.
From Professors Carroll V. Hess, E. Fred Koller,
and Dale C. Dahl, Department of Agriculture and Applied
Economics, University of Minnesota, I received the stimulus
for studying Agricultural Economics and the requisite
personal confidence.
From the Department of Agricultural Economics,
Michigan State University, I received the necessary financial
support for graduate study and was provided an excellent
learning environment.
From Professor A. Allan Schmid, major advisor,
teacher, and humanitarian, I received an intellectual per­
spective, a teaching philosophy, and a human problem
orientation that will remain with me forever more.
From other members of my committee, James D. Shaffer,
James Booth, and Collette Moser, I received the guidance and
assistance necessary for the completion of this study.

From my wife, I received the personal sacrifice,
support, and encouragement so necessary for successful
graduate study.
To each and all I remain eternally grateful.

TABLE OF CONTENTS

Chapter
I.

II.

Page
INTRODUCTION ..................................

1

A.
B.
C.
D.
E.

1
5
6
7
7

M E T H O D O L O G Y .................................

10

A.
B.
C.
D.
E.

10
12
17
10

F.
III.

Problem S e t t i n g .......................
Purpose of the S t u d y ....................
Scope of the S t u d y ...................
O b j e c t i v e s ..............................
Study Design and Format . . . . . .

THE
A.
B.

Methodological Issues
.............
T h e o r y .................................
Empirical Support for the Theory . . .
The Study M o d e l .......................
Formulation of Hypotheses and Testing
P r o c e d u r e s ..............................
Procedure for Analyzing Policy
Alternatives
...........................
ALLEGAN COUNTY LABOR MARKET

. . . .

28
29
32

1.
2.

32
41

Employment Levels by Industry
Employment Levels by Occupation

.
.

.
.

Estimates Using the BLS Matrix .
Census Bureau Estimates
. . .

Labor Force Characteristics
. . . .
Disequilibrium in the Labor Market
. .
Estimation and Analysis of Job
V a c a n c i e s ..............................
1.
2.

IV.

26

Labor Market Definition
.............
Industry - Occupational Structure
. .

a.
b.
C.
D.
E.

20

The Data
. . . . . . . . .
Results of the Job Vacancy Survey
.

DESCRIPTION OF THE ADC CASELOAD
v

. . . .

41
43
47
51
54
54
58
67

Page
A.
B.
C.
D.

The ADC P r o g r a m .......................
The D a t a .................................
Classification of the ADC Caseload
. .
Characteristics of Adult Recipients
. .
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

E.

Family Status and Sex of Adult
R e c i p i e n t s ...........................
A g e .................................
R a c e .................................
E d u c a t i o n ..........................
H e a l t h ..............................
Family Size and the Availability of
.............
Mother for Employment
Place and Length of Residence
. .
Availability of Transportation
. .
Employment History
................
Earned I n c o m e .......................
Time on Assistance
. . . . . .

Combinations of Characteristics

.

.

.

ANALYSIS OF FACTORS INFLUENCING EARNED
INCOME POTENTIAL
...........................
A.

2.

Interpretation of Regression
Results .
a.
b.
c.
d.
e.
f.
g.
h.

B.

Length of Time on Assistance
Level of Earned Income
. .
Probability of Being Employed

Place of R e s i d e n c e ..............
T r a n s p o r t a t i o n .................
E d u c a t i o n ........................
Work E x p e r i e n c e .................
Age
..............
H e a l t h ...........................
Number, Age, and Health of
Dependent Children .............
R a c e ...........................

Employment Opportunities

.............

86
91
93
94
101
103
105

108

Regression Model Formulation and
E s t i m a t i o n ....................
a.
b.
c.

76
78
79
81
84

108

Significance of Client Characteristics
as Determinants of Earned Income
P o t e n t i a l ..............................
1.

67
69
72
75

110
.
.
.

110
113
115
117
118
119
121
122
123
125
126
129
129

Page
1.
2.
3.
C.
VI.

130
134
135

S u m m a r y .................................

140
142

A.

Modification in Eligibility Criteria

.

14 3

1.
2.

.

146
153

Elimination of the 100 Hour Rule
Reduction in the Welfare Tax Rate

.

..............
Transportation Provisions
Improved Day Care P r o g r a m s ..............
Labor Market Information
..............
Education and T r a i n i n g .................
Public Service Employment
..............
Cumulative Assessment of Policy
Options
.................
. . . . .
1.
2.

Cumulative Effect Without Public
E m p l o y m e n t ...........................
Cumulative Effect With Public
E m p l o y m e n t ..........................

INSTITUTIONAL REORGANIZATION AND RESOURCE
R E A L L O C A T I O N .................................
A.
B.
C.
D.

VIII.

.

EVALUATION OF POLICY ALTERNATIVES FOR
INCREASING EARNED I N C O M E ....................

B.
C.
D.
E.
F.
G.

VII.

Number of Job Vacancies That
Clients Are Capable of Filling
.
Job L o c a t i o n s .......................
Wage Rates and the Potential for
Self-Support
.......................

Current Programs and Services for ADC
R e c i p i e n t s ..............................
Needed Changes in Resource Allocation
.
Suggestions for Institutional
Reorganization ...........................
Needed R e s e a r c h ........................

155
160
162
166
171
175
175
178
180
181
185
189
192

SUMMARY AND C O N C L U S I O N S ....................

196

B I B L I O G R A P H Y ........................................

203

APPENDICES
APPENDIX A

........................................

209

APPENDIX B

........................................

211

APPENDIX C

........................................

214

APPENDIX D

........................................

216

Vii

LIST OF TABLES

Table
1.
2.
3.
4.
5.
6.
7.

Page
Minimum One-Way Commuting Distances for
Welfare Recipients at Various Wage Rates

.

31

Allegan County Employment Levels by Industry
for the Years 1960, 1964, 1967, and 1970
.

33

Allegan County Monthly Employment Levels by
.................
Major Industrial Category

38

Employment Levels by Industry and Occupation,
Allegan County Employers Only .............

44

Employment Levels by Sex for Residents of
Allegan County ..............................

46

Per Cent Participation in the Labor Force by
Sex and Age Group, 1 9 7 0 ................

49

Years of Education Completed by Allegan
County Residents by S e x ...............

51

8.

Job Vacancy Survey Results

9.

Job Vacancies by Occupational Category,
Minimum Entry Requirements and Average
Wage R a t e s .............................

10.

11.
12.
13.

.................

59

61

Distribution of the Allegan County ADC
Caseload by Type of Case, Number of
Recipients, and Reason for Assistance

.

.

74

Family Status and Sex of Allegan County
Adult ADC Recipients by Types of Cases

.

.

77

Age Distribution of Allegan County Adult ADC
R e c i p i e n t s .............................

78

Racial Distribution of the Allegan County
ADC Caseload Based on the Race of the
Family H e a d .............................

80

viii

Page
14.
15.
16.
17.
18.

19.

20.
21.

22.
23.
24.
25.

26.

Years of Formal Education of Allegan County
Adult ADC R e c i p i e n t s .......................

82

Health of Allegan County ADC Recipients by
Family Status and S e x ....................

85

Family Size and Children's Age Distribution
by Type of Case, Allegan County
. . . .

87

Status of Allegan County ADC Mothers with
Respect to Availability for Employment .

.

90

Per Cent of Allegan County ADC Families Who
Live in the Country or Village
Respectively
. . . . . . . . . .

92

Per Cent of Allegan County ADC Families Who
Do or Do Not Own or Have Access to an
A u t o m o b i l e .................................

94

Work Experience of Allegan County ADC
Recipients by S e x ...........................

96

Per Cent of Various Groups of Allegan County
ADC Recipients Who Left Their Last Job for
Various Reasons
...........................

99

Distribution of Earned Income Levels by Type
of Case, Allegan County ....................

102

Length of Time on Assistance by Type of Case,
Allegan County ..............................

104

Combinations of Characteristics of Allegan
County ADC Recipients
....................

107

Comparison of Available Jobs by General
Entry Requirements with ADC Recipients by
General Characteristics ....................

132

Estimation of the Impact on Welfare Incomes
and Welfare Costs of Elimination of the
100 Hour R u l e ..............................

150

A - l . Monthly Welfare Assistance Allowances .

.

.

B - l . Maximum Income and Liquid Assets Allowed for
Food Stamp Eligibility
....................

ix

210
212

Page
B-2.
B-3.

Food Stamp Schedule for Non-Assistance
Cases:
Four-Person H o u s e h o l d .............

212

Food Stamp Schedule for Public Assistance
C a s e s ................ ........................

213

x

LIST OF FIGURES

Page

Figure
1.
2

.

Michigan Welfare Cost and Caseload Trends
Welfare Choice Model

.

.

.

.

.

.

2
13
16

3.

Model of Constrained Welfate Choice

4.

Geographic Distribution of A D C Cases and Job
V a c a n c i e s , Allegan County

136

Frequency Distribution of the Budgeted
Requirements of ADC Families and of the
Met Wages from Available J o b Vacancies

138

5.

xi

CHAPTER I
INTRODUCTION
t- ,

A.

.

Problem Setting
Welfare costs and caseloads have risen to unprece­

dented levels both nationally and in Michigan and continue
to increase rapidly.

Welfare expenditures for the cate­

gorical programs'*- in the State of Michigan, exclusive of
administrative costs, totaled $448,756,690 in fiscal 1971.
The federal, state, and local shares were $191,000,000,
$227,716,179, and $30,040,511 respectively.

Costs increased

by 46 per cent relative to fiscal 1970 and by 133 per cent
over the past five years.

As illustrated by Figure 1,

most of the increase can be attributed to the ADC and GA
programs.

In fiscal 1971 Michigan ADC cases increased by

50 per cent, while costs rose 69 per cent.

Over the same

period GA cases and costs increased by over 45 per cent.
During the five years ending in January, 1972, the ADC
caseload nearly quadrupled to about 145,000 families per

■^The term categorical programs as used here in­
cludes: Aid to Families with Dependent Children (ADC), Aid
to the Aged (AA), Aid to the Disabled (AD), Aid to the Blind
(AB), and General Assistance (GA).

1

220

Welfare Caseload

Welfare Costs

210

100

200
190

90

180
170
160
150
n

o
a
c

140
130

U

120

<u

110

o
a

100

C

*

a
3
£O 40 .

90
80

AA

70

GA

60
50
AD

40
30
20

m

10

0

0
62
Sou: cei

63 64

65

66

67 68

69

70 71

1
62

63

64

1

1

65

66

1
67 68

1

X

1

69

70 71

Report of the Welfare Study Commission, State of Michigan, Lansing, 1971.

to the Blind (AB) is too insignificant to be displayed on the above graphs as scaled.
Figure 1.— Michigan Welfare Cost and Caseload Trends.

3
month.

Relative to Michigan's total population, the number

of ADC recipients increased from 2 to 6 per cent in the
last five years, while total payments to recipients
2
increased five-and-a-half times.
Such large increases have alarmed the public and
Congress has responded accordingly.

In 1967, Congress

enacted a series of amendments to the Social Security Act
which, among other things, emphasized employment as an
alternative to public assistance.

The amendments increased

the responsibilities of employment and rehabilitative
agencies, who, in cooperation with welfare agencies, were
to provide services and incentives to increase the employ­
ment of welfare recipients.

In addition, we witnessed

during the late sixties'" implementation of a series of other
programs with similar goals, e.g., Work Incentive Program
(WIN), Job Opportunities in the Business Sector

(JOBS), and

a variety of federally funded training programs.

Behind

these efforts was the belief that such activities would
mean increased employment of welfare recipients and conse­
quently reductions in caseloads and expenditures.

Continued

increases, however, suggest that different approaches or
perhaps different levels of current approaches would be
appropriate.

2
Vernon K. Smith, Employment of AFDC Recipients in
M i c higan, Division of Income Maintenance And Employment
Research, Research and Program Analysis, Michigan Department
of Social Services, Lansing, Michigan, 1972, p. 1.

4
A number of proposals for change have recently
been made.

The most well known and, perhaps, most

significant is Nixon's Family Assistance Plan

(FAP).

Congressional response to FAP, which is essentially a
guaranteed income proposal with work incentive and job
development provisions, was to pass the Talmadge amendments
to the welfare bill.

Whereas FAP sought to establish an

income floor for families with dependent children and
offered financial incentives to supplement that guarantee
with earned income, the Talmadge amendments ignore in­
centives and focus on strengthening already existing work
requirement provisions.

These two approaches and most

others share a basic similarity in that the emphasis is
upon employment

(workfare as an alternative to welfare).

The overriding question thus becomes, what is the potential
for increasing employment of welfare recipients and what
is the best way to exploit that potential?
Researching the question posed above has several
dimensions:

description of welfare recipients with respect

to employability; consideration of employment opportunities;
analysis of factors hypothesized to be obstacles to in­
creased employment of welfare recipients;

consideration

of hypothesized differences between demographic groups and
geographic areas with reference to their public policy
relevance; and development and evaluation of policy
alternatives.

A great deal of work has been done on most

5
of these components/ with inconclusive results.

Much is

known about the general characteristics of welfare recipients

3

and about work incentives.

4

Little is known/ however/

about the possibilities for recipients to find employment
in particular geographic areas or type of labor market or
about how recipient characteristics vary between types of
communities/ e.g., rural vs. metropolitan.

Perhaps more

significantly, little is known about the expected impact
of policy alternatives.
B.

Purpose of the Study
If the objective of reducing welfare costs through

increasing employment

(earned income) of welfare recipients

is to be met, both agency people and politicians must know
first what the problems

(obstacles)

are and, subsequently,

what impact on those problems is likely to result from
particular public programs.

The primary purpose of this

study is to provide some of this information with refer­
ence to the needs of rural counties.

A secondary purpose

is to identify for future researchers what the conditions
3

Profile of Michigan ADC Caseload, Michigan
Department of Social Services, Lansing, Michigan, Research
Paper No. 1, October, 1969; Characteristics of Families
Receiving A F D C , National Center for Social Statistics,
Social and Rehabilitation Service, U.S. Department of
Health, Education and Welfare, 1961, 1967, 1969, and 1971.
^Leonard J. Hausman, "Potential for Financial SelfSupport Among AFDC and AFDC-UP Recipients," Southern Econ­
omic Journal, (July, 1969); David Martin and Jane Leuthold,
"Formulas for Income Maintenance:
Their Distributional
Impact," National Tax Journal, XXI, No. 1 (1968).

6
are in rural counties; what data is available and where it
can be found; and what specific questions need further
investigation.
C.

Scope of the Study
Although the concern is with employment of welfare

recipients in general, the term "welfare" is unnecessarily
encompassing.

Of the major categorical programs, Aid to

the Aged and Aid to the Blind were eliminated from consider­
ation at the outset because the participants are employable
only under very special circumstances.

This leaves Aid to

the Disabled, Aid to Families with Dependent Children, and
General Assistance.

AD, as indicated in Figure 1, is not

relatively significant and was eliminated for that reason.
GA tends to be a catchall program characterized by sub­
stantial variability in administration between counties and
was therefore eliminated.

Thus, the study considers the

employment potential of ADC recipients only.
Original plans were to consider three or four
separate and distinct counties such that rural-urban and
similar comparisons would be more feasible, but resource
constraints and the paucity of secondary data rendered
that impossible.

It was therefore decided that an in-depth

study of a single county was the best approach.

Allegan

County, Michigan, was chosen for reasons to be discussed
later.

7

D.

Objectives
The objectives of the study are:

(1) to describe

Lhe ADC clientele and the Allegan County low skills labor
market,

(2) to diagnose the obstacles to increasing earned

income of ADC recipients and assess their significance;
(3) to suggest and evaluate policy alternatives for remov­
ing those obstacles;

(4) to draw inferences regarding

needed public welfare policies for rural areas in general;
and

(5) to suggest ways of improving the existing welfare

system, including identification of research priorities.
E.

Study Design and Format
Given the objectives of the study, the availability

of data, and the current state of the art, a case study
was selected as the preferred approach.

A case study lends

itself to in-depth and comprehensive analysis and is con­
sistent with the needs of politicians and agency people.
The single greatest disadvantage of a case approach is that
the results are often not generalizable to other situations.
But, drawing inferences regarding the welfare problem in
other rural communities is certainly not precluded.
Allegan County was chosen as the study community
for several reasons.

First and foremost, there was con­

siderable willingness on the part of agency people in
Allegan County to cooperate in such a study.

Secondly, it

is characterized by a relatively diversified economy, i.e.,
substantial agricultural and manufacturing employment and

8
some recreation resources.

Also, it does not include a

city of any significant size.

Because it is not particu­

larly unique, results of the study should be somewhat
generalizable to other rural areas.
The first portion of the study

(Chapter II) consists

of a brief review of the relevant economic theory, develop­
ment of a basic theoretical model, enumeration of hypotheses,
and a brief discussion of testing procedures.

It consti**-

tutes the foundation for the study, but is not comprehensive
in that several aspects to be investigated do not fit the
conventional theoretical formulation and hypotheses testing
framework.
Chapter III consists of a description and analysis
of the Allegan County labor market.

Demand and supply

conditions are described with considerable attention devoted
to conditions of labor market disequilibrium.

In particular,

job vacancies are estimated via a sample survey and ex ­
tensively analyzed.

Focus is on assessing the excess demand

for the types of skills possessed by ADC recipients.
Description of the labor market is followed
(Chapter IV) by a detailed description of Allegan County
ADC recipients, including comparisons with recipients in
other welfare jurisdictions.

The emphasis is on those

characteristics which one would expect to be important
determinants of employability.
The core of the study

(Chapter V) consists of an

analysis of the factors influencing earned income potential.

9

Multiple regression analysis is used to explain differences
in earned income levels, length of time on ADC, and the
probability of being employed utilizing the model developed
in Chapter II.

Also, existing employment opportunities

are assessed by contrasting the entry requirements of
available job vacancies with the skills possessed by ADC
recipients.
Results of the employability analysis are used
{Chapter VI) in evaluating a series of policy alternatives.
Among others, a reduction in the welfare tax rate, guar­
anteed loans to ease the difficulty of automobile acqui­
sition, education and training, and public service jobs
are considered.

Mo attempt is made to conduct a rigorous

benefit-cost analysis of the alternatives.

As desirable

as such results might be, data availability and resource
constraints effectively preclude doing more than identi­
fying basic relationships and estimating policy impacts.
The final stage of the study examines the operations
of the Department of Social Services, Michigan Employment
Security Commission, and federal manpower programs in terms
of their consistency with the study results.
use and institutional issues are considered.

Both resource

CHAPTER II
METHODOLOGY
A.

Methodolical Issues
This study is essentially addressed to what it is

that policy makers could do to increase employment within
the welfare prone population.

Given the current stock of

knowledge and resource constraints, it is impossible

in

one study to come up with definitive answers to this all
encompassing question.

Definitive statistically sound

conclusions require intensive in-depth analysis.

At some

point in the development of knowledge in a problem area it
is feasible to select a narrow component for in-depth s t u d y ,
because enough is known about the problem to determine for
which components of the policy issue the research payoff
will be significant, but unfortunately that point has not
been reached in the case of the welfare employment issue.
It cannot be determined, for example, whether it would be
useful to conduct an in-depth study of the possibilities
of public service employment until such time as more is
known about the dimensions of the problem with reference
to several policy alternatives of which public service
employment is but one.

Therefore, the methodology employed
10

11
In this study is designed to provide explorative results
over a broad spectrum as opposed to more definitive results
on a narrower component of the policy problem.

Accordingly,

the thrust of the analysis is on description of the problem
situation and tests of hypotheses which seek not only to
answer the question directly, but also have as a major
purpose the identification of those aspects of the problem
that most merit further in-depth investigation.
Before one can formulate specific relevant hypothe­
ses, some basis for choice of hypotheses must be developed.
In other words, a theory is needed where theory is defined
as a plausible or scientifically acceptable general princi­
ple or body of principles offered to explain phenomena.
Unfortunately, existing economic theory does not offer very
much that is directly relevant to the questions asked
herein.

Much of the work by economists in the welfare

problem areas has focused on the economics of the workwelfare decision in the form of attempts to predict
caseload levels, i.e., explain why particular numbers of
people choose welfare instead of employment.

In this study,

it is assumed that they choose a particular level of public
assistance because it is the best of known alternatives
and seek to identify what factors obstruct or limit p e r ­
ceived real opportunities for employment— a somewhat
different question.

Nevertheless, the theory of the

welfare-work decision which has been developed is useful

12
as an organizational frameowrk and as a base for develop­
ment of a model

(set of hypotheses)

for testing.

Further­

more, in the final analysis, the objective is to modify
the choice spectrum, i.e., actual and perceived income
opportunities, of welfare recipients such that they will
choose more employment.

Viewed in this context, the current

theory of the welfare-work decision is quite relevant.
B.

Theory
Brehm and Saving developed the initial model in

1964.

5

They proposed a simple static model of consumer

choice between income from work
welfare)

and leisure

(defined as not being on

(defined as being on welfare), with

the line of attainable combinations modified to reflect
the welfare stigma.

This model, with an assumed 100 per

cent tax rate and constant wages, is depicted in Figure 2.
Income

(Y) is measured vertically in dollars, and leisure

(L) is measured horizontally.^

The indifference curves

have the usual properties, i.e., nonsatiety, transativity,
and diminishing marginal rates of substitution.

Recog­

nizing that there is some relative disutility associated

^C. T. Brehm and T. R. Saving, "The Demand for
General Assistance," American Economic Rev i e w , LIV
(December, 1964), 1002-1018.
**The unit of time used on the horizontal axis is
hours and the maximum leisure hours represents some total
time period, usually one day.
Brehm and Saving made the
conventional assumption that the maximum hours one could
work is also the total time period.

13

with welfare income

(the welfare stigma), the value of the

welfare grant is discounted to k(Y) amount such that the
line of attainable combinations becomes YmaxCB instead of
YmaxCD.

Without a welfare program, the consumer would

operate at point A representing Y q units of income at a
cost of L q units of leisure.

With a welfare program con­

sisting of an available grant of Ymin and a 100 per cent
tax rate, but no welfare stigma, the individual depicted
would choose point D, maximum leisure
full welfare grant Ymin.

(no work) and the

However, assuming a welfare

stigma such as that shown, the consumer would remain at
Point A.

Y ♦

max
Leisure

Figure 2.— Welfare Choice Model.

14

Like any initial e f f o r t , the Brehm and Saving model
needs a great deal of modification before it is of much
use.

Of primary concern are the policy alternatives for

increasing the proportion of work income as opposed to
welfare income chosen by the welfare prone population.
These alternatives can be viewed in the context of the
Brehm-Saving model as consisting of two sets:

those which

focus on modifying preferences and those which alter the
available options.

Over the long run it may be appropriate

to consciously seek preference changes, however, the prob­
lems addressed in this study are more immediate and short
run.

Therefore, in terms of the theory, attention is

focused on modifications to the model discussed that will
result in a more complete and realistic portrayal of the
available options.
First, consider possible modifications to reflect
the probability of being able to find employment at the
7

individual's possible wage.

A broup of people with

particular job entry skills face the conventional budget
line whose slope reflects the wage rate for their skill
level (s).

But, not all in the group will be able to find

jobs at that wage such that the expected earned income of
any one of the group is something less than the possible
wage times the number of hours worked.

This factor can be

Possible wage is herein defined as the income per
unit time an individual could earn if he were given the
opportunity to utilize his existing skills.

15
viewed as imposing a parallel shift of the budget line
downward and to the left.

Also, since the probability of

finding employment for different quantities of hours is
likely not constant for all h o u r s , the budget line may no
longer be a straight line.
p
As noted by Hausman,

one needs to consider not

only the probability of finding employment at a given wage,
but also the difference in income variance between earned
income and welfare income.

If earned income is more vari-

able than welfare income and if there is a waiting period
for getting on welfare

(a transaction cost)

then for some

range, beginning at that point where working more means
getting off welfare entirely, the individual will discount
welfare income relative to earned income less than he
otherwise would.
The next step in the development of the theory is
to closely define the feasible region.

As Peter Albin and

9

Bruno Stein correctly point out,

utility maximizers with

low income are faced with more than just a budget con­
straint.

There is the matter of subsistence incomes,

maximum working hours, and welfare requirements.

The

significance of these constraints and the other
O
Leonard Hausman, "The 100% Welfare Tax Rate:
Its
Incidence and Effects" (unpublished Ph.D. dissertation,
University of Wisconsin, Madison, 1967).
9

Peter Albin and Bruno Stein, "The Constrained
Demand for Public Assistance," Journal of Human Resources,
III (Summer, 1968), 300-311.

16

modifications discussed are illustrated in Figure 3.

Note

the relatively small range within which there is any choice.

Y

Feasibility
region

Y
Y

g
s

I
S— H
—

I

I

'minimum

Welfare grant
if zero work
Subsistence
income

Leisure

Figure 3.— Model of Constrained Welfare Choice.

In the early development of the theory, as reflected
by the discussion thus far, it was assumed that the choice
involved the allocation of time between work and leisure.
With the exception of Elizabeth Durbin's Ph.D. disser­
t a t i o n ^ and a piece of research not yet in published form

"^Elizabeth Durbin, "Family Instability, Labor
Supply and the Incidence of Aid to Families with Dependent
Children," Columbia University, 1970.

17

by Daniel S a k s , ^ there has been little attention given to
the fact that welfare choice is really a choice about how
members of the welfare family allocate their time between
home activities and employment.

12

This is to say that the

opportunity cost of work is not just leisure.

Over time;

employment may even result in more leisure in that the
individual with a comparative advantage in out-home pro­
duction can produce more there permitting greater in­
vestment in human capital and household labor saving
devices.

This view is not only more realistic, but also

opens up the possibility of considering more explicitly
the tradeoffs

(production possibilities) between home

production and employment and the relative values of each
from both a private and a social perspective.
C.

Empirical Support for the Theory
There is woefully little good empirical evidence

to support or reject the existing theories.

Most of the

empirical work has focused on explaining the demand for
welfare in terms of caseload levels over time and across

^ D a n i e l H. Saks, Michigan State University, in a
research report available only in preliminary form, examines
the thesis that the household combines time with goods and
services bought in the market to produce commodities over
which they have a well ordered set of preferences.
12

The concept of tradeoffs between home activities
and employment has been used extensively in work concerning
the participation of women in the labor f o r c e , but for
unknown reasons researchers tend to assume that welfare
women choose between work and leisure.

18
welfare jurisdictions, as opposed to case studies focused
on employment possibilities at a single point in time.
What has been done will not be reviewed here, but those
studies relevant to the various aspects of this study will
be discussed as the analytical issues are encountered.
There appear to be two major reasons for the
limited relevance of existing empirical work.

The first

is that the paucity of secondary data and the high cost
of gathering primary data has effectively precluded in­
tensive micro studies of the variables affecting employment
opportunities and choice.

Given that welfare administra­

tive practices, local labor markets, and the welfare
populations do vary considerably across geographic areas,
micro studies are essential if we are to develop a clear
picture of the boundaries of the feasible region.

The

second factor that should be noted is that use of number
of cases or number of applicants for assistance is a poor
indicator of the demand for welfare, but is nevertheless
used as the dependent variable in virtually all attempts
to estimate demand.

This approach tends to measure the

demand for assistance for those at the margin of capacity
for self-support and does not consider the demand for
various combinations of welfare income and earned income.
The real issue is not the number of cases, given the docu­
mented limited capacity of welfare recipients for total

19

self-support,

13

but the demand for particular levels of

assistance among existing recipients.
D.

The Study Model
Given the study objectives and the current state

of the theory, the most appropriate analytic framework or
model to use appears to be a static consumer choice model
with income on one axis and home produced goods on the
other, with an assumed utility surface and a carefully
defined feasibility region.

Algebraically, the utility

surface and line of attainable combinations can be written
as
u = f(Yt , Hh ,);
B = f(Yw , W, Pe );

Yt = Ye + K(YW )
Yw = f(G, T)
W = f(H, A, E, Ex)
Pe “ f <V ' V

V

Welfare recipients are viewed as utility maximizers allo­
cating their time between employment and home activities.
Their preferences are a function
from total

income

of the utility derived

(Yfc) and hours at home

homogeneous dollars and the value of

(H^)where

Yfc is

is assumed to be

a function of the opportunities for home use of time, e.g.,
13

Leonard J. Hausman, *yfie Potential for Work Among
Welfare Recipients. U.S. Department of Labor, Manpower
Administration, Manpower Research Monograph No. 12, 1969,
p. 32.

20
child care, rest, recreation, housekeeping, lovemaking, etc.
The opportunities open to them
able welfare income

(B) are a function of avail­

(Y ), possible wage
Vf

(W), and the prob-

ability of finding employment at that wage

(Pw ), where Y W

is a function of total eligibility requirements
the welfare tax rate

(T) ; W is a function of health

age (A), education and training
(E ); P

<1I) ,

(E), and work experience

is a function of job vacancies

residence

(G) and

(V), place of

(R ), and availability of transportation

(T ).

The rational consumer will maximize his satisfaction by
consuming Yfc and

such that the marginal utilities of

the last unit of each divided by their respective relative
prices are equal.
E.

Formulation of Hypotheses
and Testing Procedures
Given the objectives of the study, the concern is

not with testing the above model in the traditional sense,
i.e., examining its capacity for predicting caseload
levels or the number of hours a particular group of welfare
'*

*

recipients will choose to work.

Instead the model is

presented only as a mechanism for identifying some of the
characteristics and relationships which are relevant to the
employment potential of welfare recipients and, thus,
worthy of further analysis.
Taking our cues from the m o d e l , the formal
hypotheses testing component of this study consists of

21
three parts.

First, a number of characteristics of welfare

recipients hypothesized to be significant determinants
of employment potential are examined in terms of their
significance in explaining differences in earned income
of welfare clients and in length of time on assistance,
i.e., those recipient characteristics which affect either
the probability of finding employment or the possible wage
are analyzed.

Secondly, a series of hypotheses concerning

the availability of jobs for the skill levels possessed
by welfare recipients and the feasibility of self-support
are tested.

Third and last, the earned income changes one

could expect from a series of policy alternatives are
estimated, given what has been learned about the labor
market and the significance of various employability
characteristics.

Within each of these categories there

are many propositions which merit analysis, but it is
feasible to consider only a few because of the availability
of data.
With respect to the employability significance of
welfare client characteristics, six hypotheses are tested.
Two involve the probability of finding employment given
a set of entry skills; three consider the significance of
particular entry skills; and one involves the importance
of home responsibilities.

The data used in testing are

from a sample survey of welfare recipients and a survey
of job vacancies.

Each of the hypotheses is tested using

22
multiple regression analysis with length of time on assist­
ance, earned income, and employment status as dependent
variables.

The hypotheses with brief accompanying expla­

nations are enumerated below.
1.

Recipients who live in the country are less

likely

to be employed and remain on assistance longer than
those who live in a village or city.
One would expect this relationship to hold because
of proximity to jobs and to labor market information.
2.

Recipients who do not own
automobile will remain on

or have access to an
assistance longer and

are less likely to be employed than those who do.
Particularly in rural areas, the relevant geo­
graphical labor market is very small for those without
access to an automobile.

Therefore, with everything else

constant one would expect it to be more difficult for them
to find employment.
The model being used distinguishes between factors
which affect the probability of finding employment, i.e.,
position of the line of attainable combinations where a
group of recipients are being considered, and those which
affect the possible wage, i.e., slope of the line.

Un­

fortunately, data constraints do not permit making such a
clear distinction.

It should nevertheless be kept in mind

that, for the most part, hypotheses three, four, and
five involve factors which influence the amount one can

23
earn as opposed to the probability of finding employment
at a given wage.
3.

The earned income of welfare
function

recipients is a

of age; highest for middle age groups and

lower for the younger and older cohorts.
This hypothesis is based on a belief that produc­
tivity and, thus, earnings increase until late middle age
and then begin to decrease.

For the relatively low skilled

occupations that characterize welfare recipients, one would
expect the initial increases to be less pronounced than
the general case

and the decreases with old age to be

greater, because

physical stamina as opposed to knowledge

is of greater importance for many low skilled occupations.
Also, the decreases associated with old age may be greater
for welfare clients than in the general case due to dis­
continuous employment.
4.

The earned income of welfare recipients is not a
function of years of formal education.
It is known that for the population at large

education is a significant determinant of earnings; however,
one can argue that within the range which characterizes
the welfare population education may not be significant,
given basic literacy.

For example, a man with eight years

of education may be as capable of driving a forklift as
a man with a high school diploma.

24
In addition to testing this hypothesis with
regression analysis, the significance of education is
considered in an analysis of job vacancies by entry re­
quirements.
5.

The earned income of welfare recipients is not a
significant function of the number of months of
job experience.
Although for some occupations the value of work

experience is reasonably clear and positive, it seems
reasonable to postulate that job experience makes little
difference for many of the types of jobs open to welfare
recipients.

If there is little to learn, experience would

be of little value.
As in the case of education, this hypothesis is
examined in an analysis of job vacancies by entry require­
ments in addition to including work

experience as a

variable in the regression models.
6.

Women with larger numbers of children and/or with
children less than age six are less likely to be
employed and remain on assistance longer than
women with fewer and/or older children.
The significance of children as an employability

factor is conceptualized as a preference variable.

It is

believed that home activities provide utility to women in
relation to the number and age distribution of children
in the home.

Although no data is available on preferences

per se, by examining the significance of number of children

25
in explaining differences in length of time on assistance
and in earned income levels we should get some indication
of preference differences.
To this point, only hypotheses concerning differ­
ences in employability within the welfare population have
been discussed.

The most important determinant of the

feasible region for all groups is the number and type of
available job vacancies.

Skills are worth something only

when there is an opportunity to use them.

Several

hypotheses regarding the availability of jobs and the
feasibility of self-support at prevailing wages are tested.
They a r e :
1.

Welfare recipients tend to be located in those
parts of the county where there are relatively
fewer job vacancies.
This hypothesis is tested by "eyeball" analysis of

a dot map showing the geographical distribution of welfare
recipients and county employment.
2.

There are relatively large numbers of jobs avail­
able for which welfare recipients possess the
necessary entry skills.
This hypotheses is tested through a simple compari­

son of job vacancy requirements and the entry skills of
welfare recipients.
3.

Prevailing entry wages preclude self-support for a
high proportion of the welfare population if only
one member of the family w o r k s .

26
To test this hypothesis, the heads of welfare
families are grouped according to family size and market­
able skills;

the amount they could earn estimated, assuming

they could find employment at the prevailing wage; and the
proportion who could conceiveable earn more than their
welfare grant is then determined.
4.

A relatively large porportion of two-parent families
would attain self-support if both parents were to
work at their expected wage.
The potential for reducing the welfare caseload is

usually considered in terms of the earned income potential
of the family head, which often leads to very pessimistic
conclusions.

If both parents are considered, one would

expect the results to be

considerably more favorable.

This proposition is analyzed by estimating the proportion
of two-parent families that could likely attain selfsufficiency if both parents worked.
P.

Procedure for Analyzing Policy
Alternatives
From the perspective of people interested in improving

the well-being of low income people and in reducing welfare
expenditures through increased earned income levels, one
needs to know more than the relative significance of
assorted explanatory variables.

It is equally important

to have some estimate of the number of people who face
particular sets of constraints such that impact estimates

27

of changes in the variables can be made.

To arrive at

indications of probable impact of policy alternatives,
the following procedure is used:
a.

For each of a series of policy alternatives, the
adult ADC population is divided into employability
groups according to sex, family circumstances, age,
health, education and training, and other charac­
teristics in whatever combinations are appropriate
for the policy issue in question.

b.

The population size for each of the groups is then
estimated using standard estimating techniques.

c.

The number of recipients who would potentially be
affected by a particular policy alternative and
the degree of the earned income effect is then
assessed given what has been learned in the earlier
analysis.
In analyzing policy alternatives via this method,

no attention is given to program costs in quantified t e r m s .
That aspect is left for future study.

In essence, the

intent is only to identify the programs from which sub­
stantial gross benefits would be expected.

This will

facilitate identification of those alternatives for which
an in-depth study may be appropriate and, in addition, aid
those program decisions which are eminent whether or not
in-depth study is forthcoming.

CHAPTER III
THE ALLEGAN COUNTY LABOR MARKET

In the final analysis, what can be done to increase
the earned income of welfare recipients depends on the
opportunities available in the relevant labor market.

If

no job vacancies exist for which welfare recipients are
qualified or for which it is feasible to train them, no
policy is going to be effective short of job creation or
programs to enhance labor mobility.

Furthermore, under­

standing either the plight of welfare recipients or the
potential for improving their well-being is impossible
without knowing something about labor demand factors and
the composition of the labor force within which welfare
people compete for jobs.

Therefore, this chapter examines

the industry-occupational structure of Allegan County, the
general characteristics of the total labor force, and the
availability of job vacancies including an analysis of
entry requirements.

These aspects are considered here in

primarily a descriptive manner to be used later in hypothe­
sis testing and analyses of policy alternatives.

28

29

A.

Labor Market Definition
Labor markets can be delineated in several ways.

One could simply use existing political boundaries or go
the other extreme, which is perhaps the ideal, and attempt
to define labor markets in terms of functional economic
areas.

The most appropriate approach lies somewhere

between these extremes and depends on one's purpose and
the constraints of data availability, time, and research
funds.
The political boundaries of Allegan County certainly
do not delineate a comprehensive labor market area.

Over

30 per cent of Allegan County residents work outside the
county.

To the Northeast, about 15 miles from the county

border there is the Grand Rapids metropolitan area, popu­
lation 352,703, and about 12 miles to the Southeast is
Kalamazoo, population 152,0 83.

In addition, only about

one-third of the city of Holland, population 26,337, is
located within the county boundaries

(see map on page 136) .

Nevertheless, the boundaries of Allegan County will define
£

the labor market area for this study.
The justification for using county boundaries
rests with the nature of the study, particularly the char­
acteristics of the ADC clientele and with the matter of
data availability.

Most labor market data are available

only on a county or SMSA basis, but this is not to say that
primary data collection or the inclusion of the market of

30

adjacent counties or SMSA's would not be appropriate.

The

crucial question is whether a broader definition of the
labor market would add enough to the study to justify the
added cost.

Given that we are interested only in those

ADC residents who reside in Allegan County and not in the
entire Allegan County labor force or in welfare recipients
from other counties, it can be argued that very little
would be gained by defining the relevant labor market more
in terms of a functional economic entity.
Most welfare recipients are relatively low skilled
and thus are qualified only for relatively low paying jobs.
This means that it is not to their advantage to commute
very far to work.

Table 1 displays maximum one-way com­

muting distances under varying circumstances.

It is

evident from Table 1 that maximum commuting distances are
relatively short for wage rates of $2.00/hour or less,
under either assumption regarding the minimum acceptable
gain from work.
iB

At $2.00/hour the maximum acceptable gain

$6.00 and $8.00 per day respectively.

In neither

instance is the figure sufficiently low for either of the
surrounding metropolitan areas to fall within the relevant
labor market of low-skilled welfare recipients living in
the center part of Allegan County.

However, both metro­

politan areas are relevant for those people living in the
respective fringe areas of the county.
Another factor that effectively limits the relevant
labor market area for welfare recipients is access to

TABLE 1.— Maximum One-Way Commuting Distances for Welfare Recipients at Various Wage Rates.

Reductions Due to Taxes and Work
Expenses Except Transportation Costs
Hourly
Wage

Daily
Income

Social
Security
j5 #2 |)

Other
Taxes
(14%)

u„ v p
E

P

Gross
Income Less
Reductions

Minimum
Acceptable
Gain From
Work/Day

Reduced Gross
Less Required
Gain Equal
Income Available
For Transport.

Maximum
One-Way
Commuting
Distance 8
90/mile
14.0 miles

Transport.

$1.60

$12.80

5 .67

$1.79

$2.00

$ 8.34

$6.00

$2.34

2.00

16.00

.83

2.24

2.00

10.93

6.00

4.93

22.5

2.50

20.00

1.04

2.80

2.00

14.16

6.00

8.16

45.0

1.60

12.80

.67

1.79

2.00

8.34

8.00

.34

2.9

2.00

16.00

.83

2.24

2.00

10.93

8.00

2.93

16.0

2.50

20.00

1.04

2.80

2.00

14.16

8.00

6.16

34.0

aThe figures for the minimum acceptable gain from work per day are completely arbitrary assumptions.
^The 90 per mile cost of travel is based on the cost of operating a standard sized automobile as estimated
by the U.S. Department of Transportation, Federal Highway Administration, Bureau of Public Roads. Their estimate
of 11.90 per mile is reduced by 2.9C to account for part of the fixed cost of owning and operating an automobile
given that said auto is used for purposes other than commuting to work.

32
transportation.

Without an automobile the relevant area

is small irrespective of the costs of transport, because
there is no public transportation available and over 30 per
cent of all ADC families do not own an automobile.
One reasonable argument for countering the position
that the labor market area for a given set of welfare re­
cipients is relatively small is the issue of labor mobility.
To the extent that welfare recipients are able and willing
to change their place of residence, labor market consider­
ations in out-county areas are relevant.

But, consideration

of questions of labor mobility is outside the scope of this
study such that it remains reasonable to limit the labor
market of interest to the boundaries of Allegan County.
B.

Industry-Occupational Structure
1.

Employment Levels by
Industry
Allegan County is characterized by a rather hetero­

geneous industrial structure that exhibits significant year
to year and seasonal variations in total labor requirements.
These aspects are considered in turn below.
Table 2 gives a breakdown of employment levels by
major industrial category for the years 1959, 1964, 1967,
and 1970.

Although the data are somewhat deficient because

of disclosure problems and excluded categories

(most notably

agricultural employment), they nevertheless illustrate the
industrial structure of the county.

Manufacturing

33
TABLE 2.--Allegan County Employment Levels by Industry for the Years 1960,
1964, 1967, and 1970.
Number of Employees,
Mid-March Pay Period
1959

1964

1967

1970

5

13

20

24

14

60

67

66

230

264

418

366

3 ,5B4

3 ,776

4,466

5,817

Food t kindred products

592

539

653

745

Paper & allied products

795

749

766-

741

Printing & publishing

106

118

136

156

Fabricated metal products

650

539

485

1,531

Electrical products

179

285

281

537

Transportation 6 other public utilities

203

231

273

302

Wholesale trade

366

276

300

318

1 ,337

1 ,698

2,055

2,214

164

136

145

169

98

118

120

115

Food

294

352

446

413

Automotive dealers & service stations

289

358

496

513

Apparel & accessories

55

65

73

72

Furniture & home furnishings

44

35

37

90

Eating & drinking places

235

315

391

526

Miscellaneous retail store

158

319

347

316

Finance insurance 6 real estate

118

139

113

121

Services

599

719

951

1,208

41

28

25

6 ,469

7 ,204

8,688

Ag services, forestry, fisheries
Mining
Contract construction
Manufacturing0

Retail trade
Building materials 6 farm equipment
General merchandise

Unclassified establishments
TOTAL
Sourcet

10,535

Countv Business Patterns. U.S. Bureau of the Census.

aBecausa of disclosure problems, the categories under main
headings, e.g., manufacturing and retail trade, do not sum to the main
heading total.

34
employment is the most important sector, accounting for
over 50 per cent of the recorded total.

Manufacturing is

followed in significance by the major categories of retail
trade and services.
In terms of existing or potential welfare prob l e m s ,
the manufacturing component is particularly significant,
because with the type of firms involved labor demand for
manufacturing in Allegan County is extremely volatile or
at least has been since about 1967.

The category "fabri­

cated metal products" accounts for nearly one-third of
total manufacturing employment and this category more than
tripled during the 1967-1970 period.

More significantly,

with reference to the current welfare problem, this cate­
gory has been reduced sharply since 1970
the table).

(not shown in

Although no completely comparable data are

available for 1971 or 1972, we know from interviews with
county officials that there has been a substantial reduction
in manufacturing employment due to the closing of at least
one major metal fabricating plant which at its peak em14
ployed a total of about 450 persons.
With respect to other major industrial categories,
there is no evidence of any changes during the 1959-1970
period which would not be expected given the economic
structure of the county.
14

Employment in the retail trades

Information from interviews with Homer Patterson,
County Cooperative Extension Director, and with numerous
officials associated with manpower programs in Allegan
County.

35
remained relatively stable as a proportion of total employ­
ment.

This one would expect since retail trades employment

tends to be a direct function of the economic base which is
reflected in the total employment estimates.

Employment

in the service industries increased significantly during
the period

(202 per c e n t ) , but again one would expect this

considering the importance of tourism in the area as well
as state and national trends.
There has been one important change in sectoral
employment levels that is not reflected by the County
Business Patterns data, i.e. , a decrease in the relative
importance of agricultural employment.

Data collected by

the Michigan Employment Security Commission, hereafter
referred to as M.E.S.C., indicates that agricultural em­
ployment has decreased nearly 20 per cent during the past
...
15
frve years.
The issue of agricultural employment is quite
important because as agricultural employment decreased
manufacturing employment increased both relatively and
absolutely.

A probable implication is that as rural farm

youth entered the labor force many of them chose to accept
manufacturing employment in Allegan County instead of
migrating to urban areas like many of their counterparts in
other regions.
15

Then, over time as family responsibilities

Estimates compiled from data collected monthly by
the Kalamazoo office of the Michigan Employment Security
Commission.
It is not available in published form.

36
and community ties "lock in" these individuals to the
opportunities available in their immediate area they may
become very susceptible to prolonged unemployment due to
layoffs.

Being laid off from a job in rural areas is often

times more serious than being laid off in a major metro­
politan area because of the lower proximity to other
alternatives and the relative significance of major e m ­
ployers.

I f f for example, a single plant in a rural area

closes shop the problem is often very serious because there
are too few employers within a reasonable distance to
readily absorb those who are now without employment.

The

seriousness of this proposition is supported by the fact
that over 20 per cent of the Allegan County ADC recipients
left their last job because they were laid off.

Unfortu­

nately, comparable data for a more densely populated region
are not available so that one could get a better idea of
the relative seriousness of the problem for rural areas.
In this context, it should be kept in mind that
although employment opportunities in Allegan County in
total are reasonably diverse, there nevertheless exist a
number of communities which are largely dependent on a
single employer.

For example, Chase Manufacturing Company

of Plainwell, Michigan, employed at its peak in excess of
450 persons from an immediate community with a population
of only 3,195.

It is now closed down.

Former employees

must now commute to surrounding communities or relocate.

37

Either alternative requires that they have private trans­
portation for the necessary job search and/or that they
have the necessary resources for relocation.
A second major factor which needs to be considered
with reference to the industrial structure of Allegan County
is the seasonal difference in labor demand.

The need for

public assistance and related manpower programs depends to
a significant extent on the degree of seasonality.

Differ­

ent services are needed for people who are temporarily
unemployed because of the seasonal nature of their work
than are needed for people who need assistance for other
reasons.

For example, people who are unemployed for ex­

tended periods of time during the off-season need temporary
employment and would generally possess reasonable skills
and work records such that an emphasis on placement services
would likely be appropriate.

On the other hand, those

people who are completely without employment opportunities
are likely lower skilled and have poor work histories such
that income maintenance, guidance, and training are more
needed in addition to placement efforts.
Table 3 gives employment levels by major industrial
category for the months of March, July, October, and
December in the years 1967 through March of 1972.

It

should be noted that these data were collected by M.E.S.C.
using different categories and employing different esti­
mating techniques than those used by the Bureau of the

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39

Census in compiling the County Business Patterns data cited
earlier.

The Census data are based on a 20 per cent sample

of county employees, whereas the source of M.E.S.C. data
is employer reports made for the unemployment compensation
program supplemented by survey estimates of employment in
uninsured categories.
There is nothing particularly striking about the
seasonal employment pattern in Allegan.

As one might

expect, employment tends to be highest in July and lowest
in March.

Employment in agriculture and construction is

highest in the summer months because of weather require­
ments, but interestingly employment in the retail trades
is also significantly higher during July.

Apparently,

tourism has a substantial impact on retail employment.
Agriculture and construction also account significantly
for the low employment in March along with generally low
employment throughout most categories.
More important than when the highs or lows occur
is the magnitudej of differences in seasonal employment
levels.

Average total employment for the months of March,

July, October, and December is 14,375; 15,781; 15,219; and
14,700 respectively.

On the average employment is 9.8 per

cent or 1,406 higher in July than in March.

This difference

would be highly significant if the size of the labor force
were the same fqr the two periods, i.e., it would mean
that unemployment in March is very high relative to July.

40
Fortunately, however, the labor force is much smaller
during the winter months when employment is low
of 15,506 in March compared to 17,094 in July)

(an average
such that

unemployment is even lower in March than in July.

In fact,

in both absolute and percentage terms unemployment tends
to be highest in July.

Unemployment, as a per cent of the

labor force, averaged 7.25, 7.65, 5.7, and 6.75 per cent
respectively for the months of March, July, October, and
December over the period 1967-1971.
In the final analysis, it doesn't appear that
seasonal variations in employment present much of a problem
in Allegan County.

The fact that increased summer employ­

ment is accompanied by an even greater increase in the
size of the labor force indicates that many of those
persons employed in summer but not in winter are people
who are in the labor force only for the summer months, e.g.,
students and seasonal farm workers.

Thus, it appears that

one is not faced with finding temporary employment for
large numbers of family heads during the "off season."
However, the significant increase in the labor force in
the summer months indicates that manpower programs need
to be geared to provide more placement services during
that time for people who are in the labor force only
temporarily.

41
2.

Employment Levels by Occupation
Knowing the year to year trends and seasonal

variations in employment by industry provides a perspective
of the nature of the welfare problem and the potential for
effecting the problem through programs directed at employ­
ment.

Of equal importance, however, is the occupational

structure.

Over time the potential for increasing the

earned income of welfare recipients is to a significant
extent dependent upon the types of occupations which
characterize the community.
There are two means available for getting estimates
of employment levels by occupation for Allegan County.

One

could use either 1970 Census data or attempt to estimate
occupational employment levels by applying the national
industry-occupational matrix developed by the Bureau of
Labor Statistics to the estimates we have of employment by
16
major industrial category.
Unfortunately, neither
approach is very adequate.

Thus, both are employed herein

to provide as good of an idea as possible about the oc c u ­
pational structure of the county.
(a)

Estimates Using the BLS
Matrix
The National Industry-Occupational Matrix is a

matrix of the ratios of employment levels by occupation to

•^National Industry-Occupational M a t r i x , Bureau of
Labor Statistics, U.S. Department of Labor.

42

total employment by industry.

It is derived from national

data with 1960 employment levels by occupation as the base.
It was developed for use in state and regional manpower
planning and includes estimates of the ratios for 1975.
Using the matrix to estimate employment by occu­
pation for a single county results in at best only "ball
park" estimates.

The two major problems with the technique

are the limited appropriateness of using national employment
patterns as an approximation of those in a single county
and the applicability of 1960 patterns to 1972.

Because

of area' relative price and wage rate differences and
differences in available resources, one cannot expect the
distribution of employment by occuaption for a given
industry in a particular area to be the same as that for
the nation.

Similarly, changes over time in labor supply,

technology, and relative prices will change employment
patterns significantly.
A related problem in using the matrix, which is
perhaps equally serious, is the difficulty which results
from the need to aggregate industrial categories.

At the

county level employment data by industry are available
only for relatively major industrial categories.

Thus,

the divergence between the actual employment patterns in
Allegan County and the estimated patterns is further in­
creased, because of the greater variation within broad
industrial categories.

43

Table 4 gives estimates of employment by occupation
as calculated by applying the BLS matrix.

It is particu­

larly interesting to note that those occupational categories
which tend to require the least skilled workers account for
a relatively small proportion of total employment.

For

example, the category "laborers, except farm and mine"
accounts for only 4.9 per cent of total employment.

Simi­

larly, the category "sales workers" which includes a large
proportion of low skilled cashiers and c l e r k s , accounts
for only 4.6 per cent of total employment.

It is likely,

however, that these figures do not portray the actual
situation because of the reasons cited above.

Nevertheless,

to the extent that the low skilled categories are small,
there are some quite obvious implications regarding the
potential for increasing the earned income of welfare
recipients.
(b) Census Bureau Estimates
The 1970 Census provides information on the occu­
pational structure of Allegan County that is a useful
complement to that based on BLS ratios.

First, it is a

necessary supplement given the weaknesses of the previous
estimates, but most importantly the Census data provide
a breakdown by sex.

This source, however, also has its

deficiencies.
For our purposes, the Census data are deficient in
that they include people who live in Allegan County but

TABLE 4.— Employment Levels by Industry and Occupation, Allegan County Baployers Only.
Humber Employed by Occupational Category11
A

Categories
Categories

Managers, Clerical ( Sales Craftsmen Operatives Service
Laborers Farmers
Professional
Total
Technical
Officials,
Kindred Workers Foremen
C Kindred Workers Except Farm 6 Farm Employment
Proprietors
Workers
6 Kindred
6 Mine
Workers
Workers
Kindred

Agriculture

7.63

5.50

6.13

1.75

5.25

21.62

2.62

Mining

4.16

4.71

4.45

.22

12.12

23.75

.60

Total durable
goods manuf.

252.20

148.72

323.96

48.10

584.74

994.24

Mon-durable
goods manuf.

122.54

149.16

269.72

110.22

316.58

Construction

15.26

31.87

11.85

.82

Trans., com,
6 utilities

21.28

33.16

96.96

6.52

60.77

34.71

21.12

1178.38

1250

0.0

0.0

SO

46.80

201.24

0.0

2600

1066.78

45.10

119.90

0.0

2200

142.45

21.62

1.37

49.75

0.0

275

3.56

85.08

105.04

13.16

41.76

0.0

400

60.03

56.32

15.57

53.57

2.75

19.47

0.0

275

484.18

224.45

466.44

137.47

206.51

329.16

67.08

0.0

1950

2.70

20.29

44.18

20.90

1.65

.40

7.29

1.59

0.0

100

Service

320.40

62.90

117.50

6.10

53.30

54.90

357.60

27.30

0.0

1000

Fed. Gov't.

415.06

239.25

1638.72

2.66

302.08

119.77

123.90

108.56

0.0

2950

State Gov't.

55.22

30.97

94.90

.73

17.08

4.03

42.95

4.13

0.0

250

Local Gov't.

254.18

278.93

507.13

2.23

139.59

78.71

1102.61

111.62

0.0

2475

1511.86

1550.41

3399.98

720.05

1812.96

2750.94

2075.91

773.52

wholesale
trade
Betail trade
Finance, real
estate 6 ins.

Totals for
occupations
Per cent by
occupation

9.594

9.831

21.551

4.564

11.494

17.444

13.164

4.914

1178.38
7.474

15775
1004

^Includes all employment in Allegan County as estimated by M.E.S.C. for April, 1972, except for non-agricultural
self-employed and unpaid family workers and domestic workers in private households.
^Occupational employment estimated by multiplying the ratios calculated by the Bureau of Labor Statistics times the
level of employment in the industry. The ratios were based on national employment levels for 1960.

45
work elsewhere.

Therefore,

it provides the occupational

distribution of the residents as opposed to an occupational
distribution of employment opportunities within Allegan
Co u n ty.
A second problem with the Census information is
that there is some question as to whether a 20 per cent
sample is adequate at the county level especially for those
occupational categories where few people are employed, i.e.,
estimates based on small numbers have limited statistical
validity.

But, this is not a serious problem if the infor­

mation is interpreted and used with caution.
The Census bureau estimates of employment by occu­
pation of Allegan County residents are shown in Table 5.
Note that the estimate of total employment is considerably
higher than the 15,775 estimated by M.B.S.C.
apparently the case for two reasons.

This is

First, to the extent

that Allegan County is a "bedroom community" employment of
residents would be higher than employment opportunities
within the county boundaries and, secondly, there are some
differences in the categories used such that the Census
data may be more complete.

Given this factor, direct

comparisons of the two sources are not possible.
Taking the Census data by itself, there are some
interesting observations one can make.

A most interesting

item is that 10.8 per cent of all female employees are
classed as professional-technical whereas only 6.5 per cent

46

TABLE 5.— Employment Levels by Sex for Residents of Allegan County, 1970.

Occupation

Number of People Employed
and Per Cent of Total
for All Occupations
Males

Females

Total

15,930
100«

8,048
100ft

23,978
100ft

Professional, technical fi kindred workers

1,040
6.53%

872
10.B3ft

1,912
7.97ft

Managers t administrators, except farm

1,082
6.79%

228
2.83ft

1,310
5.46ft

Sales workers

688
4.321

438
5.44ft

1,126
4.69ft

Retail trade

306

379

685

Other than retail trade

382

59

441

771
4.84ft

1,840
22.86ft

2,611
10.89ft

3,976
24.96«

277
3.44ft

4,253
17.74ft

4,044
25.39ft

1,944
24.15ft

5,988
24.97ft

2,488

1,054

3,542

Nondurable goods manufacturing

913

646

1,559 .

Nonmanufacturing industries

643

244

887

Transport equipmont operatives

970
6.09«

142
1.76ft

1,112
4.64ft

Laborers, except farm

1,075
6.75ft

121
1.50ft

1,196
4.99ft

Farmers & farm managers

995
6.25«

57
.71ft

1,052
4.39ft

Farm laborers 6 farm foremen

441
2.77ft

96
1.19ft

537
2.24ft

Service workers, except private household

848
5.32ft

1,779
22.10«

2,627
10.96ft

0
0

254
3.16ft

254
1.06*

Total employed, 16 years old and over

Clerical & kindred workers
Craftsmen, foremen

kindred workers

Operatives, except transport
Durable goods manufacturing

Private household workers

Sourcet

Compiled from General Social and Economic Characteristics, Michigan,
U.S. Bureau of the Census, Table 122, 1970.

47
of male workers are.

Perhaps, this is because a large

proportion of primary and secondary teachers are female and
in rural areas teaching may account for a large proportion
of total professional-technical employment.

Another reason

may be that women have fewer alternatives such that only
those qualified for professional positions choose to work.
A second factor one ought to note, because of its
relevance for determining the potential for employing ADC
women, is that nearly one-fourth of female workers are
employed as service w o r k e r s , excluding private household
employment.
C.

This compares to only 5.32 per cent for men.

Labor Force Characteristics
Although our target population is limited to

welfare recipients, it is important that we know something
about the characteristics of the entire Allegan County
labor force for two main reasons.

First, revealed differ­

ences between the total population and the subgroup of
welfare recipients will be useful in understanding the
welfare problem in general and in assessing the relative
significance of particular characteristics or factors.
Secondly, the welfare population must compete with the
total labor force for employment such that the potential
for increasing employment of welfare recipients must be
seen in light of the employability characteristics of the
total population.

48

According to the 1970 Census

17

Allegan County has

a total population of 66,575, of which 25,432

(16,766 male

and 8,666 female) are in the civilian labor force.

Of

those classified as being in the labor force, 15,930 of
the males and 8,048 of the females were employed at the
time of the Census; 35.1 per cent of them, however, worked
outside the county.

In the paragraphs which follow, the

entire Allegan population is described with reference to
labor force participation by age, sex, and education.
Table 6 gives labor force participation rates for
males and females by age group.

The most interesting

aspect regarding male participation is that the rate falls
off significantly after age 44.

How much of this decrease

is due to reduced need and how much to reduced capacity to
participate is an open question.

One would expect, however,

that reduced need is the major reason, because aside from
the discouraged worker phenomenon people searching for work
no matter how capable or employable are still considered
part of the labor force.

Perhaps, the figure reflects

early retirement by farmers who live in the county or a
migration to Allegan for retirement purposes.
Participation rates for women fall off at about
age 20 apparently due to the advent of marriage and

17

General Social and Economic Characteristics, U.S.
Bureau of the Census, 1970.

49

TABLE 6.— Per Cent Participation in the Labor Force by Sex
and Age Group, 1970.
Per Cent Participation
Age Class
Males

Females

14 & 15 years

15.2%

10.7%

16 & 17

44.6%

25.4%

18 & 19

82.7%

62.9%

20 & 21

86.9%

57.0%

22 - 24

93.6%

44.2%

25 - 34

97.0%

41.0%

35 - 44

97.0%

47.1%

45 - 64

90.2%

44.5%

65 & over

19.1%

9.2%

All ,
age 16 or over

79.4%

39.1%

Source:

General Social and Economic Characteristics,
Michigan, U.S. Bureau of the Census, T a b l e 121,
1970.

children and pick up slightly at about age 40 when many
families would be largely grown.
The level of labor force participation of women
with children is of considerable interest because of the
size of that potential labor supply and because knowing
how many women with children in the total population par­
ticipate in the labor force may shed some light on the
feasibility of expecting welfare mothers with young
children to work.

Unfortunately, however, data are

50
available only with respect to participation by all women
with particular numbers and ages of children and by women
whose husbands are present.

Participation rates are not

available separately for women with children whose fathers
are not in the home/ which is the usual welfare case.
For all women age 16 and over who have children
less than age 6 the participation rate is 29.9 per cent
out of a total of 4,888 women.

For all women with children

age 6 to 17 the participation rate is 50.8 per cent of
4,851 women.

For women age 16 and over whose husbands are

present the comparable figures are 27.8 per cent of 4,532
and 48.2 per cent of 4,417 respectively.

These figures

indicate that as professionally staffed day care facilities
increase and outside employment by women continues to
become increasingly acceptable the available labor force is
likely to increase substantially.

This, of course, would

increase the job competitiion encountered by welfare
women relative to what it would be without such a change,
given the same level of demand.
Table 7 shows the number of adult males and females
in Allegan County who have completed various levels of
education.

These data are provided here for later com­

parison with the educational distribution of the welfare
population.

51
TABLE 7.— Years of Education Completed by Allegan County
Residents by Sex.
Years of Education
Completed

Males 25 Years
& Older

Hone

136
.8%

129
.7%

1 - 4

368
2 .2%

363
2 .1%

5 - 7

1266
7.7%

937
5.4%

8

4094
24.8%

3777
21.7%

9-11

3389
20.5%

3766
2 1 .6%

12

5111
30.9%

5867
33.7%

13 - 15

1129
6 .8%

1755
1 0 .0%

16 or more

1015
6 .2%

829
4.8%

Median years
completed
Source:

D.

Females 25 Years
& Older

11.8

11.1

Compiled from General Social and Economic
Characteristics, U.S. Bureau of the Census,
Table 120, 1970.

Disequilibrium in the
Labor Market
Since early 1970, unemployment has been a very

serious problem in Allegan County.

The unemployment rate,

as estimated by M.E.S.C., increased from a monthly average
of 5.2 per cent in 1969 to 9.7 per cent in 1970 reaching a
high of 12.0 per cent in December, 1970.

During 1971 and

52
to date in 1972 the rate has remained high, fluctuating
between about 8.0 and 11.0 per cent, and shows no signs of
a decreasing trend.

Despite this situation, a significant

number of job vacancies continue to exist.

Given concern

with increasing earned income of welfare recipients, it
is essential that this disequilibrium condition be analyzed.
Of greatest importance is the availability of job vacancies.
However, before that aspect is examined in detail it is
instructive to consider some of the reasons why job vacan­
cies and unemployment can and do exist simultaneously.
Neo-classical wage theory, under the assumptions
of flexible wages, a homogeneous labor force, and a p e r ­
fectly operating labor market, would predict that employers
would bid wages to that level where the labor market was
in equilibrium.

At the equilibrium point there would be

no one willing to work at the prevailing wage who could
not find employment, i.e., no involuntary unemployment,
and there would be no job vacancies which employers would
like to fill at the prevailing wage.

At wage rates above

the equilibrium level there would be unemployment and
below the equilibrium level job vacancies would exist.

In

a dynamic world unemployment and job vacancies would exist
temporarily enroute to the equilibrium point, but both
would not exist simultaneously given the assumptions of
the theory.

Unfortunately, the assumptions do not hold and

a situation of simultaneous involuntary unemployment and

53
job vacancies develops.

The specific reasons why this

occurs are very germane to understanding the Allegan County
situation.
Any geographic labor market is composed essentially
of a series of sub-markets for different sets of skills and
job characteristics, i.e., a geographic market is not homo­
geneous.

Therefore, one could have, for example, an excess

demand for cooks
teachers

(vacancies) and an excess supply of

(unemployment) existing at the same time.
A second and equally important reason for the

simultaneous existence of unemployment and job vacancies
is poor labor market performance.

To the extent that

imperfect information exists, i.e., those searching for
jobs do not know about all the alternatives, unemployment
can exist despite the availability of jobs.

In addition

to poor information, one could have limited resource
mobility which similarly would result in poor market p e r ­
formance.

For example, if an unemployed individual is

without either transportation or the resources to migrate,
he would remain unemployed even if there was a job available
a few miles away that he knew of and was interested in.
There are numerous

other reasons for potentially poor

market performance, but for purposes herein these two
factors are the most important.

With these issues in mind,

the availability of jobs in Allegan County is considered
below in detail.

54
E.

Estimation and Analysis
of Job Vacancies
|
For formulation of needed manpower programs in
j
general or, more specifically, needed welfare programs,
knowledge of available job vacancies is an important if
not the most crucial input.

The potential for increasing

the earned income of welfare recipients cannot be properly
assessed without taking a close look at their opportunities
for employment.

Tliis involves determining the number and

types of jobs available, with emphasis on job entry rei

guirements and wage; rates.
i

i

Despite its importance in public program formu­
lation, there is no secondary source of data on job vacan­
cies for Allegan County that comes anywhere near being
complete and adequate.

Thus, it is necessary to go directly

to employers to get an estimate of job vacancies.
1.

The Data
The necessary job vacancy data for this study were

collected by surveying employers.

18

Using a list of Allegan

County employers provided by M.E.S.C., a stratified random
sample of 150 employers was drawn.

In order to get the

most accurate estimate for the least cost, the sample was
stratified on the i^asis of employers size (number of

18James Bo<j>th of the Department of Agricultural
.

Economics, Michigan State University, developed the basic
design for collecting the job vacancy data and was also
very helpful throughout the collection pro c e s s .

55
employees).

Five size classes were arbitrarily chosen:

1-3, 4-7, 8-15, 16-40, and greater than 40.

It was then

assumed that the variance in number of job vacancies per
firm within each of the classes would be proportional to
the mean number of employees.

On this basis, a sample of

20 firms size 1-3, 22 firms size 4-7, 30 firms size 8-15,
45 firms size 16-40, and 34 firms size greater than 40
was drawn.

The proportions of the total number of firms

in each class were 5.0 per cent, 12.9 per cent, 28.3 per
cent, and 100 per cent for the two largest classes.
After the sample was drawn a brief survey question­
naire was constructed

(see Appendix C) and each of the firms

selected was surveyed using a combination of procedures.
Manpower agencies in Allegan County were interested in job
vacancy information for career guidance and program planning
such that the survey was modified slightly to reflect their
needs and their help enlisted in gathering the information.
Because of the importance of the larger employers and the
desire of the manpower agencies to make personal employer
c ontacts, it was decided that each of the firms in the
two largest classes would be personally contacted.

For

the three smaller classes of employers, copies of the
survey form were sent out by mail and those who did not
respond immediately were contacted by phone.

With the

exception of those firms which had gone out of business or
moved from their last known address, job vacancy data were
gathered from all firms in the sample.

56
The results of this survey procedure were, however,
insufficient in that the list of employers used was incom­
plete.

Two major groups of employers were missing:

most

public employers; and employers of part-time or less than
permanent workers, i.e., domestic workers and farm hands.
As a result, a separate survey of those public employers in
Allegan County which could be identified was conducted.

To

assess the significance of the other excluded groups, the
help wanted advertisements in various county newspapers
were screened.
Job vacancy information for the public sector was
collected by first compiling a list of public employers
from phone listings.

Because of the deficiencies of this

process, the resulting list was no doubt incomplete.
However, an attempt was made to identify all schools, major
city governments, county government agencies, and all state
and federal government agencies operating in the county.
Each of the employers on the list was then contacted by
phone and asked the same questions as were asked the private
employers.
Regarding job vacancies with employers of part-time
or less than permanent workers, the screening of help wanted
advertisements in three county newspapers for the last two
weeks in May

(the period of time when most of the employers

were contacted)

indicated that there were very few vacancies

in employer categories not included in the survey.

In fact,

57
the entire search revealed only two job vacancies by
employers that
process.

had not been included in the sampling

It cannot, of course, be concluded from this

procedure that the survey estimates are complete.

All the

procedure provides is an indication that no major employer
category with a significant number of job vacancies avail"
able was missed.
In addition to problems of employer coverage,
severe estimation problems were encountered.

In fact, they

were so severe as to make estimation impossible for the
two smallest classes of private employers.

Of the 20 firms

surveyed with 1-3 employees, only one vacancy was reported,
and of the 22 firms with 4-7 employees there were no
vacancies reported.

Thus, any inferences regarding vacan­

cies with those firms not surveyed is impossible.

It needs

to be considered, however, whether the reason no vacancies
were reported was because there, in fact, are very few
vacancies in those categories or if the results indicate
lack of understanding or cooperation by employers.
In the two largest categories where all employers
were interviewed in person, there was a vacancy rate of
1.5 per cent
1,736)

(26 vacancies of estimated employment of

in the 16-40 size class and 1.2 per cent

2380) in the over 40 group.

(29 out of

For the middle group, size

8-15, where 24 out of the 62 firms were contacted by mail
and/or phone, the estimated vacancy rate is 2.9 per cent
(21 out of 713).

The fact that the vacancy rate is even

58
higher for the 8-15 group where phone contacts were used
than for the larger classes would indicate that it is not
lack of cooperation by phone that accounts for the absence
of vacancies.

Furthermore, there is no evidence from job

bank listings or newspaper advertisement that the smaller
employers have a significant number of vacancies.

Thus,

despite underestimation of available vacancies due to e x ­
cluding vacancies in the smaller firms from the estimate,
there are indications that the number of vacancies within
those classes is not substantial.
2.

Results of the Job Vacancy
Survey
From the entire survey there were 85 job vacancies

reported, 65 in the private sector and 20 in the public
sector.

In addition, if it is assumed that vacancies are

distributed in the same proportion throughout those firms
in the 8-15 group who were not contacted as they were in
those firms who were, there are an additional 13 vacancies,
making a grand total of 98.
Table 8 provides a breakdown of the vacancies by
major occupational class, public or private employer, and
employee size (private sector o n l y ) .

If the hazardous

estimates of job vacancies by occupation for the 8-15 group
are accepted despite the very small numbers, the greatest
demand is for 23 operatives, 16 nonfarm laborers, 18 service
workers, and 12 craftsmen or foremen.

Do these vacancies

TABLE 8.— Job Vacancy Survey Results,
Number of Vacancies by Employer Size
Occupational Category
1-3

4-7

8-15

16-40

40

Professional & technical

4

Managers, officials &
proprietors

2

public
Sector

Totals

Clerical (receptionistsecretary)

1

Sales

6

Craftsmen & foremen

8

3

4
10 est.

2

11

Nonfarm laborers

3
8 est.

1

5

12
16 est.

Service workers

1

7

2

18
21 est.

28

28

Operatives

1

7
6

11
20
26 est.

3 est.
TOTALS

8
21 est.

20

85
98 est.

60

exist because of poor market performance or because, in
fact, no one is available to fill the positions?

To answer

this question and eventually explore the feasibility of
filling these jobs with people on the welfare rolls, it is
necessary that the requirements and characteristics of the
available vacancies be examined.

Table 9 shows the distri­

bution of available job vacancies by occupational category,
minimum entry requirements, and average beginning wage.
Each occupational class is discussed in turn below.
(a) Professional and Technical
This category includes those jobs requiring either
advanced formal education or substantial technical training
or experience.
category.

There were nine vacancies identified in this

Three required either a four-year college degree

or an advanced degree, and six required technical training,
a minimum of from nine to eighteen months.

Three of the

nine also required substantial work experience.

The average

starting wage for the group was $3.74/hour, highest of all
categories.

In this case, it appears that the major barrier

to filling these positions is the availability of appropri­
ately trained manpower.
(b) Clerical
This category includes the full range of clerical
activity, e.g., stenographers, secretaries, receptionists,
desk clerks, etc.

Seven clerical vacancies were identified.

TABLE 9.— Job Vacancies by Occupational Category, Minimum Entry Requirements and Average Wage Rates.
Humber of Job Vacancies by Different Minimum Entry Requirements
Occupational
Category

Literate, No
Training or
Exp.

Literate,
Some Training
and/or Exp.

Some H.S.,
No Training
or Exp.

Some H.S.,
Some Training
and/or Exp.

Professional K technical
Managers, officials
proprietors

Average
Beginning
Wage

H.S. or More,
No Training
or Exp.

H.S. or More,
Some Training
and/or Exp.

1

8

$3.74/hr.

3

S3.04/hr.

3

$2.24/hr.

4

1

S2.50/hr.

3

4

S2.49/hr.

1

8

$2.43/hr.

t

Clerical (receptionistsecretary)

1

3
1

Sales
Craftsmen s foremen

4

Operatives

4

1

6

Nonfarm laborers

9

Service workers

8

3

1

3

2

1

Total vacancies by entry
requirements

21

8

2

13

13

28

Average beginning vagea

52.39/hr.

$2.43/hr.

SI.96/hr.

S2.01/br.

S2.46/hr.

S3.05/hr.

52.83/hr.

2

aJobs involving base wage plus piece work were averaged in as base plus 10 per cent.
consissions were treated as base plus 20 per cent.

$1.99/hr.

Those involving tips or

62

Three o£ the seven required a high school education and
the remainder only some high school.
required some training.
required in three cases.
$2.24/hour.

All but one of them

Substantial job experience was
The average starting wage was

The generally acceptable wage rate, relatively

low entry requirements, and the fact that none of the
positions had been vacant for more than thirty days at the
time of the survey would indicate that the existence of
these vacancies is more a product of rapid turnover due to
marrying, pregnancy, etc. than any other factor.
(c) Sales
The sales category includes everything from retail
clerks to company sales representatives.

Of the six

vacancies reported, two were for retail clerks

(cashiers),

two were for auto salesmen and two were for retail clothing
sales.

Interestingly, although training and experience

was important in only one case, minimum required education
levels were higher than one would expect given the nature
of the job.

In only one instance was less than a high

school education acceptable and in two cases some college
was required.

Given the number of sales workers in the

county, it is surprising that so few sales positions were
vacant.

Apparently, the relatively high average wage of

$3.07/hour, excluding cashiers, and the limited special
training and experience required make these positions easy
to fill.

63
(d) Craftsmen and Foremen
During the process of surveying employers, it was
this occupational category which emerged as being the most
troublesome to employers.

A frequent complaint was that

foremen of all types were difficult to find.

The same was

true of some crafts, but to a lesser extent.

A brief

examination of the entry requirements gives some indication
why this is the case.

Although wages are reasonable and

minimum education is in no case greater than twelve y e a r s ,
substantial training and/or experience is required for
foreman.

Furthermore, and perhaps most importantly, a

particular personality type is required to effectively
handle the job of foreman.
Another factor we ought to note with reference to
this category is that few vacancies were reported within
the crafts

(five of the eleven vacancies in this category

were for foremen).

This is perhaps due to a surprising

willingness on the part of employers to train their own
employees.

Several employers who hire a large number of

people in the crafts indicated willingness to train if they
could find ambitious, dependable employees willing to
learn.

They, of course, would prefer trained, experienced

people, but rarely required it as an absolute prerequisite
for hiring.

Even for the vacancies identified, where one

would expect higher requirements to exist because of the
fact that the positions are vacant, two of the six crafts

64
positions required no training or experience and the
remainder only a few months of one or the other.
(e) Operatives
This category had the largest number of vacancies
not so much because of the attributes of the occupation,
but because it tends to be a bit of a "catch all" category
for a variety of different jobs.

It includes many factory

jobs as well as truck drivers, equipment operators, etc.
The range of jobs includes vacancies from the very lowest
paid and minimally skilled to relatively high paying skilled
jobs such that it is very difficult to generalize about the
category.

One observation that can be made is that with

one notable exception employers did not appear to require
more education or preparation than needed to perform the
job and, in general, evidenced a willingness to train their
employees where appropriate.

The one exception was a large

firm employing several sewing machine operators.

The

personnel manager complained bitterly about not being able
to find the needed operators, but continued to pay only
minimum wage plus piece work and require both training and
experience as a prerequisite for hiring.
(f) Nonfarm Laborers
The most interesting characteristic of the eleven
vacancies in this category is the relatively high beginning
wage rate.

Despite very low general education requirements

65
and no instances of training or experience being required,
the average starting wage for this group

($2.83/hour) was

higher than all categories except Professional and Technical
and Managers.

Examination of the types of general labor

vacancies available indicates that most involve either very
dirty or very difficult work or both.

Perhaps, this accounts

significantly for vacancies existing despite a large unem­
ployed labor pool with the requisite skills.
(g) Service Workers
This group of vacancies includes primarily cooks
and waitresses, although there are a few other types of
service jobs included.

Like nonfarm laborers, this group

is characterized by very minimal entry requirements, but
contrary to the laborers case beginning wages are very low.
Waitress positions appeared to exist primarily because of
rapid turnover, i.e., employers indicated limited difficulty
in filling such positions.
matter.

Cooks, however, were another

Second only to foreman, cooks emerged as the job

most difficult to fill in the county.

In talking with

employers the reason appeared to be that there were few
dependable people willing to cook at the wage
$ 1.60/hour)

they could afford to pay.

(usually

Employers complained

considerably about welfare paying more than they could
afford to pay their cooks.

Why wages and subsequently

prices would not be bid up in this situation was a bit
baffling at first, but closer examination revealed that it

66
was the smaller, lower quality establishments that were
having trouble hiring cooks.

Apparently, one way to remain

viable in a very competitive industry is to pay your e m ­
ployees very poorly and accept the implications of high
labor turnover, i.e., worry more about keeping your prices
low than providing quality food with trained and experienced
employees.
(h) Managers
Surprisingly, in a county relatively devoid of
highly skilled manpower there were only three vacancies for
managerial positions.

A likely inference one could draw

from this is that employers broaded their search for mana­
gerial talent and do not limit themselves to the local
labor market.
In summary, there were few job vacancies identified
for a population of nearly 70,000 people, but given the
probable degree of underestimation the number of jobs
available is still significant.

The extent to which welfare

recipients would be capable of performing the jobs in ques­
tion, if they knew about them, were able to get to the
place of employment, and it was to their advantage to do
so, is discussed extensively in Chapter V, Part B.

CHAPTER IV
DESCRIPTION OF THE ADC CASELOAD

The second descriptive component of this study
considers the ADC recipients who reside within the bounda­
ries of the labor market described in the foregoing chapter.
The task is treated in four main parts:
of the ADC program;

(1) an explanation

(2) discussion of the data used;

13)

classification of the ADC caseload; and (4) description
of the target population in terms of public assistance
eligibility factors and employability variables, including
comparisons with the urban ADC population in Michigan and
other states.
A.

The ADC Program
The ADC program is designed to provide needy

families with dependent children a subsistence income.
The amount of income provided and the procedure for d e ­
termining how much each family receives is discussed in
Appendix A.

In addition to income maintenance, the ADC

client is automatically enrolled in the Medicaid program
(most medical expenses paid for) and has available to him
a wide range of services offered by the local offices of
67

68
the Michigan Department of Social Services
include:

(DSS).

These

family planning services, housing services, aid

in collecting child support payments, counseling to improve
interpersonal family relationships, and help in finding
employment.

Some ADC recipients are also eligible for

various training and job development programs.
Aid to dependent children may be granted for a
child who

(1 ) is under the age of 18 years

(21

years of age

if attending school), (2 ) is living in an approved home
with father, mother, or other near relative,

(3) is deprived

of parental support or care because of the death, continued
absence from the home, physical or mental incapacity, or
unemployment of a parent,

(4) has insufficient property

or income to meet his needs,

(5) has no legally responsible

relatives able to support him, and (6 ) is not receiving
aid to the blind or aid to the disabled.

17

The ADC program is administered by the county
department of social services under rules promulgated by
the State Department of Social Services.

To be eligible

for federal matching, administrative rules must be con­
sistent with federal guidelines.
The program is funded by the state with 50 per cent
matching funds from the federal government.

The county

provides office space and equipment.
17

Social Welfare L a w s , Michigan Department of Social
Services, Lansing, Michigan, March, 1971.

69
B.

The Data
Although a large amount of data on welfare recipi­

ents is available from secondary sources, most of it is
collected for administrative and not research purposes.
Social services agencies collect large quantities of infor­
mation on the composition of the welfare population in
terms of eligibility factors and expenditures, but despite
the concern over employability, very little information is
gathered on major employability factors such as education,
training, and work experience.

Therefore, for this

analysis it was necessary to go to a sample survey, with
all its attendant costs, to get the necessary data.
Using November, 1971, payroll lists, a 25 per cent
sample of the Allegan County ADC caseload was randomly
drawn.

A questionnaire was then prepared and over the

ensuing three month period the data were collected.

It

should be noted at this point that a 25 per cent sample was
selected not because that number of observations were be­
lieved to be perfectly adequate, but because resource
restraints in collecting the data were so severe as to
make a larger sample virtually impossible.
With the assistance and cooperation of the Deputy
Director of the Allegan County Department of Social Services,
case workers were enlisted as enumerators.

This was neces­

sary because of laws which prohibit public access to the
personal case histories of welfare recipients.

This

70
could not legally search the files or be given the names of
recipients for interview purposes.

Using case workers was

very desirable, however, in that they are usually very well
informed about individual cases, which places them in an
ideal position for interpreting case records and interview
responses.
The initial plan was to use case records as the
basic source of the desired data and where necessary have
the case workers supplement file information through home
visits.

The case records proved to be reasonably adequate

in those instances where the case had been active for a
relatively long period of time, but for cases that had
been recently opened substantial supplementation was needed.
The most typical problem was an absence of adequate edu­
cation and work experience data.

The initial idea of having

case workers make home visits was tried, but proved to be
much too time consuming

(only a relative small percentage

were found at home on first attempts).

As an alternative,

telephone interviewing was tried, and again this did not
work very well.

With small independent rural telephone

exchanges phone numbers were difficult to trace and a
relatively large number of clients did not have telephones.
After these attempts failed, the only alternative remaining
was to use a mail questionnaire and risk biased responses.
In the end, the following survey procedure was
employed.

First, case workers pulled all the case records

71

for the sample set and filled in the questionnaire as
completely as possible.

Secondly# duplicate blank copies

of the questionnaire were mailed to recipients# and those
returned were used to complete the originals.

Mail ques­

tionnaire responses were then compared to case record
information# where the information was available from both
sources# to get an idea of the validity of the data provided
by the recipients themselves.

Rather surprisingly, few

discrepancies were discovered.
The data were collected over a three month time
period.

This cause some problems in that the ADC caseload

is relatively fluid, i.e.# a large turnover in terms of
cases closed, new openings, and intercounty transfers.

Of

the original 261 cases that were randomly selected from
November# 1971, payroll information# nine had transferred
out of the county and twenty-eight cases were closed prior
to March 1, 1972.

Cases closed during the data collection

period are included.in the sample, although in many cases
the data is sketchy because follow-up to supplement case
record information was difficult— clients are more difficult
to locate and less inclined to cooperate when no longer on
assistance.

Those cases which transferred out of the county

had to be dropped from the sample, because when a client
transfers all records are forwarded to the new county of
domicile.
Another problem caused by the length of the data
collection period is that it is now difficult to speak of

72
the composition of the ADC caseload as it existed at a
specific point in time.

To the extent feasible, however,

the survey data represents the assistance levels and
employment conditions of the ADC population during February,
1972.
In summary, this analysis is based on a 25 per cent
random sample of 251 cases

(261 less nine transfers and one

misplaced questionnaire).

The data were collected by case

workers from case records with responses to mail question­
naires used as a supplement.

In some cases, education,

training, and work experience data are not complete, but
with that exception the survey data are complete and
believed to be reasonably reliable.
C.

Classification of the ADC Caseload
The ADC caseload includes families characterized

by significantly different circumstances and who are on
assistance for varying reasons.

The Department of Social

Services classifies the caseload into two major categories:
ADC-U

(Unemployed parent— almost always the father) and

regular ADC

(all other cases).

Occasionally ADC-I

pacitated parent) cases are classified separately.

(inca­
For

purposes of analysis herein, the ADC caseload is classified
into five categories:
ADC-R

ADC—U, ADC—I, ADC—SP (stepparent),

(acceptable relative), and ADC-M

female headed families).

(single parent

The stepparent cases are circum­

stances where the parent who has custody of the children

73
remarried

(almost always the mother) and the stepparent

could not or would not support the children.

In most cases

only the children receive assistance and neither the parent
nor stepparent is included in the grant.

The acceptable

relative cases are circumstances where children have been
placed in the custody of someone other than their parents.
The guardian receives a flat sum per child irrespective of
his or her income.

Table 10 gives the distribution of the

Allegan County caseload by type of case and reason for
assistance.

In addition, the table shows the number of ..

children and the number of adults by type of case.
Of particular note in the table is the relatively
large number of unemployed father cases.

ADC-U cases

account for 22.7 per cent of the total Allegan caseload
whereas for the State of Michigan ADC-U cases account for
18
only 8 . 8 per cent of the total.
This is particularly
significant because it is with the unemployed father group
where the greatest potential for increased employment is
believed to lie.
Another interesting factor to note is the seemingly
low number of cases

(16.7 per cent) where the dependent

child has no legal father.

18

This compares to 32.9 per cent

Social Services Statistics, Michigan Department
of Social Services, Lansing, Michigan, December, 1971.

TABLE 10.— Distribution of the Allegan County ADC Caseload by Type of Case, Number of Recipients, and Reason for Assistance.*
Number of Times Each Reason for Assistance Appears
Type of Case

ADC-M (single parent
female headed
families)
ADC-U (unemployed
father)
ADC-I
(incapacitated)
ADC-S (stepparent
cases)
ADC-R (acceptable
relative cases)
TOTALS

Number
Nuaber
of Cases
of Adult
and %
of Total Recipients
Caseload

Nuaber of
Total
Dependent Nuaber of
Children Recipients

Father Absent
Divorce,
Separation Dead
or Desertion

No
Legal
Father

Father
Father
Mother
Incapacitated Unemployed Absent

129
51.4%

129

317

446

97

2

30

0

4

0

57
22.71

114

166

180

8

0

3

0

57

0

25
9.9%

50

111

161

0

0

0

25

0

0

23
9.2%

11

52

63

15

0

6

0

5

0

17
6.8%

0

23

23

8

3

6

0

0

17

251
100.0%

304

669

873

128

5

45

25

66

17

‘Figures reported are for a 25 per cent sample and thus the total figures for the county would be approximately four
tines those listed herein.

75
for the State of Michigan.

19

Why this is the case

remains open to speculation.
Close examination of the table reveals that there
are more reasons for being on assistance than there are
cases.

This is because it is deprivation with respect to

the child that determines eligibility and in any one family
there may be children who are deprived for different
reasons, e.g., a mother with one illegitimate child and
another fathered by a husband since deserted.
with which this occurs is of some interest.

The frequency
Observations

of the case histories indicate that many of the adult
clients arrived at their current circumstances through a
long line of misfortune.

For example, a mother whose first

marriage goes sour finds herself with little to offer a
second husband except the burden of another man's children
and, perhaps, accordingly accepts as a second marriage a
less than desirable situation such that eventually she is
often in even worse straits, i.e., older, more children,
and totally disillusioned with life.
D.

Characteristics of Adult Recipients
There is an extremely large number of client

characteristics, circumstantial factors and combination
of factors that could be discussed as part of a description
of the welfare population.

Rather than attempting to be

19Profile of Michigan ADC Caseload, Michigan Depart­
ment of Social Services, Lansing, Michigan, Research Paper
No. 1, October, 1969.

76
exhaustive, this section focuses on those characteristics
of welfare recipients that relate to employment potential,
e.g., sex, age, education, race, work experience, and those
items which affect availability for employment.

The Allegan

County ADC population is described in terms of these char­
acteristics and compared with the State of Michigan and/or
national ADC population where appropriate.

For the most

part, combinations of characteristics are not discussed in
this chapter, but instead are treated in Chapter VI in
the context of policy alternatives.

Other aspects that

are of some interest, but are not particularly relevant
to the objectives of this study, e.g., food stamp program
participation, use of services, status of dependent children
16 or over, etc., are discussed briefly in Appendix A.
1.

Family Status and Sex of
Adult Recipients
Table 11 shows the distribution of the adult ADC

population classified by type of case, family status, and
sex.

Our 25 per cent sample includes a total of 304 adults

of which 71.3 per cent are female and 28.6 per cent are
male.

There are 155 females and 62 males who are heads of

families and, in addition, there are 62 females and 25
males who are second parents.

The family head distinction

is important because it is usually with reference to the
family head that any efforts to alter the circumstances
of the case are made.

TABLE 11.— Family Status and Sex of Allegan County Adult ADC Recipients
of Case.

Type of
Case

by Type

Female
Family
Heads

Female
Second
Parents

Total
Females

Hale
Family
Heads

Male
Second
Parents

Total
Males

Total Adult
Recipients
(3) + (6 )

U)

(2 )

(3)

(4)

(5)

(6 )

(7)

ADC-M

129

0

129

0

0

0

129

ADC-U

13

44

57

44

13

57

114

ADC—I

9

16

25

16

9

25

50

ADC-S

4

2

6

2

3

5

11

155

62

217

62

25

87

304

71.3%

20.4%'

8 .2 %

Totals

% of total
number of
recipients 50.9%.

20.4%

28.6%

Only those adults who receive a welfare grant for themselves are
included. Acceptable relatives who receive money for children in their care
and step-parent cases where only the children are supported are excluded.

78

2.

Age
The age distribution of the ADC population is of

considerable importance when considering alternative
measures for improving the well-being of recipients and
particularly for those measures with an employment focus.
The importance is of course most obvious in the case of
training programs or other investment oriented endeavors
— the younger the individual the longer one has to recoup
investment costs.

Also, age may often be a criteria in

the hiring practices of employers.
In this context, it can be seen from Table 12 that
the mean age of all adult recipients is 33.2 years, 75 per
TABLE 12.— Age Distribution of Allegan County Adult ADC
Recipients.

Group
Classification

Mean
Age

Standard
Deviation

Per Cent Distribution
by Age Group
25-40

41-55

55

30.0%

45.0%

17.9%

7.1%

25
All adultsa

33.20

All female
family heads

31.81

10.12

33.1%

46.9%

18.5%

1.5%

Females ADC-M
only

31.48

10.32

33.1%

46.9%

18.5%

1.5%

All male
family heads

33.06

12.34

34.3%

40.3%

17.9%

7.5%

Males ADC-U
only

29.47

8.35

40.3%

47.4%

12.3%

0 .0 %

Includes all second parents as well as all family
heads.
It is for this reason that mean age for all adults
is greater than for either of the other categories.

79
cent are less than age 41, and 30 per cent are less than
age 25.

Only 7.1 per cent are older than age 55.

The

distribution for all adults is slightly older than for any
other group, because it includes second parents as well as
family heads.
It is of some interest to note that the age distri­
bution for ADC-U fathers is significantly younger than that
of any other group.

A mean age of 29.5 compared to 33.1

and 31.8 for all male and female headed families, over 40
per cent being less than age 25.
The age distribution for ADC mothers for the entire
State of Michigan is essentially the same as for Allegan
County, 75.6 per cent vs. 75.0 per cent less than age 40.

20

Comparative data for ADC-U fathers are not available.
3.

Race
To the extent that race may be a consideration in

the hiring practices of employers, it is useful to know
the racial distribution of the ADC population.

Table 13

shows the distribution of the ADC caseload by race and
type of case.

Note that only 12.0 per cent of the total

caseload consists of racial minorities;

5.2 per cent are

Negro, 5.2 per cent are of Spanish origin, and 1.2 per cent
are American Indian.

This is substantially lower than for

the State of Michigan in total, 12 per cent as opposed
20
Table 16.

Profile of Michigan ADC Caseload, Appendix A,

80

TABLE 13.— Racial Distribution of the Allegan County ADC
Caseload Based on the Race of the Family Head.
Number of Cases by Race
Type of Case

American
Indian

Caucasion

Negro

Spanish
Origin

ADC-M

113

7

5

2

ADC-U

50

2

5

0

ADC-I

20

2

3

0

ADC-S

23

0

0

0

ADC-R

13

3

0

1

219

Totals

8 8 .0 %

14
5.6%

13
5.2%

1

3
.2 %

to 54.8 per cent:, but the distribution is quite comparable
to that for all rural areas in Michigan

21

A much smaller

proportion of

the ADC caseload is composed of racial

minorities in

rural areas than in the major metropolitan

areas of the state, reflecting the fact that there are few
minority people living in rural a r e a s .
Not surprisingly, minorities account for a higher
proportion of the total caselaod than they do of the total
population of

Allegan County. Only 2.6 per

cent of the

population of

Allegan are from the minority

r a c e s , whereas

they account for 12 per cent of the ADC caseload.

This

discrepancy is somewhat less than for the State of Michigan.
Considering the Negro situation only

2 1 Ibid.,

Appendix B, Table 2.

(comparative data are

81
not available for other minority r a c e s ) , the proportion
of blacks on ADC in Allegan County is 3.5 times greater
than the proportion of the total population they account
for, whereas the comparable figure for the state of Michigan
is 5.4.
With reference to the racial distribution in terms
of type of case, there is only one item of particular
interest.
10

Note that people of Spanish origin account for

per cent of the unemployed father cases; nearly one half

of all the Spanish cases are in this category.

One plausr

ible explanation is that many people of Spanish origin are
dropouts from the agricultural migrant stream and, although
they may have dropped out because they found a "permanent"
job, their relatively low skills and, perhaps, a language
barrier as well make them very susceptible to structural
unemployment.
4.

Education
The unfortunate plight of ADC recipients becomes

quite evident when their extremely low education levels
relative to the same
are considered.

age group in the general population

Despite a relatively young age distri­

bution, overy 70 per cent of all adult recipients have
less than 12 years formal education

(see Table 14).

contrast, slightly less than 50 per cent of the total

In

TABLE 14.— Years of Formal Education of Allegan County Adult ADC Recipients.

Group
Classification

Mean
Years
Education

Per Cent with Indicated Education Level
Standard
Deviation

All adults

Females
Males

<

8

8-11

12
(HS Diploma)

>

12

16.9%

56.0%

25.3%

1 .8%

10.11

2.03

8.0%

56.0%

33.3%

2.7%

8.48

2.76

25.0%

61.5%

11.5%

2 .0%

83
Allegan County population age 25 or over have less than
a high school education.

22

Of particular interest is the difference in
education levels between females and males.

Mean education

for females is 10.11 years as opposed to only 8.48 for
males.

Even more significant is the proportion with less

than eight years education, 8 . 0 per cent for females and
25.0 per cent for males.

To some extent, this difference

should be expected because of the relatively more severe
eligibility requirements for unemployed fathers.

Whereas

highly employable female family heads may remain on
assistance without working as long as they are classified
as being in the home full time and also can work any
number of hours as long as their income does not rise
above the break even point, unemployed fathers can remain
on assistance only as long as they cannot find a job and
if they work more than 1 0 0 hours in any one month period
they go off assistance entirely irrespective of their
income.

Nevertheless, the difference is significant and

quite important with reference to the differences expected
in the returns to employment programs directed at the two
groups.
Although the above difference is significant for
Allegan County, the relationship apparently doesn't hold
for the State of Michigan.
22

For all of Michigan, 74.6 per

U.S. Census of Population, 1970.

84

cent of ADC mothers have less than twelve years education
compared to only 64 per cent for Allegan.

Figures for

ADC-U fathers are not available, but it is doubtful that
ADC-U fathers are very much less educated in other Michigan
areas than they are in Allegan, such that the male-female
difference in Allegan is, unusual.

Whether the relatively

high education levels of Allegan ADC mothers is representa­
tive of rural areas in Michigan is an interesting question,
but unfortunately we can only speculate.
5.

Health
The health status of adult recipients is an

important variable both for understanding the reasons for
being on assistance and for evaluating their potential
for employment.

Table 15 gives a distribution of the

health status of adult recipients classified by family
status and sex.
For purposes herein, the most important health
factor is the number of adult recipients whose employment
opportunities are restricted for health reasons.

Note

that over 20 per cent of all adults are restricted in some
way.

23

Thus, if those older than age 55 are because of
23

The health status of adults was rated on a scale
of 0 to 6 on the basis of the degree of impact the author
thought the particular health problem would have on employ­
ability:
0 D excellent health; 1 = minor health problem,
but no effect on employability; 2 = health likely to increase
absenteeism; 3 =* health restricts employment opportunities;
4 ® severe restriction of employment opportunities; 5 ~
totally incapacitated, unemployable; and 6 = near constant
care required.

TABLE 15.— Health of Allegan County Adult ADC Recipients by Family Status and Sex.

r™-...„
Group
Classification

All adults
All family
heads
All second
parents

Female payees

Male payees

No
Minor Problem,
Health
No Effect on
Ptobl!!m Employability

Enough to

240
74.81

6

8

1.9%

2.5%

176
74.51

6

6

2.51

2.5%

64
75.3%

Restricted
Employment
Opportunities

30
9.3%

Restricted
ogggJSJ,,

22
6.9%

Totally
incapacitated,
Unemployable

14
4.4%

24

16

8

10.2%

6.8%

3.4%

Re^ ^ es
_
“ .
Co^ “ t

1

.2%
0
0

0

2

6

6

6

0

2.3%

7.1%

7.1%

7.1%

6

11
6.6%

1.8%

3

0
0

5
7.5%

.5
7.5%

0
0

11

131
79.0%

3.6%

4
2.4%

6 .6 %

44
65.7%

0
0

1
1.5%

7.9%

12

1

1 .2%

86
age removed from consideration for employment,

24

the

magnitude of the health problem is less than it might appear
to be.
A second factor that merits attention is that the
health of male recipients is significantly inferior to that
of the females.

Some 22.9 per cent of male recipients are

restricted compared to only 15.0 per cent for females.

This

difference is likely due to the more stringent eligibility
requirements for male recipients, but that matter aside it
is still a significant difference in that it indicates that,
ceteris p a r e b u s , male recipients as a group are relatively
less employable.
6

.

Family Size and the Availability
of Mothers for Employment
A very important factor in assessing the employment

potential of ADC recipients is the constraints imposed on
ADC mothers by home and family care responsibilities.

Under

the current rules, mothers with children less than age six
or

more than three children are classified as needed in

the home full time and are not required to work.

Thus, the

number and ages of the children of ADC families is of
critical importance.
Table 16 gives the number and age distribution of
children of ADC families by type of case.

24

Contrary to

Age 55 is purely arbitrary and is mentioned here
only for illustrative purposes.

TABLE 16.— Family Size and Children's Age Distribution by Type of Case, Allegan
County.

Number of
Children

Number of Families with Particular
Numbers of Children by Type of Case
ADC-M

ADC-U

ADC-I

ADC-S

Total

Per Cent of
FamiliesAllFamili

ADC-R

Total number
of children
1-2

73

31

9

17

15

145

58.0%

3-5

49

19

9

6

2

85

34.0%

7

6

7

0

0

20

8 .0 %

0

50

7

10

15

12

94

37.6%

1-2

72

42

11

7

4

136

54.4%

8

7

4

1

0

20

8 .0 %

More than 5
Number children
less than age 6

More than 2

88
popular belief, 58 per cent of all ADC families consist of
less than three dependent children.

Only 8.0 per cent

have more than five and nearly 40 per cent have no children
under age six.

Therefore, it would appear that there are

a substantial number of ADC mothers who are not severely
constrained by child and home care responsibilities.

The

Allegan County family size distribution is very similar
to that of the State of Michigan,

25

and according to a

national study the size distribution of ADC families is
very similar from region to region.

26

Although the family size and children's age
distribution does vary somewhat by type of case in several
instances, the only significant difference worthy of note
is the ADC-U situation.

Family size is not markedly

different, but in an extremely high 87.5 per cent of ADC-U
cases there are children less than age six.

Thus, there

may be little potential for employing the mothers in
unemployed father cases.
There are factors other than the total number of
children or the number less than age six that influence
the availability of ADC mothers for employment.

Further­

more, to assume a^ priori that large and/or young families

^ P r o f i l e of Michigan ADC Caseload, Appendix A,
Table 10.
^ Findings of the 1969 AFDC S t u d y , U.S. Department
of Health, Education, and Welfare, Social and Rehabilitation
Service, National Center for Social Statistics, December,
1970, Table 4.

89
severely limit the availability of mothers for employment
may be in error.

Very instructive in this regard is the

employment status of ADC mothers as classified by the
Department of Social Services

(DSS).

The DSS classified all ADC mothers as either
employed full-or part-time, actively seeking work, having
no marketable skills, incapacitated, or needed in the home
full-time.

A recipient may be classified in more than

one category, e.g., needed in the home and actively seeking
work.

The criteria used in classification is within broad

limits at the discretion of the case workers.

Mothers with

more than three children or any children under age six are
automatically classed as needed in the home.

Incapaci­

tation may mean anything from being mentally unprepared
to cope with family and job to a severe physical disability.
No marketable skills means essentially that in the opinion
of the case workers family responsibilities would permit
the individual to work but it is not likely that she could
find employment.

Those classified as having no marketable

skills, incapacitated, or needed in the home are not
required to seek employment but, of course, may do so if
they wish.
Table 17 shows the status of Allegan County ADC
mothers with respect to availability for employment as
classified by DSS and recorded on the respective case
records of the sample population.

The data must be

TABLE 17.— Status of Allegan County ADC Mothers with Respect to Availability for Employment.
Number of ADC Mothers
Family Status
of the Mother

Employed
Full Time

Employed
Part Time

Actively
Seeking
Work

Single parent,
no children
< age 6

9

4

13

6

13

5

1

Single parent,
children <
age 6

9

2

5

0

1

75

11

Two parent
family, no
children <
age 6

0

2

2

2

7

14

0

Two parent
family,
children <
age 6

2

2

2

2

4

74

4

20

10

23

10

25

168

16

8.9%

4.4%

74.7%

7.1%

Totals
Per cent of
all mothers

10.2%

No
Marketable
Skills

4.4%

Incapacitated

11.1%

Needed
in
Home

Classed as Needed
in Home, but
Working

aThe percentages total to more than 100% because a given mother may be classified in more
than one category.

91
interpreted very cautiously, because several mothers fall
into more than one category.

For example, it would be

incorrect to sum the per cent of those with no marketable
skills, who are incapacitated and who are needed in the
home and conclude that that portion is unavailable for
employment because of double counting.

But nevertheless,

some useful inferences can be drawn from the data shown.
One of the more interesting observations is that
23.5 per cent of the mothers are either employed full
part-time or actively seeking work.

Even more striking,

of those employed full- or part-time, 53.3 per cent meet
the requirements for being classified as being needed in
the home full-time.

In other words, 53.3 per cent of those

working have either children less than age six and/or more
than about three children.

In light of this, it seems

that one would be hard pressed to argue as others have
done in the past

27

that those ADC mothers classified as

needed in the home full time cannot be considered part of
the labor force.
7.

Place and Length of Residence
As shown by Table 18, 23.9 per cent of the female

headed families and 34.4 per cent of the male headed
27

The usual procedure is to assume that because
welfare women classified as needed in the home full time are
not required to work they are uninterested in doing so and,
thus, are not part of the labor force.
For a case in point,
see the Report of the Welfare Study Commission, Lansing,
Michigan, 1971.

92
TABLE 18.--Per Cent of Allegan County ADC Families Wh o Live
in the Country or Village Respectively.
Place of Residence 3
Case Group
Country

Village or City

Female headed families

23.9%

76.1%

Male headed families

34.4%

65.6%

All families

26.9%

73.1%

aData based on the assumption that rural route
addresses indicate country residence and are thus subject
to a significant degree of error.
families live in the country, i.e., outside village or city
limits.

This estimate is based on the assumption that rural

route addresses indicate country residence such that these
figures have very little meaning other than to indicate
that approximately 25 per cent of the adult recipients are
relatively isolated from employment opportunities and
available public services.
Another aspect of residency that is of some interest
is the length of time the recipients have resided in Allegan
County.

Contrary to what one might expect, given limited

income and education, they appear to be relatively mobile
as a group.

Nearly 40 per cent have lived in Allegan County

for less than five years, and 1 2 . 0 per cent have lived there
for less than one year.

In contrast, only 16.7 per cent

of all Allegan County residents at this time of the 1970
population Census had lived in a different county in 1965.

93
This indicates one or both of two things:

either as a

group the welfare prone population migrates significantly
more than the total population in search of better oppor­
tunities, or new residents of an area have a more difficult
time getting themselves established to the point where
they have a relatively stable earned income and do not need
public assistance.

From the limited information available,

it appears that both reasons are valid.

Over 3 per cent of

the sample transferred to a different Michigan county over
a span of about ninety days

(presumably their residence

changed, but not necessarily) , which indicates substantial
mobility.

On the other hand, in a large number of cases

the pattern appeared to be a major move, such as dropping
out of the agricultural migrant stream

(6.4 per cent of

the caseload were former agricultural m i g r a n t s ) , with no
further migration despite many months without employment.
8

.

Availability of Transportation
Table 19 indicates the proportion of various

categories of adult recipients who own, have periodic access
to, or neither own nor have access to an automobile.

Given

the complete absence of public transportation facilities
in rural areas, this factor is quite important.

Without

access to an automobile the individuals job search area
effectively includes only those opportunities within walking
distance.

94
TABLE 19.— Per Cent of Allegan County ADC Families Who Do
or Do Not Own or Have Access to an Automobile.
Automobile Access
Case Group
Own

Periodic Access

Neither Own
Nor Have Access

Female headed
families

59.3%

13.6%

27.2%

Male headed
families

83.3%

7.6%

9.1%

All families

6 6 .2 %

11.9%

21.9% -

In terms of transportation to work, the most rele­
vant figure is the proportion who own an automobile— more
than periodic access is needed.

Note that 59.3 per cent of

female headed families and 83.3 per cent of male headed
families own an automobile.

Both figures are quite low,

considering the importance of an automobile in rural areas,
but, the 59.3 per cent is incredibly so and has severe
implications for the employment potential of the group.
9.

Employment History
The employment history of ADC recipients is very

revealing.

It provides insight into both the reasons for

the "welfare problems" and the possibilities for solving
it.

In this context, the employment history of ADC

recipients is considered with reference to the quantity
and type of work experience, the period of time since last
job, and the reason for leaving last job.

95
With respect to type and quantity of work experience,
the recipients as a group appear to have better quality and
more work experience than one might expect.

As indicated

by Table 20, 80.7 per cent of the male recipients have had
some semi-skilled work experience and 16.9 per cent have
had skilled job experience.

28

This implies that an absence

of work experience should not be a severe barrier to finding
employment for the group.
some

It should be noted, however, that

(very few given the small number of ADC-I cases) of

those with higher skilled experience are individuals who
are on assistance because they are mentally or physically
incapacitated.
Of the female recipients, 32.0 per cent have had
no outside the home work experience;

52.2 per cent have had

semi-skilled experience, and 6.4 per cent have had skilled
job experience.

Allowing for the fact that 32 per cent

have never worked outside of the home, the type, in terms
of skill level, of experience is not decidedly different
from that of men.
28

If anything, of those women who have had

The distinction between the categories of e x ­
perience were arbitrarily made by the author on the basis
of the job description provided.
Unskilled are those jobs
where productivity is essentially unaffected by experience;
semi-skilled are those where training or experience is
likely to influence productivity but is not a prerequisite
for performing the job; skilled includes those jobs where
some training or experience is a prerequisite for job per­
formance.
The paraprofessional category may involve either
unskilled or semi-skilled experience, but is included
because experience as an aid to a professional may be quite
valuable irrespective of the skill level.
The farm manage­
ment category is self-explanatory.

TABLE 20.— Work Experience o£ Allegan County ADC Recipients by Sex.

Per Cent with Experience in a
Each Skill Category

Months of Work
Experience Reported

Months Since Last Job

Sex
Skilled Farm
Mgmt.

Unskilled

SemiSkilled

Paraprofessional

Males

38.61

80.7*

2.4*

16.9*

1.2*

0.0*

14.5*

Females

18.7%

52.2*

7.9*

6.4*

0.0*

32.0*

23.6*

None

1-6

24

0

1-6

7-24

24

22.9*

62.6*

15.6*

23.4*

35.1*

25.9*

23.6*

20.7*

27.4*

10.5*

28.2*

33.9*

7-24

Percentages do not total horizontally to 100 per cent# because an individual stay have reported experience in
more than one category.

97
experience it is of higher quality.

The significant work

experience factor in the case of women would appear to be
that a substantial portion have not worked outside the
home.
In terms of quantity of work experience, any
inferences from the data are hazardous.

Employment infor­

mation was requested for the recipients last three j o b s ,
but in many instances less information was provided.

Also,

if the recipient had worked at the same job for several
years a large quantity of experience would be recorded,
whereas if he had changed jobs frequently there would be
less total experience indicated because those jobs reported
on would span a shorter period of time.

This should be

kept in mind when examining the data reported in Table 20.
A surprisingly large number of male recipients
reported a total of more than twenty-four months work
experience

(62.1 per cent).

In light of the fact that data

was gathered only for the last three jobs and often not
that far back, this is most significant.

It indicates

not only that male recipients have substantial amount of
w o r k experience but also that they tend to have relatively
stable work histories, i.e., they do not move from job to
job too frequently.

We shall return to this issue later

when considering the reasons given for leaving their last
job.

98
Women report significantly less work experience,
but no more less than should be expected given child rear­
ing and other home responsibilities.
Perhaps, the most interesting and useful aspect of
the employment history data is the reasons recipients gave
for leaving their last job.

Table 21 displays this infor­

mation for different groups of recipients.
at the data,

Looking closely

it is apparent that to a large extent welfare

recipients left their last job for reasons they could not
control.

More than half

(56.1 per cent) of the males and

25.9 per cent of the females left their last job either
because they were laid off or because of illness or injury.
Adding the reasons of pregnancy and family needs to the
figure for women brings it to 50.3 per cent.

If the pro­

portions still employed are added to those figures, a full
71.9 per cent of the males and 79.0 per cent of the women
are either employed or left their last job for reasons over
which they had very limited control.

Only 17.6 per cent

of the men and 9.3 per cent of the women quit or were fired
from their last job.
The reasons for leaving their last job were provided
by the recipients and, thus, are subject to error in the
direction of what they think the case worker would like
to hear, but there is no evidence that this factor is too
significant.

In total, the employment history of Allegan

County ADC recipients indicates that they are neither

TABLE 21.— Per Cent o£ Various Groups of Allegan County ADC Recipients Hho Left Their Last Job for Particular
Reasons.

Group
Classification

—
stm

Employed

1■■

Laid

Off

■■

Reasons for Leaving Last Job
-■—

Illness

Lack of

Training

Fired

ln°Jry

Transport

g

school

—

'

- ■

—

Family

Keeda

(Husband)

All adults

22.9%

22.8%

4.4%

17.1%

3.9%

6.8%

1.5%

9.3%

7.3%

1.5%

Females

28.7%

14.81

2.8%

11.1%

3.7%

9.6%

0.0%

14.8%

5.6%

2.8%

Males

15.8%

33.3%

5.3%

22.8%

5.3%

0.0%

5.3%

0.0%

12.3%

0.0%

Married

2.9%
VO

5.6%
0.0%

®

100
seriously lacking in experience nor characterized by
extremely poor work records or attitudes.

At the very

least, it can be said that a substantial number of re­
cipients have a relatively satisfactory work history.
Given the surprisingly good employment histories
of Allegan County ADC recipients, it would be particularly
interesting to compare them to urban area recipients or
at least to the State of Michigan in total.

Unfortunately,

information on the employment history of recipients in
other areas is rather sketchy, and it is possible to make
only indirect comparison.
According to the 1968 Michigan survey, the usual
occupational classes of ADC fathers were 49.7 per cent
unskilled laborers and 27.8 per cent operatives and kindred
29
semi-skilled and skilled workers.
The usual occupational
classes of ADC mothers were 35.6 per cent service workers
except private household, 21.9 per cent unskilled laborers,
17.4 per cent clerical and sales, and 15.5 per cent private
household service workers.

Assuming no major differences

in the classification systems used, from a comparison of
this information with the data on types of job experience
displayed in Table 20, it might be inferred that Allegan
County ADC recipients tend to be somewhat better qualified,
in terms of experience, for higher skilled jobs than is
the Michigan caseload in general, which is predominantly
29

Profile of Michigan ADC Caseload, Appendix B,
Tables 54 and 57.

101
urban.

Whereas the usual occupation for 49.7 per cent of

ADC fathers in Michigan is unskilled labor, only 38.6 per
cent of Allegan ADC fathers indicated that they had any
experience as an unskilled laborer.

For some proportion

of that 38.6 per cent, however, their usual occupation
would be something other than unskilled laborer.

Similarly,

the usual occupation for 37.4 per cent Michigan ADC women
was either unskilled laborer or private household worker,
whereas only 18.7 per cent of the Allegan ADC women indi­
cated unskilled work experience.
10.

Earned Income
The level and distribution of earned income among

welfare recipients is of considerable importance, because
it is on the possibilities for increasing earned income
that this study is focused.

At this point, the question

is how much those who work earn and who
has what earnings.

(type of case)

Later the relationship of the other

client characteristics to earned income are examined.
Table 22 gives a frequency distribution of earnings
by fcyP© of case.

It is evident from the table that the

proportion of the caseload with any earned income is small
and that those who do work earn very little.

In 80 per

cent of all cases there is zero earned income and of those
who do work over 70 per cent earn $300 or less per month.
Average monthly earned income, excluding those with zero,
is $222.85.

102
TABLE 22.— Distribution of Earned Income Levels by Type of
Case, Allegan County.
Number of Cases
Earned Income
ADC-M

ADC-U

ADC-I

ADC-S

Percentage
Distribution

102

43

22

20

80.0%

1-50

1

0

0

1

.9%

51 - 100

3

2

1

0

2.5%

- 200

5

4

1

0

4.3%

201 - 300

7

7

1

1

6

301 - 400

8

1

0

0

3.8%

400

3

0

0

1

1.7%

Total cases

129

57

25

23

Per cent with 0
earned income

20.9%

0

101

24.6%

1 2 .0 %

.8 %

13.0%

In addition to the earnings distribution for the
total caseload, it is useful to note the distribution by
type of case, because type of case, in fact, represents
a cluster of circumstances.

It can be observed, for

example, that a slightly larger proportion of ADC-U cases
reported earned income greater than zero than any other
category, but that monthly earnings were lower.

The level

of earnings is indicative of the effect of the rule which
states that ADC-U fathers who work more than 100 hours in
any thirty-day period are no longer eligible for assistance
irrespective of their income.

Thus, for those with low

earning capacity, part-time employment is encouraged.

The

103
relatively high proportion reporting some earnings, perhaps,
reflects the existence of two potential wage earners in
each ADC-U family.
These factors, in addition to the relationship of
earned income to numerous other client characteristics
are considered in depth in Chapter V.
11.

Time on Assistance
On par with earned income in terms of importance

is the matter of length of time on assistance.

To a

substantial extent, differences in length of time on
assistance are related to earned income potential, i.e.,
one would expect those recipients with the highest earning
potential to remain on assistance the shortest length of
time.

A t least, this would be the case for some range near

the margin of self-support.

Also, inferences can be drawn

from time on assistance data regarding general aspects of
the welfare problem.
Table 23 gives a distribution of time since most
recent opening of the case by type of case and whether or
not the case had been open before.

The most striking

aspect of the distribution is the apparent fluidity of the
caseload, as reflected both by the number of cases that
have been open for less than one year

(43.1 per cent) and

by the number of cases which had been open for a time
previously;

34.3 per cent of all cases, 28.1 per cent of

ADC-M cases, and 36.8 per cent of ADC-U cases had been open

104
TABLE 23.— Length of Time on Assistance by Type of Case,
Allegan County.

Type of
Case

ADC-M
ADC-U
ADC— I
ADC-S
ADC-R
Totals
Per cent
of all
cases

Was or
Was Not
on ADC
Before

Number of Cases by Months Since
Most Recent Opening of the Case
1-4

5-12

Yes
No

7
8

9
28

Yes
No

6

6

4

Yes
No

2
0

Yes
No

3

4

2

1

2

5

Yes
No

0
0

1

0

3

4

31

76

61

36

12.5%

13-24

25-48

Total
Cases

48

7

8

5

21

13

22

3

16

5
13

1
2

36

2

1

13

3

2
1

6

5

3

12

2
2

2
0

10

1

0

2

3

3

13

44

248

30.6%

24.6%

1

14.5%

36
92
21

13

19.8%

foe some time previous to the most recent opening.

With

sufficient other income being the most common reason for
being temporarily off welfare, the fluidity of the caseload
indicates the large extent to which welfare functions as
emergency relief from the irregularities of the labor
market.

The Department of Social Services is apparently

not a haven for free loaders but a source of relief for
the poor who are the most susceptible and the least capable
of coping with labor market gyrations.

105
The other aspect of the distribution which ought
to be discussed at this stage is the differences between
Allegan County and other welfare jurisdictions.

Comparisons

with the 1968 Michigan study indicate that the Allegan
distribution is no different than that which characterizes
other rural Michigan counties, but that the caseload is
decidedly more fluid in rural areas than in metropolitan
areas.

According to the 1968 study, the larger the urban

area the more likely recipients are to remain on assistance
longer.

30

Only 23.6 per cent of Detroit cases had been

open for less than one year, whereas 46.6 per cent rural
nonfarm had been open less than one year.
43.1 per cent for Allegan County.

This compares to

There does not appear

to be significant difference, however, in the proportion of
repeat cases.
The many factors which influence time on assistance
are analyzed in depth, along with earned income differences,
in the next chapter.

From explanations for differences in

length of time on assistance inferences are drawn regarding
the determinants of earned income potential.
E.

Combinations of Characteristics
The foregoing discussion of client characteristics

treats each factor individually and ignores the all impor­
tant aspect of what combinations of factors exist.

^®Ibid., Appendix B, Table 1.

This

106
matter is left until after the relative significance of
each factor has been determined

(Chapter V) and is then

treated in depth in the context of policy alternatives.
It is nevertheless useful at this point to identify the
caseload in terms of a matrix of combinations for later
reference and as a means of summary description.
Table 24 describes all adult ADC recipients in
terms of combinations of seven characteristics:
age; health; sex

education;

(male, female, and female with young

children); months of work experience; type of work experi­
ence; and automobile ownership.

It is evident from the

matrix that to a large extent the welfare population is
less than age 30, has 8-11 years education, is healthy,
and has some work experience.

The young tend to be better

educated, are less likely to own an automobile, have better
health, and less work experience.

Males have more work

experience, but tend to be younger and have less education
than females and so forth.
Above all else, the extreme diversity of the
caseload is evident.

Which of these differences are

significant in terms of employability and, accordingly,
what policy action would be appropriate remains to be
seen.

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CHAPTER V
ANALYSIS OF FACTORS INFLUENCING
EARNED INCOME POTENTIAL

The foregoing chapters describe the Allegan County
labor market and the composition of the ADC caseload in
some detail.

At this point, much is known about the char­

acteristics of the people on ADC and about the labor market
they operate within, but very little about earned income
potential per se.

This chapter focuses on this aspect and

consists of two main parts.

First, multiple regression

models are developed and used to test a series of hypotheses
in an attempt to determine which client characteristics are
significant determinants of earned income potential and,
secondly, the earned income opportunities available to
welfare recipients are examined at some length, assuming
no employment constraints other than job entry requirements.
A.

Significance of Client Characteristics
as Determinants of Earned
Income Potential.
The model developed in Chapter II posited a r e ­

lationship between a series of variables and the earned
income options open to welfare recipients.

10 8

The attainable

109
combinations of earned and welfare income were identified
as a function of available welfare income, (Yw) potential
wage

(W) and the probability of finding employment at the

potential wage

(Pe) , where Yw is a function of eligibility

requirements and the welfare tax rate; W is a function of
those factors which influence what one is capable of earn­
ing, i.e., education, work experience, age, and health;
and Pe is a function of those factors which influence the
probability of finding a job at what he is capable of
earning, i.e., available job vacancies and knowledge of
them, place of residence, and availability of transpor­
tation.
To the extent that some of the variables indicated
do have an influence on the options open to welfare recipi­
ents

(earned income potential), it should be reflected both

in differences in earned income among welfare recipients
and in the length of time clients remain on assistance.

In

other words, if it is possible and advantageous for welfare
recipients to choose more work and less welfare they will
do so.

Thus, one can test for significance in explaining

differences in earned income and length of time on assist­
ance as a means of determining which variables are important
determinants of the earned income options.
To test the significance of various client charac­
teristics as determinants of earned income potential, three
regression equations are estimated.

The first explains

110
differences in length of time on assistance; the second
differences in earned income among those recipients who are
employed; and the third is an attempt to explain why some
recipients are employed and others are unemployed.

It is

believed that by examining the significance of client
characteristics, e.g., age, education, work experience,
etc. in these three contexts it will be possible to get a
good idea of what difference it would make in the quantity
of employment chosen by ADC recipients if the variables
were modified..

Accordingly, it will help determine what

policies for increasing earned income would be most appro­
priate and also toward which recipients those programs
should be directed.
Because concern herein is with the relevance of
the individual client characteristics

(dependent variables)

as determinants of employment potential and not with e x ­
plaining differences in length of time on assistance or in
earned income per se, all the regression results will be
presented first and then each of the variables believed to
be important determinants will be discussed in turn.
1.

Regression Model Formulation
and Estimation

(a) Length of Time on Assistance
The equation for length of time on assistance is
of the general form:

111

lnTi

Bq + B 1 Pi + B 2 lnLi + B ^

+ B 4 lnAi + BglnCt^ +

BgCy^ + B^lnHc^ + BglnHa^ + Bg lnEi + B 1 QlnWi +
BllTri + °i
where:

T. = Number of months since most recent opening
1
of case i
= 1 if client resides in country, 0 otherwise
= Length of residence in Allegan County
1

if less than 1 year

2 if at least 1 but less

than 3 years

3 if at least 3 but less

than 5 years

4 if 5 years or more
= 1 if family head is female, 0 otherwise
A^ = Age of family head in years
Ct^ = Total number of dependent children
Cy^ = Number of children less than age 6
Hc^ =

Health of children coded 1 to 4

Ha^ =

Health of family head coded 1 to 7

= Years education of family head
= Months work experience of family head
Tr. » 1 if own a car, 0 otherwise
r
- an error term

112
It is assumed:
distrubance that is

that

the error term

is a random

normally distributed with zero mean

and constant variance; the independent variables are un­
correlated with CL ; and no exact linear relationship exists
between any of the explanatory variables.

Under these

assumptions, ordinary least squares calculation of the
regression coefficients will yield best linear estimates
which can be tested for significance using test statistics
developed on the basis of a normal probability distribution.
The estimated equation, utilizing 168 observations,
is:
InT

*

- 0.342 (0.661)

0.203P
+ 0.4441nL
- 0.097S
(0.073)
(0.160) (0.076)

l.OOlnA
(0.381)

0.2721nCt
(0.122)

+

0.3921nHa
(0.123)
R2

=

+

-

0.0131nE (0.208)

0.171Cy (0.088)
0.1201nW
(0.065)

0.2331nHc
(0.253)
-

0.107T
(0.070)

+
;

.3840

The coefficients for place of residence
of residence

+

(L), age

(P), length

(A), and health of family head

(Ha)

are all significantly different from zero at less than the
1 per cent level.Total number of children
of children less than age six
the 5 per cent level.
of an automobile

(Ct) and number

(Cy) are both significant at

Work experience

(W) and ownership

(T) are significant at 6 and 12 per cent

respectively, Both the health of the children
education of the family head

(He) and

(E) are very insignificant.

113
The signs of coefficients/ with one exception, are
what you would exp e c t , a priori.

The one exception is the

negative sign for place of residence indicating that people
who live in the country as opposed to within the boundaries
of a municipality remain on assistance a shorter period
of time.

Given their reduced proximity to employment

opportunities and various social services, one would expect
the contrary.
The R

2

of .3840 is relatively low, but with cross-

sectional data this is not unexpected.

Furthermore, the

significance levels of the particular variables are of
more importance for this study than is predicting the
length of time a given type of client might remain on
assistance such that the proporition of the total variance
explained is not of too much concern.

Using the same

variables in simple linear form, an equation with a
2
slightly higher R was fitted, but for the most part, the
standard errors were larger and, thus, it was rejected in
favor of the above equation.
(b) Level of Earned Income
The equation for level of earned income is of the
general form:
lnl.

1

=

B

O

+ B.P. + B 0 lnL. + B _ S . + B.lnA. + B,-lnCt. +
11

2

1

J 1

4

1

3

1

B 6 Cyi + B 7 lnHci + B glnHa^ + B 9 lnE± + B 1 Q lnWi +

114
where

equals the amount of earned income for case i and

all other symbols are the same as for the previous equation.
The

same assumptions areassumed to hold.
Initial attempts

to explain differences in

earned

income levels when all observations, including those with
zero earned income were used, proved futile.

When those

observations of zero were dropped from the observation
set, a relatively good fit was achieved.

Therefore, the

estimated equation includes only those cases where there
was some earned income, a total of forty-three observations
The estimated equation i s :
lnl

=

4.853
0.103P
(1.48)
(0.193)
2.0471nA
(0.825)

+

0.4311nHa
(0.260)

+

+

0.4961nL
- 0.127S
(0.334) (0.151)

0.3951nCt (0.205)
0.2171nE
(0.528)

+

-

0.133Cy
(0.171)

+

0.5451nHc
(0.562)

0.2771nW
(0.129)

-

0.258T
(0.192)

;

R 2 = .4443
Relative to the previous equation standard errors
are quite low and, correspondingly, more of the variables
are significantly different from zero at acceptable levels.
Age and work experience are significant at the 5 per cent
level.

Total number of children and health of family head

are significant at the 10 per cent level.

Length of resi­

dence and auto ownership are significant variables at 14.8
and 18.8 per cent respectively.

All the others are not

significant at any reasonable level.

115
Three o£ the signs of the coefficients are differ­
ent from what one might expect.

One would expect that the

larger the number of children and the poorer their health
the lower the earned income of the parent or p a r e n t s ,
because in both instances there would be reason for ADC
mothers to work less, but the opposite relationship exists.
The other unexpected relationship is the negative sign for
auto ownership.

Possible explanation for these relation­

ships will be offered when we consider the results of all
three equations for each of the important variables.
(c) Probability of Being Employed
In addition to differences in earned income among
those recipients who are working, there is the matter of
what factors explain who is employed and who is not.

In

an attempt to shed some light on this issue, an equation
of the following general form was estimated:
/*

P1 ” Bo + Vi + Vi + V i + Vi + V i + V°i +
v ai + Vi + Vi + Bi0Ti + ui
where the dependent variable

(P^) is dichotomous taking

the value of 1 if the family head is employed, 0 otherwise,
and

= 1 if the mother is classified as needed in the

home full-time, 0 otherwise.

All other symbols are the

same as for the previous equations.

The model can be

regarded as a linear probability model, although there

116

are no restrictions on the stimates such that they may be
outside the 0 - 1

range of a true probability.

Ordinary least squares estimation, utilizing 168
observations, yields:
P

=

0.162 + 0.031P
(0.289)
(0.081)
0.237N
(0.078)

-

0.001W
(0.001)

+

0.075Hc
(0.072)
0.097T
(0.075)

-

0.021L +
(0.032)
-

;

0.044S
(0.080)

0.039Ha
(0.025)

+

+

0.018E
(0.015)

0.005A
(0.004)

-

+

R 2 « .1555

For equations in which the dependent variable is
dichotomous, there exists heteroskedacity and, although
the estimates of the coefficients are still consistent,
estimates of the standard errors are biased in an unknown
direction and, thus, tests of hypotheses may be incorrect.

31

The problem of heteroskedacity could be partially corrected
by weighing those observations with smaller vacancies more
heavily, but this is a difficult and expensive procedure
and would not likely add much of significance to the
results.

First of all,

minor bias in the size of the

standard errors will not materially affect the conclusions
to be drawn and, secondly, in using a GLS weighted r e ­
gression procedure, it is necessary to drop from the sample
those OLS estimates of

which were less than or equal to

zero or equal to or greater to one and it is possible that
31

Jan Kmenta, Elements of Econometrics, (New York:
The Macmillan Company, 1971), pp. 425-28.

117
the loss In efficiency due to this factor would be greater
than the gain due to the removal of the effects of hetero32
skedacity.
Therefore, an acceptable approach would seem
to be a conventional interpretation of the OLS estimates
keeping in mind that the size of the standard errors and
thus the significance levels of the variables may be biased
in either direction.
Whether the mother is classified as needed in the
home full-time is significant at the 3 per cent level.
Using conventional

(1, 5, or 10 per cent) significance

limits, none of the other variables is significant.

How­

ever, if one accepts 25 per cent or less as significant,
three other variables meet the criteria.

Health of the

family head, education, and automobile ownership are
significant at 12.0, 23.1, and 19.8 per cent respectively.
The signs of the coefficients are as expected,
a priori.
2.

Interpretation of the
Regression Results
Given the estimated regressions, it is now possible

to consider the overall relationship of each of the impor­
tant dependent variables

(client characteristics) to the

employment potential of welfare recipients.

Each variable

is discussed in turn.
32

York:

Arthur S. Goldberger, Econometric Theory (New
John Wiley and Sons, Inc., 1964), pp. 248-51.

118
(a) Place of Residence
Earlier it was hypothesized that recipients who
live in the country are less likely to be employed and
remain on assistance longer than those who reside in the
village or city.

The results of the foregoing analysis

indicate that place of residence is significant as a de­
terminant of length of time of assistance at the 1 per cent
level, but is not significant at any acceptable level in
A

the other two cases.

More importantly, the value of

in

the case of time on assistance is - 0.203 indicating that
the mean difference between people who live in the country
and those who live in the village is approximately a minus
fifteen months, country residents being on assistance for
less time.

Thus, the hypotheses the country residents

remain on assistance longer must be rejected.
Although the place of residence is not a significant
variable in the other two cases, it is of some relevance to
note the sign of the coefficient.

In both cases, it is

negative indicating that country residents earn less when
employed and are less likely to be employed.

The latter

is consistent with our initial hypothesis, but contrasts
with the results for time on assistance.

One would expect

that those who earn less and are less likely to be employed
would remain on assistance longer.

It cannot be said with

any degree of certainty that this contrast exists, but if
it does, there is a plausible explanation.

The data were

119
collected during the late winter and early spring and
represent the state of affairs at that point in time.

Thus,

to the extent that country residents are seasonal workers,
e.g., agriculture or agribusiness, as a group they would
have been on assistance a short time and nevertheless be
largely unemployed relative to their village counterparts
as of the time the data were collected.
(b) Transportation
In Chapter II, it was hypothesized that recipients
who do not own an automobile remain on assistance longer
are are less likely to be employed than those who do.
According to the regression results, those recipients who
do not own an automobile do remain on assistance an average
of about five months longer and are less likely to be e m ­
ployed.

The coefficient for auto ownership

(B^)

is

negative

(indicating less time on assistance for those who

own an auto) and significantly different from zero at a
12.6

per cent level of significance in the case of time.

It is positive

(meaning those who own an auto are more

likely to be employed) and significantly different from
zero at a 19.8 per cent level of significance in the case
of the probability of being employed.

Therefore, the null

hypothesis that auto ownership has no effect can be rejected
in both cases.

But, of course, this contention is subject

to a relatively high probability of error given the poor
significance levels.

120
The magnitude of the effect, moreover, is quite
small.

The indicated mean effect of auto ownership is only

about five months less time on assistance and a 9.7 per
cent greater probability of being employed.
Although nothing was hypothesized about the effect
of auto ownership on the level of earnings of those employed,
it is quite interesting to note that according to our re­
gression estimates for earned income employed recipients
who own autos earn about $38/month less on the average.

To

the extent that a relationship exists, one would expect
those who own autos to earn more because they are able to
search greater distances for employment.

One plausible

explanation is the degree of colinearity that exists between
auto ownership and type of case.

In the description of the

caseload, it was observed that a much larger proportion of
unemployed father cases have automobiles than do single
parent female headed families.

And the simple correlation

coefficient between auto ownership and the difference b e ­
tween the two types of cases is .2
of colinearity.

indicating some degree

Thus, the indicated lower earnings for

auto owners could be explained by the fact that ADC-U
fathers are subject to a 1 0 0 hour/month work limit or else
must leave the welfare roles, which provides an incentive
to work only part-time and part-time employment would ex­
plain the lower earnings.
In sum, it can be concluded that recipients who
own autos remain on assistance less time and are more likely

121
to be employed at least part-time.

This supports the

original contention that auto ownership contributes s i g ­
nificantly to employment potential.
(c) Education
The hypothesis is that the earned income of recipi­
ents is not a significant function of years of education
and, accordingly, that education is not a significant
determinant of length of time on assistance.

The results

of the regression analysis support this contention.

Edu­

cation is not at all significant as an explanatory variable
either in explaining differences in earned income or in
explaining differences in length of time on assistance.
The signs of the coefficients, however, indicate that to
the extent there is any effect recipients with more e d u ­
cation earn more and remain on assistance less time.
It is not surprising that within the welfare
population the level of education is unimportant.

For

nearly all of the jobs at which recipients work, formal
education would not be important to productivity.

This

is born out by both the occupational pattern of recipients
and by the emphasis employers placed on education as an
entry requirement for the jobs in question.
In addition to the effect of education on the
earnings of those employed, it is of some interest to
consider whether education contributes to the probability
of having a job.

Although the coefficient for education

122
in the case of the probability of being employed is
significantly different from zero only at the 23.1 per
cent level, it is nevertheless more significant in this
case than either of the other two.

This indicates that

education is somewhat useful for finding a job and, at
least, is more useful in that regard than in performing
the job once one has it.

That education may facilitate

job search is not to be unexpected.

Within the range of

education levels we are talking about, the simple process
of filling out applications can be a barrier where only
basic literacy or less is the case, but would not be a
barrier for someone with some high school.
(d) Work Experience
In this case, the a priori hypothesis is that
months of work experience is not a significant variable
in explaining differences in earned income among employed
welfare recipients.

If this hypothesis holds, then there

is no reason to expect any relationship between work ex­
perience and length of time on assistance or the prob­
ability of being employed either.

From the results of the

analysis, this hypothesis can be rejected with a high degree
of certainty.
The coefficient for work experience

(B ^g) is sig­

nificantly different from zero at the 6 . 6 per cent level
in the case of time and at the 4 .0 per cent level in the

123
case of earned income.

It is not significantly different

from zero in the case of employment probability.
The value of the regression coefficients indicate
that the more work experience a recipient has the shorter
the time on assistance and the higher the income of those
working, although the effect is not particularly substantial
in either case.

Depending on the point one is at on the

curvilinear function, the effect of one month's additional
job experience is approximately 40C/month additional income
and .2 months less time on assistance.
It can be quite safely concluded from this analysis
that work experience is an important factor delineating
the earned income possibilities open to welfare recipients.
The initial contention that work experience would not be
significant, because for most of the jobs available to
welfare clients experience would not be important to pro­
ductivity, is apparently false.

Either work experience

does in fact contribute to productivity and/or employers
use experience as an indicator of productivity where it
is difficult to measure.

Probably both explanations are

to some extent true.
(e) Age
It was hypothesized in Chapter II that earned
income differences were not significantly related to age
because, as in the case work experience, there seemed no
a priori reason to believe that age was related to

124
productivity for the types of jobs in question.

The

regression results permit one to clearly reject this
hypothesis.

The coefficient for age

(B^) in the earned

income equation is significantly different from zero at
the 2 per cent level.
More surprising than the significance level is
that the coefficient has a negative sign meaning that
older recipients earn less.

This author can come up with

no good logical or statistical reason for this relationship
to exist other than the possibility of age discrimination
33
in h i r i n g .
None of the variables for which age might
act as a proxy, e.g., health and work experience, have
been excluded and there is no significant degree of multi­
colinearity.

It would seem most likely that the relation­

ship was incorrectly specified, but a simple linear and
parabolic functional form were tried and provided no
indication that there is not a negative relationship
between earned income and age.
The relationship of age to length of time on
assistance and to the probability of being employed does
not negate the observed negative relationship of age to
earned income.

In the time equation, the age variable is

significantly different from zero at the 1 per cent level.
33

Although no direct evidence of age discrimination
was observed, it is apparently not uncommon in the indus­
trial sector.
See Daniel E. Diamond, Industry Hiring
Requirements and the Employment of Disadvantaged G r o u p s ,
(New York University, School of Commerce, 1970), p. 350.

L

I-

125
The coefficient is positive and relatively large indicating
that older people have been on assistance substantially
longer.

This is to be expected, because older recipients

have had the opportunity to be on assistance longer, but
it is also consistent with the evidence of lower earned
incomes for older recipients.

The age coefficient in the

probability equation is statistically insignificant, but
the sign of the coefficient does indicate that a higher
proportion of older recipients are employed.
In summary, it is evident that age is a significant
determinant of employment potential and that in general the
older the recipient the lower the potential.

This does not

mean, however, that the thirty-five-year-old recipient has
a lower earning potential than the twenty-year-old, but
what can be said with some certainty is that the recipient
less than age twenty-five has a higher earning potential
per unit time than the individual over age fifty, ceteris
p a ribus.
(f) Health
There is no question but that health is an important
determinant of employment potential.
how important.

The only question is

The variable for state of health

( ^ 4 ) is

significantly different from zero at the 10 per cent level
in the case of earned income and at the .2 per cent level
for time on assistance.

In both cases, the sign of the

coefficient is as expected and its value is relatively

126
large.

The approximate mean effect of one unit poorer

health is six months more time on assistance and $ 1 2 . 0 0
less income per month.
Further reinforcing the importance of health is the
fact that a significantly smaller proportion of recipients
with poor health are employed.

is significantly differ­

ent from zero at the 1 2 per cent level in explaining the
probability of being employed.
Of all the client characteristics to consider when
assessing employment potential, it appears that health is
most important.
(g) Number, Age, and Health of
Dependent Children
It was hypothesized in Chapter II that women with
larger numbers of children and/or with children less
than age six are less likely to be employed and remain
on assistance longer than women with fewer and/or older
children.

The results of testing this hypothesis are

conflicting.
The variable for total number of children

(Bg) is

significantly different from zero at 2 . 8 per cent for time
on assistance and at 6.4 per cent for level of earned
income.

This is not surprising, but the signs of the co­

efficients are a different matter.

The sign is positive

for time on assistance indicating that families with more
children are on assistance longer, which is as hypothesized.

127
But the sign for earned income is also positive indicating
that families with more children have more earned income.
This is contrary to what would be expected if mothers w i t h
large numbers of children are, in fact, needed in the home
full-time, but is consistent with the earlier observation
that a substantial number of women classified as needed in
the home full-time work outside the home.
For the effect of children less than age six
(variable B ^ )
B^

the results are also not totally as expected.

is significantly different from zero at the 5.2 per cent

level in the case of time, but the sign is negative indi­
cating that families with children less than age six are
on assistance less time.

Although one would expect less

employment effort from mothers with children under age
six and, thus, more time on assistance, this effect is
apparently counterbalanced by the fact that many of the
cases with children under age six have only been eligible
for assistance for a short time.
The effect of B ^

on earned income is not signifi­

cantly different from zero.

Perhaps recipients with

children under six do not work significantly less than
recipients without any children under six (remember that
differences in earned income exist both because of differ­
ences in earning capacity and because of amount worked ) ,
but there is insufficient evidence to say that this is
the case.

128
In the equation for estimating the probability of
being employed, a variable for whether the mother was
classified as needed in the home full-time

(B^)

was used

instead of variables for age and number of children.

B^ 2

was highly significant, being significantly different from
zero at the .3 per cent level, and has a negative sign.
Clearly, mothers not classified or needed in the home
full-time are much more likely to be employed.
The variable for health of the children

(B^3 ) was

not significantly different from 2 ero in either of the
three equations.

To the extent that the signs of the

coefficients are nevertheless relevant, they indicate
that cases where the children are in poor health are on
assistance longer, have more earned income if the adult
recipient(s) are employed, but employment is less likely.
The overall effect of children on the employment
potential of adult recipients is apparently negative, but
less substantially than is often believed.

The evidence

is that mothers of young children, for the most part,
prefer not to work, but a significant number of those with
large families, which may or may not include children under
six, do choose to work, and when they do, those with the
largest families earn the most.

It could be inferred,

therefore, that when earned income is most needed, because
of large families, those mothers most capable of earning
choose to work.

This is quite consistent with what was

129
posited in Chapter II regarding the preference relationship
between home responsibilities and earned in c o m e , i.e., those
with substantial home responsibilities will choose to work
only if their earnings are greater than the opportunity
cost of home production.
(h) Race
Although a race variable was not included in the
reported regression equations, it was included in earlier
runs and found to be very insignificant.

On this basis,

however, it cannot be concluded that race is an unimportant
variable.

When the original thirty minority cases in the

sample are reduced by the number for which complete data
were unavailable, too few remain to draw any reasonable
inferences.
B.

Employment Opportunities
The earned income possibilities for welfare recipi-

ents depend as much on available earning opportunities as
on the earning capability factors and employment constraints
discussed in the preceding section.

If there are no job

vacancies available that welfare recipients are capable of
performing, their earned income opportunities are obviously
zero.

Similarly, if a job exists in the county, but is

relatively distant from the residence of the recipient, it
is effectively not an earning opportunity.

Accordingly,

this section is an analysis of, first, the number of jobs

130
which are available that welfare recipients are qualified
to fill and, secondly, the location of jobs relative to
the location of ADC recipients.

In addition, the potential

for self-support is considered, given prevailing entry
wages.
1.

Number of Job Vacancies That
Clients Are Capable of
Pilling
It was hypothesized in Chapter II that there is a

relatively large number of jobs available for which welfare
recipients possess the necessary entry skills.
involves two issues:

This really

how many job vacancies exist; and to

what extent are there jobs for which welfare recipients
possess the necessary entry skills.
The number and type of existing job vacancies were
discussed in Chapter III.

As reported therein, fewer jobs

exist than was expected, but when the deficiencies of the
survey procedure and other factors are considered, the total
number is nevertheless significant.

The number of vacancies

is clearly small relative to need but is significant in
that there are enough vacancies to merit asking how many
of the welfare recipients possess the necessary skills to
perform the jobs in question.
Answering this question in anything akin to a
complete manner is impossible.

There are so many variables

and so much uncertainty that there exists no precise answer.
Nevertheless, some insight can be gained by matching basic

131
specifications, i.e., cluster the vacancies by basic entry
requirements and then examine how many recipients possess
those requirements.
The best that can be done with the available data
is to classify the job vacancies according to requirements
for basic education, training and/or experience, and sex;
then estimate the number of recipients classified by age
and health who are not employed full-time and meet those
requirements, further classified by age and health.

This

is feasible as long as one is prepared to be subjective
with respect to the sex criteria, because there is no data
on job requirements by sex.

Also, lack of data on the

training and job specific experience possessed by recipients
requires that the work experience factor be treated as work
experience in general.

This means, of course, that not all

of the recipients shown to meet the experience requirement
in fact do so.

Although this particular problem does

severely limit what can be said about the number of r e ­
cipients qualified to fill particular vacancies, it should
be remembered that for many low skilled jobs where e x ­
perience is a requirement, it is not a requirement for
job specific experience.

In other words, the employer

wants someone with demonstrated capacity to be dependable,
follow instructions, etc., but may not care at what job
that experience was acquired.
Table 25 provides a comparison of the estimated
number of jobs by general entry requirements with the

TABLE 25.--Comparison of Available Joba by General Entry Requirements with ADC Recipients by General Characteristics.

,
Clusters of
Job Entry
Requirements

Number of
Jobs by Sex
Requirement

Number of Recipients in the Sample Who Are Unemployed or
Underemployed2 and Estimates2 of the Number in the Total ADC
Population Who Possess the Indicated Characteristics
Male
age 56
0-2

Male
age 56
3-4

:iale
age 55
0-2

Female
age 56
0-2

Female
age 56
3-4

Female
age 55
0-2

Male
0
Female 0
Either 3

Sample
Pop. est.

0
0

0
0

0
0

0
0

0
0

1
5

0-3 yrs. ed., some
training or
experience

Male
0
Female 0
Either 0

Sample
Pop. est.

5
25

1
5

0
0

2
10

0
0

5
0

4-7 yrs. ed. (basic
literacy), no training
or experience

Male
7
Female 4
Either IS

Sample
Pop. est.

0
0

0
0

0
0

10
51

0
0

0
0

4-7 yrs. ed. (basic
literacy), some training
and/or experience

4
Male
Female 0
Either 6

Sample
Pop. est.

7
35

1
5

0
0

7
46

3
15

0
0

8-11 yrs. ed. (some high
scnool), no training or
experience

Male
1
Female 0
Either 2

Sample
Pop. est.

0
0

0
0

0
0

30
153

5
25

0
0

8-11 yrs. ed. (some high
school), some training
and/or experience

Male
2
Female 2
Either 12

Sample
27
Pop. est. 137

13
117

0
0

54
275

7
35

2
10

12 or more yrs. ed., no
training and/or
experience

Male
2
Female 0
Either 11

Sample
Pop. est.

0
0

0
0

0
0

9
46

2
10

0
0

12 or more yrs. ed..
some training
and/or experience

Male
11
Female 2
Either 14

Sample
Pop. est.

6
31

2
10

0
0

30
153

5
25

0
0

^Division of the available jobs according to sex was made on the basis of the author's judgement regarding the
feasibility of both sexes performing the job.
^Underemployed is defined here as an earned income of less than $275/month, which amounts to full-time
employment at the minimum wage of SI.60/hour.
^Population estimates were made by multiplying the number of observations in each cell by a factor of 5.087.
5.087 - 1.00 divided by (the proportion the above observations are of the estimated adult ADC population).

132

0-3 yrs. ed. (illiterate),
no training or
experience

133
number of recipients who possess those requirements.

Both

the number in the sample who possess particular character­
istics and an estimate of the corresponding population size
are shown.

Given the general nature of the data, inferences

from the distribution are extremely hazardous for reasons
already discussed, but there nevertheless exists a couple
of conclusions that can be drawn with some certainty.
What is most striking in general is that a sub­
stantial portion of the available jobs have entry require­
ments easily met by the "typical" welfare recipient.
the 98 total vacancies, nearly half

Of

(45) do not require

any training or experience beyond basic education, and 29
of that 45 require only basic literacy or no education at
all.

For these vacancies, aside from the question of sex,

over 70 per cent of all unemployed or under-employed adult
recipients are definitely qualified, and this does not
include those who have a health problem rated 3 or 4 (on a
scale of 0 - 6 ) and may be able to perform the job.

It

also excludes those who are illiterate but could still
perform at least those positions not requiring any edu­
cation.

If sex is ignored as a criteria, it is estimated

that there are 926 adults in the Allegan County ADC popu­
lation capable of performing the 45 jobs.

This does not

mean, of course, that this many are available for employ­
ment, only that if they are available, they do possess
the necessary entry skills.

For those jobs that require some training and/or
experience, nothing very definite about the number of
people who possess the necessary skills can be said,
because training and experience requirements are often
job specific.

It is interesting to note, however, that

58 of the 9 8 jobs required less than a high school edu­
cation, which indicates that training and experience
requirements may not be too stiff and thus outside the
reach of many recipients.
Given the above analysis, it is reasonable to
accept the hypothesis that a large portion of those jobs
which do exist have entry requirements that a substantial
number of welfare recipients can meet.

Thus, there are

earned income opportunities in the county.

The next

question is whether in general they are located so as to
constitute real opportunities for recipients with limited
transportation capability.
2.

Job Locations
in Chapter II it was hypothesized that welfare

recipients tend to be located in those parts of the county
where there are relatively fewer employment opportunities.
This hypothesis is based on the theory that a significant
cause of the welfare problem is dynamic shifts in the
location of employment opportunities, with those unable to
adjust being left behind to occupy the welfare roles and
on the related contention that fewer people will be on

135
assistance in those areas where there are more employment
opportunities.

If this is the case, the geographical

distribution of welfare recipients within Allegan County
should differ from that of the existing job vacancies.
The map on page 136

(Figure 4) illustrates that

the above relationship does not appear to hold.

There is

no discernable significant difference between the distri­
bution of recipients and the distribution of job vacancies.
The Pullman area in the southwest corner of the county
appears to have a fair number of recipients and no job
v a c a n cies, but with that exception the two distributions
are amazingly similar.

Therefore, the hypothesis that

welfare recipients tend to be located in those parts of the
county where there are relatively fewer employment oppor­
tunities cannot be accepted.

Furthermore, it appears that

in general the location of recipients relative to job
vacancies does not constitute a serious employment barrier.
3.

Wage Hates and the Potential
for Self-Support
A third aspect of employment opportunities that

is of importance in assessing earned income potential is
prevailing wage rates.

Of interest is not simply what the

wage rates are, but the extent to which they are sufficient
to permit self-support of ADC families.
A self-support level of income is defined herein
as net earned income

(gross earnings less taxes and work

136

T

*****

MilO H.W.*

£□
^^
m

KNHVtUkX

—

ut

T*

^

*

flv* ADC

O ilii

wmmm m thraa job vaoanoioa

Figure 4.— Geographical Distribution of ADC
Cases and Job Vacancies t Allegan Co u n t y •

137
expenses) equal to budgeted n e e d s , where budgeted need is
the amount of the welfare grant if there is no other income.
Self-sufficiency by this definition does not necessarily
mean that the client would not receive welfare payments any
longer, because work incentive provisions permit earning
more than budget requirements without loss of all assist­
ance.

Furthermore, it shouid be noted that budgeted need

does not reflect those living requirements provided in
kind, e.g., medical care and food stamps.
It was hypothesized in Chapter II that prevailing
entry wages preclude self-support for a

high proportion of

the welfare population if only one member of
works.

the family

In other words, it is posited that even if one

member of each ADC family were to find employment at
prevailing wages, few would achieve self-sufficiency.
As a first step in testing this hypothesis, consider
the distribution of entry wage rates relative to the dis­
tribution of budgeted needs.

Figure 5 shows these two

distributions using job vacancy entry wages converted to
gross monthly income

(hourly wage at 172 hours per month)

and then reduced by 20 per cent to reflect income after
taxes and work expenses.

It is evident

butions that even if only one member of

from the distri­
each ADC family

was to work, a substantial portion could achieve selfsufficiency as defined herein, given prevailing entry
wages.

Eighty-five per cent of ADC families have budgeted

50

Cent

45%

Per

138

Dollars Per Month
Figure 5.— Frequency Distribution of the Budgeted Requirements of
ADC Families and of the Net Wages from Available Job Vacancies.

139
needs of less than $400 per month and nearly 30 per cent of
available jobs pay more than that amount.

Said differently,

if one member of each ADC family was to find employment at
the average net entry wage of $350 per month, slightly more
than three-fourths would achieve self-sufficiency.
It is constructive at this point to also consider
the proportion of families who if employed at prevailing
wages would earn enough to be dropped from the welfare
roles, i.e., earn their budgeted needs plus that amount
allowed as a work incentive under 1972 rules.

The earned

income allowed as a work incentive is approximately the
first $30 plus one-third of the remainder.

If one member

of each family were employed at the average net wage of
$350 per month, less than 40 per cent would be earning
enough to leave public assistance.
It was also hypothesized in Chapter II that a
relatively large proportion of two parent families would
attain self-support if both parents were to work at pre­
vailing wages.

Given the foregoing analysis, self-

sufficiency is clearly possible in virtually all two
parent cases if both parents were to find work.

Likewise,

an income equal to budgeted needs plus work incentive
allowances could be earned at prevailing wages in nearly
all cases if both parents were employed.

Unfortunately,

however, only about 20 per cent of all ADC famililies
include two parents, and in some of the two parent cases

140
the employment o£ one parent is sufficient to achieve an
off-assistance level of income.

Thus, consideration of

both parents does not substantially change the situation.
In summary, prevailing wage rates alone do not
preclude self-support for many families where selfsufficiency is defined as earned income equal to budgeted
needs, but significantly less than half of all ADC
families would be able to earn an off-assistance level
of income at prevailing wage rates if only one parent is
considered.

Consideration of both parents would increase

the proportion able to earn an off-assistance level of
income only slightly, perhaps, by 10 per cent.

Therefore,

the obstacles to self-sufficiency appear to be available
jobs and the employability of the clientele as opposed to
wage rates per se.
C.

Summary
Of all the factors influencing the earned income

potential of welfare recipients, available jobs are most
important.

In this context it was found that there are

relatively few jobs available, but that many recipients
are qualified for a significant portion of those that do
exist.

Furthermore, it was observed that entry wages are

sufficient to permit self-support for many ADC families.
In attempting to determine what client charac­
teristics are important to earned income potential or,
conversely, what characteristics function as barriers to

141
employment, it was observed that health, age, and work
experience were important determinants of earning capability
and that the absence of an automobile and the presence of
young children were significant barriers to joining the
work force.

The most interesting finding was that years of

education is quite unimportant over the range that charac­
terizes welfare clients.
These observations are utilized in the next chapter
in an attempt to evaluate a series of policy alternatives.

CHAPTER VI
EVALUATION OF POLICY ALTERNATIVES FOR
INCREASING EARNED INCOME

The factors which influence earned income
potential, i.e., the various client characteristics and
existing employment opportunities, have been diagnosed
and discussed at some length such that it is now possible
to consider programs for increasing current earned income
levels within the ADC population.
considered:

Six approaches are

(1) modifications in elibigility criteria;

(2) transportation provisions;

(3) increased focus on

labor market information and job development;
and training;

(5) public service jobs; and

day care programs.

(4) education

(6) improved

No attempt is made to determine which

is the preferred alternative or to rank alternatives,
which would require consideration of costs.

The intent

is to estimate only the probable impact of a series of
alternatives on the earned income of recipients and thus
on welfare expenditures and caseload levels.

First, each

approach is considered individually and then the cumula­
tive impact of the programs is discussed.

142

143
A.

Modification in Eligibility
Criteria
There are two eligibility factors which appear to

be important to the earned-welfare income choices of ADC
recipients.

The first is the 100 hour rule for ADC-U

fathers, and the second is the welfare tax rate.

Both

focus directly on the question of work incentives.
The question of work incentives has not only
occupied the time of numerous economists for decades, but
it has been a major issue in the welfare reform debates
as well.

Increasing work incentives by effectively re­

ducing the price of work relative to other activities
makes work more attractive, but at the same time less
necessary.

In terms of the classical work-leisure model,

this matter can be expressed with reference to whether or
not the substitution effect

(substitution of work for

leisure)

is greater than the leisure increasing income

effect.

If the substitution effect is sufficiently great

or the income effect sufficiently small,36 a reduction
in welfare tax rate or similar provision, e.g., guaranteed
income, would result in higher incomes for the poor at
less cost to other members of society.

The question is

what would the effect likely be if either or both the
suggested incentive provisions
36

(welfare tax rate reduction

The reader ought to note that the income effect
would be zero if at the time of the change no work was
being performed.

144
and/or elimination of the 100 hour rule) were implemented
in Allegan County?
Unfortunately, there is little evidence upon which
to base a prediction of the earned income effects
in work effort) of either action.

(change

There is a wealth of

literature on the subject of work incentives, but most of
it is theoretical, because of the cost and difficulty of
empirical studies.

The analysis reported in Chapter V

gives some indications, but nothing at all definitive.
Nevertheless, the importance of work incentive questions,
given the current welfare reform discussions, makes it
imperative that an attempt be made to use what evidence
does exist and at least speculate as to the probable
i mpact.
Existing empirical studies provide substantial
evidence that reductions in the welfare tax rate and
similar work incentive actions result in more work effort,
but there is no clear indication of the magnitude.

The

most significant attempt to assess the impact of increased
work incentives are the guaranteed income experiments
still being conducted by the Office of Economic Opportunity
(OEO) in New Jersey? Seattle, Washington? Gary, Indiana;
and in a series of rural counties in Iowa and North
Carolina.

Preliminary results are available only for the

New Jersey plan.

It involves monthly payments to 1,359

families and is similar to the current welfare system if

145
the welfare tax rate were lower and there were no work
requirements.

After two years of payme n t s , data on 509

families show that there is no work disincentive as a
37
result of guaranteed payments.
Earnings increased
for 53 per cent of the families receiving assistance and
for only 43 per cent of the families not receiving it.
Earnings declined for 29 per cent of the families receiv­
ing aid and for 31 per cent of those not receiving it.

A

less massive, but more germane study of Michigan's experience with work incentives

38

found statistically significant

increases in employment in all of thirteen geographic areas
studied as a result of implementing the thirty-and-a-third
disregard policy.

39

Employment increases measured in terms

of the per cent of AFDC mothers reporting some earnings
in July, 1970, as opposed to July, 1969, ranged from an
increase of 3.3 per cent to 9.9 per cent in the thirteen
areas studied.

For most of the empirical studies, this is

the usual pattern.

Policy action to increase financial

37Fred J. Clark, "When You Just Give Money to the
Poor," New York Times Maqazine, May 3, 1970, pp. 23, 190-

212 .

38

Gary L. Apple and Robert E. Schlenker, "An
Analysis of Michigan's Experience with Work Incentives,"
Monthly Labor R e v i e w , U.S. Department of Labor, Bureau of
Labor Statistics, September, 1971, pp. 15-22.
39

The thirty-and-a-third regard policy is a program
implemented in Michigan in 1969 under federal provision
which permits welfare recipients to keep the first $30/
month of earned income and one-third of the remainder.

146
incentives to work results in more work, but no one has
really been able to say specifically how much more.

Thus,

predictions of the effect in Allegan County will have to
be made largely on the basis of theory and the evidence
of Chapter V.

Although both involve work incentives, the

two policy alternatives being considred are considerably
different in several respects and are discussed separately
below.
1.

Elimination of the 100
Hour Rule
The current welfare system has been dubbed "the

welfare mess," and probably no single aspect is more re­
sponsible for this title than the 100 hour rule for ADC-U
fathers.

Under this provision, a father on assistance

because of unemployment remains eligible for assistance
only for so long as he does not work more than 100 hours
in any thirty-day period, irrespective of his income or
his needs.
employment

Thus, ADC-U fathers are deterred from accepting
40

that totals more than 100 bourse per month,

unless they are relatively certain to earn on a regular
basis at least the amount of their welfare grant.

Until

quite recently, the rule was "not more than sixty-four

^ T e c h n i c a l l y , under the current rules ADC-U fathers
must accept employment when offered or lose their assistance,
but this provision is not very enforceable and, furthermore,
there is little that encourages them to search for the
opportunity to begin with.

147
hours in any two-week period," and attempts to get it
removed on the ground that it discouraged temporary full­
time employment resulted in the 100 hour rule which permits
full-time employment for a couple of weeks at a time but
is more of a discouragement to steady part-time employment.
A major purpose of this section is to demonstrate why and
to what extent the rule functions as a disincentive.
The rule affects only ADC-U fathers and thus the
analysis is limited to that component of the caseload.

The

approach used is to estimate the difference in income which
would accrue to ADC-U fathers as a result of accepting
employment after the rule change, as opposed to before,
and then on the basis of theory and what little is known
about preferences of the welfare population determine the
likely number who would accept employment, the gain in
earned income of the group, and the corresponding effect
on welfare costs.
From Chapters IV and V, it is known that relative
to other welfare recipients ADC-U fathers are quite em­
ployable as a group.

For the most part, they are young;

have considerable work experience, with reasonably good
work histories; are in good health; over 80 per cent own
automobiles; and although their formal education is quite
limited, earlier analysis indicated that education was
unimportant to employment potential.

Because of the

criteria used to define an ADC-U father, they are not

148
only quite employable but also a rather homogeneous group.
None are older than age 55, all have some work experience,
and none have a health rating poorer than 2 (male recipients
with poor health are classified as incapacitated, not un­
employed) .

Therefore, there is little reason to subdivide

ADC-U fathers into employability groups except on the basis
of those unemployed and those underemployed.

Furthermore,

to do so, given the small number of ADC-U fathers in the
sample, would make accurate estimation of the population
size more difficult.
In the sample, there are 57 ADC-U fathers, 49 un­
employed and 8 underemployed
than $275 per month).

(reported earnings of less

Multiplying by a factor of 4.16,

based on the proportion of the caseload the sample repre­
sents, yields an Allegan County welfare population of 204
unemployed ADC-U fathers and 33 with some earnings.

Average

earnings for the 8 employed were $208, and, making the
assumption that this is the mean of the population, it is
accordingly estimated that total earned income for the
group was $6,864.

What would it have been had the 100 hour

rule not existed?
Elimination of the rule, but assuming the same
welfare tax rate, would mean that those working part-time
could now either work more

hours at the same job or seek

another and keep at least one-third of each additional
dollar they earn, and those not working at all could now

149
seek employment at any wage and in any quantity with full
assurance that they would be made financially better off
by doing so.

The crucial question is to what extent the

possible financial gains would induce more work effort.
How large are the potential gains?
The major determinant of potential gain is the
availability of jobs for the group.

The job vacancy survey

revealed only 98 jobs, of which 8 require a woman.

O n the

other hand, there are 204 ADC-U fathers unemployed and
another 33 employed only part-time.

The number of avail­

able jobs which ADC-U clients would likely fill if the
100 hour rule were eliminated are estimated and shown in
Table 26, with the corresponding increase in earned income
and predicted change in welfare costs also shown.
In predicting the reaction of elimination of the
rule, a nine-step process is used:

(1) the ninety identi­

fied job vacancies are increased arbitrarily by 50 per cent
across all job descriptions to reflect underestimation;
(2) the number of jobs which could be filled by ADC-U
*

«

fathers considering only entry requirements are estimated
for four skill categories on the basis of the skills
possessed by the clients;

(3) these numbers are reduced

20 per cent to reflect barriers due to job location,
transportation, and poor market information;

(4) average

monthly income from the four categories of jobs is e s t i ­
mated on the basis of entry wages collected in the job

TABLE 26.— Extiaation of the Impact on Welfare Incomet and Welfare Coata of Elimination of the 100 Hour Rule.

Croups of
Job Vacancies
(All Suited
for Hales)

(3)

(4)
Est. 2
Est. 1 No.
Hhich
HO.
Could
Which
Be
Could
Filled
Be
Filled Given
Skills,
Given
Ho. of Total
Skills Location
Jobs
Jobs
and
If Est. and
from
Survey Assumed HO. Of Xnfor.
Est.
50% Low Clients Factors
(1)

(2)

(5)

(6)

Before3
Change
Monthly Gain
from
Hags I
172 Hrs. Work/
Per Ho. Client

(7)

(8)

(9)

(10)

(11)

After*
Change
Gain
from
Work/
Client

Added
Incentive
Per Mo.
Per
Client

Eat. Ho.5
Mho Mould
Choose to
Work
Given
Incentive

Predicted
Income
Cain to
Clients

Predicted
Saving in
Welfare
Coats

28

42

42

34

$404

$ 8

$155

$147

28

$ 4,340

$ 4,732

Jobs requiring
no training
or exp., but
12 or more
yrs. ed.

13

20

15

12

$423

$ 33

$161

$128

10

$ 1,610

$ 1,800

Jobs requiring
some training
and/or exp.
and < 12 yrs.
ed.

24

3C

24

19

$373

$ 7

$144

$151

15

$ 2,160

$ 2,280

Jobs requiring
same training
and/or exp.
and at least
12 yrs. ed.

25

38

10

8

$524

$114

$195

$123

6

$

684

$ 1,422

90

138

91

73

* e

$11,794

$10,234

Totals

150

Jobs requiring
no training
or exp. and
< 12 yrs. ed.

*

m

59

Estimate based on number of male recipients Who possess indicated skill levels, with 25 per cent reductions used to
account for job specific training or experience requirements where appropriate. See Table 25 for estimates of the total
number of clients who have the various skills.
2Colimm 3 is artibrarily reduced by 20 per cent to reflect barriers to employment other than skills.
3ADC-U clients who want to work full time would lose all assistance, so gain from work before elimination of the rule
is estimated to be gross earned income less taxes at 10 per cent, work expenses at 10 per cant and less the average grant of
5305/mth. The loss of medicaid and other social services is not considered.
4Cain from employment after elimination of the rule is computed on the basis of the thirty-and-a-third disregard
provisions as currently applied to ADC mothers. Tbus net gain ■ 530 + 1/3 (gross earnings - $30).
5Arbitrary estimate based on assumed preferences.

151
survey;

(5) monthly net gain in income from working before

elimination of the 100 hour rule is estimated for the
"typical" recipient in each group;

(6) the per client gain

in each skill category which would accrue after eilimination of the rule is estimated;

(7) the additional work

incentive per client per month is then calculated;

(8) on

the basis of this incentive, the number of clients who
would, in fact, accept employment is estimated; and (9)
estimates of the income change from elimination of the
rule are then made and the corresponding decreases in
welfare costs calculated.
The results of this procedure are subject to con­
siderable question.

At several steps along the way the

analysis is based on little more than "gut" assumptions-most notably in the case of predicting the number who
would choose to work given the estimated incentive.

How­

ever, in the opinion of the author, the assumptions are
conservative.

Out of a population of over 200 unemployed

recipients it is predicted that only sixty would become
employed if the rule was eliminated, despite a quite well
qualified population and incentives ranging from $123 to
$151 per month.

It is therefore most likely that the

additional number employed would be significantly larger
and not smaller due to estimating errors.
The analysis shows a gain to ADC-U recipients of
$10,868 per month and a monthly saving in welfare costs of

152
$8,046.

Both these figures, however, are static estimates

and reflect only the immediate effect of the rule change.
Over time the rule change would undoubtedly lead to a
larger ADC-U caseload.

Currently an ADC-U recipient who

finds a staeady job that it is to his advantage to accept
or one which he is forced to accept is dropped from the
welfare rolls, but elimination of the 100 hour rule means
that ADC-U clients working full-time could remain on
assistance until their income reached the breakeven point.
Given the current welfare tax rate and prevailing wages,
few recipients are likely to reach that point, and, there­
fore , the dynamic result will be a larger ADC-U caseload
characterized by smaller grants and more earned income
per individual.

The ADC-U prone population will clearly

be better off, but total welfare costs could conceivably
rise if the caseload increases enough to offset the redution in costs due to increased earned income of those
on assistance.

Just how much the caseload might increase

must await further study.
Because of the dynamic issues involved

(possible

increases in welfare costs), elimination of the 100 hour
rule would not necessarily constitute a pareto better
change.

But, welfare costs are simply income transfers and

the important point is that the rule change would result in
increased social product to the extent that ADC-U recipients
would be performing jobs that would otherwise be vacant.

153
2.

Reduction in the Welfare
Tax Rate
A critical issue with respect to needed welfare

reform is the appropriate level of the welfare tax rate.
If the rate is too high it stifles work incentives, and
if too low

it results in a breakeven level of income so

high as to make welfare costs prohibitive.

In efforts to

balance this tradeoff, what has emerged in the literature
is some degree of consensus regarding the appropriateness
of a 50 per cent tax r a t e . ^

In addition, it is a 50 per

cent rate that has been proposed in Nixon's Family Assist­
ance Plan

(FAP).

For these reasons, the implications of

a 50 per cent tax rate, as opposed to some more arbitrary
figure, are discussed herein.
The basic question of interest, as in the case of
the 100 hour r u l e , is to what extent would changing to a
system whereby a welfare recipient retained 50 per cent
of all earnings beyond taxes and work expenses result in
increased work incentives and thus increased employment
relative to the current thirty-and-a-third provisions.
Current work incentives, i.e., the income gains
from employment given prevailing wages, are for ADC mothers
w h a t they would be for ADC-U fathers if they were not
subject to the 100 hour rule.

Thus, it is only necessary

^ S e e Robert J. Lampsman, Adding Guaranteed Income
to the American System of Transfers, Discussion Paper, Institute for Research on Poverty, University of Wisconsin,
Madison, for an excellent discussion of the tradeoff in­
volved.

154
to calculate what the incentives would be under a 50 per
cent rate to determine what the net change would be if a
50 per cent rate was adopted.

If taxes and work expenses

are assumed to equal 20 per cent of gross income and the
50 per cent welfare tax applied to the remainder, the gain
from working ranges from $149 per month for those jobs
paying $373 per month to $210 per month for those paying
$524

(here utilizing the job categories in Table 25).

Sub­

tracting the comparable figures for the current system
yeilds added financial incentives to work of from $5 to
$15 for the four job categories.
Although the marginal tax rate under the current
system is 67 per cent, whereas it is only 50 per cent
under the proposed system, it is clear from the small
change in incentives that the average rate is very similar
for the relevant gross income range.

Whereas the current

system excludes the first $30 after work expenses

(lower­

ing the average), a flat 50 per cent system does not.
Therefore, there would be no significant change in work
incentives and, subsequently, in earned income if the
current thirty-and-a-third system were discarded in favor
of a 50 per cent marginal tax rate.
One could consider a rate lower than 50 per cent,
but if one accepts the analysis of Lampman and others the
incentive effect of a lower rate would not be sufficient
to compensate for the cost implications of the resulting

155
high breakeven point.

Accordingly, it appears that policy

action to increase work incentives for ADC mothers beyond
what they now are would not be appropriate.
There remains the question of whether it is the
marginal or average tax rate that is important to the work
decisions of welfare clientele, but there would be a differ­
ence in response only if they could trade off at the margin,
and, given the rigidity of available jobs

(forty hours per

week or nothing), it is extremely difficult to make such
tradeoffs.
B.

Transportation Provisions
In Chapter IV it was observed that 40.7 per cent

of female headed families and 16.7 per cent of male headed
families did not own an automobile.

When the significance

of this factor was assessed with respect to employment
potential, it was concluded that recipients who did not
own an automobile remained on assistance longer and were
less likely to be employed.

Also, it was observed that

2.6 per cent of the recipients gave "lack of transportation"
as a reason for leaving their last job.

The corresponding

policy question involves what difference it would make with
respect to client well being

(total income) and welfare

costs if the transportation barrier was in some way
diminished.
There are two possible ways of reducing the trans­
portation barrier that come to mind:

a rural bus system

156
and a credit program to ease the difficulty of acquiring
an automobile.

A bus system simply is not feasible in a

sparsely populated area

(even in the major cities sub­

stantial subsidization is needed), which means it is
necessary to consider only the automobile.
Consider, as one possibility, a program whereby
the Department of Social Services agreed to guarantee bank
loans for the purchase of automobiles by recipients who
are unemployed or underemployed, but considered employable
and are without transportation.

Assume a loan limit of

$800.00 and a payback policy requiring the client to pay
back only 80 per cent of the loan if he is employed for a
full-time equivalent of at least six months during the one
year after

the loan is issued, but

if employed less the

individual

would be required to repay the entire loan.

This payback policy would encourage employment and dis­
courage abuse of the loan program, because repaying such
a loan from an assistance budget would be quite difficult.
What would be the impact on employment?
As a first step in the analysis, the number of
recipients who would be potentially affected must be d e ­
termined.

Assume employable is defined to mean anyone less

than age 55 and with health status

of 2 or better.

this basis

53 females and 7 males

in the sample there are

On

who do not own an automobile and are unemployed or under­
employed.

Multiplying by a factor of 5.087 yields

157
corresponding population estimates o£ 270 females and 35
males.

T h u s , a total of 305 adults would be eligible for

loans, but this number includes 25 two parent families,
which means there are only about 270 families eligible.
The next question is how many of those eligible
would take advantage of the program, and of those who do,
how many would in fact become employed.

The regression

results in Chapter V, weak as they may be, indicate that
those who own automobiles are about 10 per cent more likely
to be employed, but that does not say anything about how
many clients would take advantage of the loan program, nor
can we necessarily infer that of those who do acquire an
auto 10 per cent will become employed.

It is quite possible

that more of those who own automobiles work not because the
automobile permits them to, but because it makes it neces­
sary, i.e., one may need an auto for purposes other than
employment but have to work to afford it.

Thus, what evi­

dence exists regarding the impact of such a loan program
does not take us very far, and impact estimates will
necessarily provide only a reasonable indication of the
likely effect.
The number of recipients who would avail themselves
of such a program depends essentially on the number pre­
pared to pay the price but for whom credit constitutes a
barrier to automobile acquisition.

If credit is not a

barrier, easier credit will not change the situation except

158
to the extent that guaranteed loans have lower interest
rates and the recipient is interested in the 20 per cent
discount contingent upon his employment.

Although w e do

not know how many are prepared to pay the price of an auto
but have been unable to acquire one because of credit con­
straints, it is reasonable to posit that, given the im­
portance of an auto in rural areas, many people without
cars would be willing to purchase them if low cost credit
was available.

The fact that many welfare clients do own

cars indicates that it is possible do to do and still sub­
sist, and discussions with case workers, administrative
officials, and welfare clients revealed that getting credit
is frequently a severe problem for people on assistance.
Even credit granted routinely to the general public, e.g.,
automobile loans,

is denied people on assistance.

As a

case in point, caseworkers talked of the problems caused
by clients needing to pay utility bills in advance, an
action rarely required of the general public.

42

There­

fore, there is clearly some portion of welfare clients
who would avail themselves of the loan program.

For

analytical purposes, assume that 50 per cent of eligible
families would choose to do so.

In discussions with social services workers about
the general problems associated with improving the well
being of welfare recipients, a problem frequently cited was
the distrust of the business community regarding the charac­
ter and dependability of recipients.

159
Regarding the number of those taking advantage of
the loan who would become employed, 15 per cent is assumed,
based on the regression results

(10 per cent) and an

additional 5 per cent because of the incentive built into
the loan program.

If this is in fact the nature of the

response, the following effects on client income and
welfare costs will result.
Fifty per cent of an estimated 270 families is
135, and 15 per cent of that number gives an estimate of
twenty additional recipients employed.

From the entry

level wages of existing job vacancies, we can assume an
average monthly wage of $400.

After reductions due to

taxes, work expenses, and a lower welfare grant, the
recipient is left with a monthly gain of $197.
allowance for transportation costs

An

(auto operating costs

are part of work expenses) has already been figured in,
but the $197 needs to be further reduced by the amount
of the loan payment.

If the "typical" loan was amortized

over the life of the car at $40 per month, this would still
leave $157 per month income gain per recipient or a total
43
gain for the twenty recipients of $3,140 per month.
With respect to welfare c o s t s , each of the twenty
welfare grants involved would be reduced by $167 per month,
A *3
In addition, there would be non-income gains
equal to the value of having an automobile available for
purposes other than employment.

160
assuming that each of the original grants was $167 or
more, which is likely.

Thus, monthly welfare costs would

decline by $3,340 less the costs of the loan program,
which would include defaults, the 20 per cent bonus, and
administration.
C.

Improved Day Care Programs
Another factor believed to constitute a major

employment barrier for ADC women is the absence of adequate
day care facilities.

Although this may be the case in some

communities, investigations of the Allegan County situation
revealed no evidence to suggest that the unavailability
of day care was a significant employment constraint.
At the present time, the State of Michigan reimburses ADC mothers for the full cost of child care during
working hours as long as the care is provided under DSS
approved arrangements.

These include a licensed babysitter

who comes to the client't home, a licensed day care home
or center, and approved relatives.

County social services

officials report that it is rare to encounter any diffi­
culty in making arrangements for child care when a client
45
requests it.
Thus, child care could present an obstacle
only insofar as clients were unaware of the program or

^ I n interviews with administrators and case workers
it was stated that to the extent there was a problem it con­
sisted of clients1 ignorance of the state reimbursement and
not with any difficulty in making the arrangements, but
enither aspect was believed to be significant.

161
employed higher child care standards than those
acceptable to the state.
If standards of knowledge of child care possi­
bilities were a problem, one would expect a significant
number of women to have left their last job because child
care was not available, but this was not the case.

Only

4.0 per cent of ADC mothers indicated that they left their
last job because of child care problems, and in several of
those cases the indicated difficulty was not child care
per se, but logistical problems of the sort which improved
child care arrangements would not alleviate.

It should be

noted, however, that the statistic ignores the 32 per cent
who have never worked, and it is possible that some of
them never worked because of day care problems.
Before concluding that improved child care arrange­
ments are unnecessary, a note of caution is in order.

Be­

cause ADC mothers do not demand child care facilities other
than dependable "babysitting" before seeking work outside
the home is not to say that the establishment of improved
professionally staffed child care facilities would not be
appropriate.

Even though such facilities apparently would

not lead to more employment of ADC m o t h e r s , it is possible
that the children would gain from a different and, in many
cases, a vastly improved environment.

46

^^It is this contention which prompted the Head
Start program which provides preschool children of poor
families with nursery school training to help compensate
for a deficient home environment.

162

D.

Labor Market Information
A fourth approach to increasing earned income of

welfare recipients consists of policy action to improve
labor market information systems.

This section explores

the need for improved labor market information in Allegan
County with particular reference to the needs of welfare
recipients.
In a very basic sense, the information issue involves determining the possibilities for increasing employ­
ment or, conversely, reducing job vacancies via improved
labor market information.
dimensions.

This aspect, however, has several

There is the conventional matter of employees

knowing of what jobs exist and employers knowing of potential
employees.

In addition, there is a series of other infor­

mation aspects which, to some extent, are a subset of the
above.

These include:

(1) employer knowledge of what

potential employees expect in terms of compensation and
working conditions for performing particular functions;
(2) employer knowledge of factors which accurately predict
employee performance;

(3) employer knowledge of what his

competitors for the same skill are doing;

(4) accurate

assessment on the part of employees regarding their per­
formance and earning capabilities;

(5) employee under ­

standing of what employers expect; and
career possibilities.

(6) knowledge of

Defined this broadly, the infor­

mation issue incorporates a wide range of manpower services,

163
including job listings, job development,
guidance, and career guidance.

47

employer

Only those aspects which

relate to the possibilities for immediately increasing
the earned income of welfare recipients are discussed
herein, but it is important to recognize that the question
of adequate labor market information involves more than
knowledge of job vacancies per se.
Given the objective of increasing earned income
of welfare recipients, in a short run context there are
two information aspects of importance.

The first is the

extent to which more recipients would be employed if they
knew of available jobs, and secondly, the extent to which
employers use inappropriate "rules of thumb" to assess the
capabilities of potential employees and in doing so deny
many low skilled individuals jobs they could

perform.

Each

of these aspects is considered in turn below.
Although there exists no direct evidence on the
extent to which welfare recipients are aware of available
jobs, there are indications that better labor market in­
formation would not have resulted in a significant increase
in employment.

The existence of most of the vacancies

identified, despite the pool of unemployed welfare recipi­
ents , can be explained by factors other than

lack of

^ T h e term "job development" is used in the litera­
ture to mean one-to-one matching of unemployed people with
jobs, i.e., attempts to find (develop) jobs for particular
individuals, and is used here in the same context.

164
knowledge on the part of recipients regarding their
existence.

In the first instance, because of the 100 hour

rule unemployed fathers have essentially no incentive to
accept employment, which means that many jobs requiring
men or favoring men would likely remain vacant even if
most welfare clients knew of their existence.

It was

estimated that of the jobs identified, 27.6 per cent r e ­
quired men, 8.1 per cent required women, and 64.3 per cent
were potentially suited to either sex.

Many of those jobs

classified as suited to either sex would favor men, e.g.,
truck drivers and equipment operators.

Therefore, there

remains at best about 50 per cent of the available jobs
for which knowledge of them could potentially make any
difference.
Of the group potentially suited to women, many
are low paying, largely undesirable, service jobs, e.g.,
waitress, cook, or cleaning services, meaning there would
be little incentive to accept the jobs if informed.

Thus,

given the current state of the job market there is little
reason to expect any significant increase in employment
of welfare recipients from better job information.

This

is not to say, however, that if the Allegan County economy
were not so stagnant that efforts to enhance job infor­
mation services would not be useful.

Furthermore, if one

thinks in terms of the total labor force it is quite
possible that action to improve job information would be

165
appropriate, perhaps taking the form of programs to
encourage employer use of the already existing M.E.S.C.
placement service, i.e., the job bank.
As with the above case, there does not appear to
be much potential for increasing earned income of welfare
recipients through efforts to inform employers of the in­
herent capabilities of the welfare clientele.

Contrary

to what might be expected, given the literature on the
subject,

48

there was no evidence that employers tend to

require more than the needed skills or use inappropriate
indicators of performance capability.

Most notably,

little emphasis was placed on years of formal education
by Allegan County employees, despite the tangibility of
the criteria.

Only in two instances did an employer

indicate minimum entry requirements that were clearly in
excess of those appropriate for the job.

Also, there

appeared to be considerable willingness on the part of
employers to "take a chance" on employees with limited
skills or poor work histories.

This is most clearly e x ­

emplified by the fact that for nearly 40 per cent of the
job vacancies where some training was required, employers
were willing to substitute their own on-the-job training
if their costs were reimbursed.

Such a program would

not be limited to welfare recipients, and, perhaps,
4 fl

Daniel E. Diamond and Hrach Bedrosian, Industry
Hiring Requirements and the Employment of Disadvantaged
G r o u p s , New York University, School of Commerce, 1970, p. 390.

166
a willingness to participate should be expected given the
reimbursement provisions, but it at least gives an indi­
cation that employers are not particularly reluctant to
hire or otherwise participate in efforts to aid those
with limited earning capacity.
E.

Education and Training
A common response to problems of unemployment,

poverty, and welfare existing side by side with economic
prosperity has been to attempt retraining those who lack
the skills to participate in the "modern" economy.
corresponding thesis is that if people are poor

The

(on welfare)

because of limited earning capacities, increase that
capacity and the problem will be solved.

The feasibility

of this approach, however, depends on the trainability of
the people involved and on the magnitude and composition
of the demand for additional skilled manpower.

This s e c ­

tion examines these two aspects in an attempt to determine
the extent to which education or training programs would
enhance the earning potential of Allegan County welfare
recipients.
Analysis of education or training programs as an
alternative for increasing earned income of welfare re­
cipients is frought with problems and requires data far
in excess of that available for this study.

In particular,

it is impossible to properly assess the demand for trained
manpower on the basis of current job vacancies for a single

167
county.

Especially for relatively high paying occuaptions

the relevant labor market to consider for potential train­
ees is much larger than a single county and, given the
investment involved, it is essential that long term needs
be considered.

Similarly, a proper assessment of train-

ability would require consideration of aptitudes and
interests in addition to the data available on education,
health, age, and work experience.

For these reasons,

definitive conclusions with respect to the appropriateness
of eduation and training for welfare recipients are not
possible from this study, and essentially all that is
provided are indications of whether the possibilities for
education and training should be further investigated.
Before proceeding any further, perhaps, it would
be useful to distinguish between education, training, and
types of training.

Education means formal classroom in­

struction of a general nature, whereas training refers to
instruction in job specific skills and may occur in either
a formal institutional setting (classroom) or via job ex­
perience.

Another commonly used term, "basic skills train

i n g ," incorporates some aspects of both education and
training and refers essentially to classroom instruction
in the skills that are essential to most occuaptions, e.g.
reading, writing, and arithmetic.
From the results of the analysis in Chapter V,
education per se can be rejected as being important to the

168
earned income potential of welfare recipients.

Within

the education range that characterizes welfare people,
there is no statistical difference in revealed earning
capacities.

Thus, it appears that one need be concerned

only with job specific training and, perhaps, basic skills
training to the extent that years of education is a poor
proxy as a measure of basic skills.
What can be said about the importance of training?
Although lack of data precludes informed judgements r e ­
garding specific skill needs, it is possible to draw some
inference from the job vacancy survey regarding the type
of training desired by employers.

Of the jobs identified

in the survey, over 40 per cent required some amount of
skill training, but in most instances it was not necessary
that the sklls be acquired in an institutional setting.

In

over 80 per cent of the cases where training was desired,
employers said appropriate work experience would be an
acceptable substitute, which means that formal training
was an absolute prerequisite for hiring for only about
8 per cent of the available vacancies.

On the basis of

Allegan County needs alone, therefore, it appears that on
the job training or experience would enhance earning
potential, but that costly institutional training programs
should be viewed with caution.
The remaining aspect of training programs that is
important and about which it is possible to say something
is the trainability of the welfare population.

169
Marven E. Konyha in a study of the potentials for
retraining rural poor in the east northcentral states e m ­
ployed general education development levels
means of assessing retraining potential.

49

(GED) as a
Konyha con­

verted years education completed to GED levels and assumed
that the GED l e v e l ^ required for training in a particular
job was the same as that estimated by the CJ.S. Department
of Labor to be necessary for performing the job.

On this

basis he concluded that people with from zero to five years
education were potentially trainable only for unskilled
occupations unless they were provided w i t h more general
education; that for people with six to eight years edu­
cation it is questionable as to whether they could be
trained to perform jobs that paid more than a poverty
level income without more general education; and that
people with nine or more years education had good train­
ing potential.

These conclusions are questionable in light

of what was observed in Chapter V regarding the relation­
ship of years education to earned income potential, but
49

Marvin E. Konyha, "Potentials for Retraining the
Rural Poor in the East Northcentral States" (unpublished
Ph.D. thesis, Michigan State University, 1970).
A published
summary of the study is available: Marvin E. Kohyha,
Rural
Poor Who Could Benefit from Job Retraining in the East Northcentral States, Agricultural Economic Report No. 204, U.S.
Department of Agriculture, Economic Research Service, Wash­
ington, D.C., 1971, p. 35.
50

For the conversion method used see R. S. Eckus,
"Economic Criteria for Education and Training," Review of
Economics and Statistics, (May, 1964), pp. 181-90.

170
on the other hand this procedure applies to institutional
training and not necessarily to on the job training, and
it is quite possible that education may be an appropriate
indicator of the capacity to complete institutional train­
ing programs and still not show up as a determinant of
earned income differences.

Two people, for example, with

different education levels may continue to earn the same
unelss one or the other embarks on a formal training p r o ­
gram in which case the one with the most education may be
more likely to complete the program.

Thus, assuming e d u ­

cation levels are an important determinant of trainability,
what is the potential for training welfare recipients?
If those older than age fifty-five or with a health
status poorer than two are first removed from considration,
according to Konyha's criteria, 36 per cent of all ADC
adults have good training potential; 13 per cent have
questionable potential; and 3 per cent could not be
trained for more than unskilled jobs without additional
basic education.
There is an additional 12 per cent of the popu­
lation which could, perhaps, be appropriate candidates
for vocational rehabilitation, i.e., they have mild health
problems coded three or four.

51

^ C o n s i d e r a t i o n of vocational rehabilitation needs
in any detail is beyond the scope of this study.

171
In total, there is evidence that, for the most
part, lack of institutional training is not a significant
barrier to qualifying for available jobs, but in many
instances at least appropriate on the job training or
experience is necessary.

Thus, OJT programs may well be

an appropriate policy action for increasing the earning
capabilities of welfare recipients, and, to the extent
Konyha's procedure is an indicator of training capability
for either OJT or institutional trainig programs, a large
proportion of the welfare population would be able to
benefit from training.
F.

Public Service Employment
With the advent of the Emergency Employment Act

(EEA) passed in July, 1971,

52

and a growing recognition

that economic prosperity does not necessarily mean that
all who are capable and want to work can work, the possi­
bilities of public service employment as a means of r e ­
ducing unemployment

(increasing earned income of welfare

recipients) haB been receiving increased attention.
Although current EEA programs are designed as much to
provide needed public services as they are to reduce
unemployment and EEA positions are not limited to the
52

The Emergency Employment Act authorized the
allocation of federal funds to counties to be allocated to
various public employers within the county for purposes of
hiring unemployed people when national unemployment rates
were high.
During approximately one year of operation,
seventy-two people were hired in Allegan County under this
program.

172
disadvantaged or chronically unemployed, there Is reason
to believe that public sercle employment offers consider**
able potential for Increasing the earned Income of welfare
recipients and reducing welfare costs.

t

Public service employment Is an attractive alterna­
tive for coping with the welfare problem because It offers
the possibility of getting Increased social product that
otherwise would not be forthcoming and at the same time
can provide valuable job experience and on-the-job train­
ing which will increase the earning capability of welfare
clients.

In addition, there is the psychic income associ­

ated with earning one's way as opposed to being dependent
on transfer income.

It is an attractive alternative,

however, only to the extent that there is a need for
public services that are not being provided through regular
budgeting procedures for the service in question5^ and to
the extent that there are unemployed welfare recipients
capable of providing those services.

This section, accord­

ingly, consists of a brief analysis of these two aspects.
Regarding the need for additional public services,
there is evidence that existing public agencies could, if
provided more manpower, provide additional or improved
services of social value.

When EEA funds were being

allocated in Allegan County public employers were asked
53

Due to the imperfections of public budgeting
procedures, services which the public would be quite pre­
pared to pay for go unprovided.

173
to submit requests for needed personnel and submitted more
than twice the seventy-two requests eventually filled.

54

An interview with the Allegan County road commissioner
revealed that they have been able to use to good advantage
the male welfare recipients sent to them under the terms
of a recently established work project and have the need
to employ many more such individuals on a regular basis.
At the national level, the National Commission on Tech­
nology estimated that 5.3 million jobs could be created
in the public sector to meet pressing needs, 1.2 million
55
of which are in the field of health.
Thus, it is quite
clear that there is a substantial need for addtional m a n ­
power in the public sector.

For purposes herein, the

crucial question is the extent to which welfare recipients
are capable of filling these manpower requirements.
This aspect involves both the capacity of welfare
recipients to be productive within the current job struc­
ture of public agencies and the possibilities for re­
structuring job descriptions to better utilize lower

54Given the 100 per cent federal financing this
should not be unexpected nor does it imply that they ex­
pected the individuals hired to produce the full amount of
their salary and, of course, a good bureaucrat would r e ­
quest twice what he hoped to get.
Nevertheless the requests
would not have been made if the people hired were not ex­
pected to be of some value.
55

Technology and The American Economy, Report of the
National Commission on Technology, Automation and Economic
Progress (Washington, D.C.:
Government Printing Office,
1966), p. 36.

174
skilled people.

With respect to possibilities within the

current job structure, there is a need for road and park
maintenance people, file clerks, typists, teacher's aides,
hospital aides, and a number of similar positions for
which many welfare recipients would be qualified, given
56
their health, age, education, and work histories.
Although no data were collected on either the
feasibility or willingness of public employers in Allegan
County to restructure their institutions to make greater
use of lower skilled manpower, there would theoretically
be considerable potential.

Jobs

can be broken into

smaller, less difficult components much as they were in
many industrial plants during WWII; paraprofessionals
could be used to improve delivery of health and other
social services; and, as a general rule, outside funds
earmarked for employment expwnditures would effectively
reduce the cost of capital relative to labor to the agency
in question leading to restructuring due to labor-capital
substitution.

Thus, it is quite evident that the existing

capabilities could be effectively used by the public sector.
The extent of the gains in income for welfare re­
cipients and corresponding saving in welfare

(transfer)

costs would be a function of the magnitude of the program

Harold Leap, Director, Allegan County Department
of Social Services, and current administrator of county EEA
funds, indicated in a telephone interview that he believed
there was substantial potential for employing welfare re­
cipients in the public sector in types of positions noted.

175
implemented and the value of

the social product produced

by the recipients employed.

The success of a public e m ­

ployment program would depend to a large extent on the
capacity of program administrators to allocate the funds
to employers who could make the best use of them.
Of all the policy alternatives considered, public
service employment appears to offer the greatest potential
for increasing earned income of recipients and reducing
welfare costs.

Programs to increase incentives or remove

barriers to employment, although effective, can have only
limited impact due to the number
G.

of jobs available.

Cumulative Assessment of
Policy Options
To this point each policy action has been considered

separately with no attention given to the cumulative impact
of the programs.

This section is addressed to this aspect

and consists of two parts.

First, the cumulative effect

of all programs excluding public employment and, secondly,
the cumulative effect with public employment is discussed.
1.

Cumulative Effect Without
Public Employment
Assuming no public service employment or other

job creation activity, the cumulative impact of the re­
maining programs would be much less than the sum of their
individual effects.

Available jobs are the constraining

factor and, and once a position is filled as a result of

176
one policy action it cannot be filled again as the result
of another.

To assess the total effect, it seems reason-*

able to begin with the program which had the greatest
estimated impact and proceed to ask what additional impact
the others could be expected to have.
it was estimated that elimination of the 100 hour
rule for ADC-U fathers would alone result in filling 59 of
147

(98 identified plus a 50 per cent miss factor) total

available job vacancies.

Of the 88 remaining positions,

rough estimates indicate that 23 are female specific, 33
have extremely high entry requirements, 18 remain vacant
because of information and location factors, and 14 remain
vacant because of insufficient work incentives.

No precise

empirical estimates of how much the other policy alterna­
tives might reduce these residuals are possible, but the
foregoing discussion of each alternative does provide
some indications.
It was estimated that implementation of an auto­
mobile credit program, considered by itself, would result
in an increase in employment of twenty persons.

If it is

assumed that the effect was in proportion to which families
were without automobiles, the cumulative impact would be
nearly as great.

Almost 90 per cent of the families with­

out cars are female headed and, thus, would not have been
affected by elimination of the 100 hour rule.
Implementation of a third program, improved edu­
cation and training, would have at best a very marginal

177
Impact.

Earlier, when considering education and training

independent of the other programs, it was observed that
such efforts would likely have little effect with the
possible exception of on-the-job training programs.

Con­

sideration in conjunction with the other programs further
reduces the probable effect, because many of the jobs into
which OJT trainees would be placed are already assumed
filled as a result of other programs.
With respect to improved labor market information
and job development, it was observed earlier that there
was little need for better job information per se, but
that one-to-one job development activity might be useful.
Without the other programs, one-to-one job development may
result in a significant increase in employment, but as in
the case of education and training, with many of the job
vacancies filled this potential effect would be reduced
to virtually zero.
Of the two remaining programs, reduction in the
welfare tax rate to 50 per cent and provisions for better
day care, it was predicted that they would have very little,
if any, effect if implemented individually, and there is no
reason to expect a different result if considered in con­
junction with other programs.
Without public employment or other job creation
activity, the total increase in employment would be limited
to approximately 100 jobs.

Of those vacancies which remain,

178
at least twenty-five have entry requirements substantially
greater that those possessed by ADC clients, and the others
are either sufficiently undesirable, poorly located, or
could be expected to remain unknown to clients despite
the programs.

Probably two-thirds or more of the initial

job vacancies would be filled by ADC fathers, because they
are more suited to men and because of the major impact
expected from eliminating the 100 hour rule.

Thus, even

if all programs were implemented nearly all the ADC women
and over two-thirds of all ADC fathers would remain unem­
ployed.
2.

Cumulative Effect With
Public Employment
The cumulative effect when a public employment

program is included depends largely on the magnitude of
such a program.

In order to employ all ADC clients capable

of working, one would need to create a total of over 900
jobs, over three-fourths of which were suited for females.
In addition, getting the desired client participation
would require incentive provisions such as elimination of
the 100 hour rule and extensive support programs including
transportation and day care arrangements.

To create 800

productive public service jobs in a single county would be
virtually impossible, but earlier analysis of the possi­
bilities indicated that a substantial number could be
created, perhaps, about half those required.

The total

179
cumulative effect would then be the 100 or so existing
positions that were filled plus the number of new positions
created.

Given the relatively small proporition of male

clients, the end result would probably be most ADC-U fathers
employed but several hundred capable women still unemployed
if all programs were implemented, including a massive public
employment program.

CHAPTER VII
INSTITUTIONAL REORGANIZATION AND
RESOURCE REALLOCATION

The foregoing parts of this study have sought to
determine what factors are important determinants of the
earned income potential of rural ADC recipients and,
correspondingly, what the possibilities are for increasing their earned income.

The analysis provided indications

of what type of action programs may be appropriate, but
what new specific policies are called for depends as much
on existing programs and institutional arrangements as on
the needs which have been identified.

Discussing only the

type of programs needed ignores the important matter of
delivery systems both with respect to possibilities for
increasing earned income through improved delivery of
currently offered services and with respect to alternative
implementation procedures for new programs.

Accordingly,

this chapter examines the current programs and services
available for ADC clients in light of what has been
observed regarding their earning potential and recommencations are made with respect to needed changes in both
resource use

(relative program size and content) and in
180

181
the institutions for delivering the services.

The chapter

closes with a discussion of high priority research needs.
A.

Current Programs to Increase
Earned Income of ADC
Recipients
Current programs for ADC recipients for the most

part are focused on meeting day to day n e e d s , e.g., pro­
viding a subsistence income; assistance in securing better
housing, medical care, and in collecting support payments
from absent parents; provision of protective services for
neglected children and general family counseling.

Sub­

stantial efforts are being made, however, to help clients
approach self-sufficiency through increased earned income.
These efforts include employment counseling, job placement
services, provision for various types of work training,
and supportive services.

The extent of these efforts and

the procedures employed, both operational and administra­
tive, are discussed briefly below.
With reference to employment counseling and job
placement services, all adult ADC recipients are first
assessed by DSS to determine those appropriate for e m ­
ployment, and those deemed appropriate are referred to
the Michigan Employment Security Commission (M.E.S.C.).
Clients referred to M.E.S.C. are interviewed, their skills
and work histories recorded, and if M.E.S.C. is aware of
jobs for which the client might qualify, he or she is
referred to them.

If no jobs are available, the clients'

182
records are placed on file for later referral if a job
should develop*

In the event that a job is available and

supportive services such as transportation, medical exams,
child care, or counseling are required, members of DSS can
be called upon to try to provide these services.

58

In addition to maintaining a file of potential
employees and of available jobs,
services provided

59

the job placement

by M.E.S.C. include efforts to "develop"

jobs by actively soliciting employers to utilize M.E.S.C.
placement services.

Little attempt is made, however, to

encourage employers to hire particular people or to find
particular individuals jobs.

Instead, the focus is on

making referrals when requested by employers, i.e., a
matching function only.**®
Regarding training or other services to improve
the employability of welfare clients in Allegan County,
not much is available.

At the present time the only major

program is Operation Mainstream.

Operation Mainstream is

cg

To facilitate this process as well as to aid in
the registration-interview process, an employee of DSS is
officed with the M.E.S.C. staff.
C Q

The file of available jobs is a computerized "job
bank" and includes vacancies from other parts of Michigan
as well as Allegan County*
**°M.E.S.C. officials are assisted in this task by
manpower agents in the Cooperative Extension Service under
terms of an experimental program dubbed Operation Hitch­
hike, which began in July, 1971.

183
a federal program designed to provide work-training and
employment acitivities for chronically unemployed poor
adults who have poor employment prospects and are unable
because of age or other reason to secure appropriate em­
ployment or training under other programs.
Essentially the way the Allegan County program
operates is that the local CAP

(Community Action Program),

under terms of a contract negotiated with Manpower Admini­
stration , U.S. Department of Labor, contracts with govern­
ment agencies and nonprofit organizations in the county to
provide relevant work experience for eligible individuals.
The welfare recipients who participate are referred by DSS
to the Operation Mainstream office of CAP where efforts
are made to place them in one of about 50 slots available
for the county.

If placed they are employed for 32 hours

per week at $1.60 per hour for 26 weeks, with possibilities
for extension of the time period.

At the end of the pro­

gram Operation Mainstream staff attempt to find permanent
employment for the people involved.
Out of 307 welfare clients placed in the program,
61
full-time employment was found for 159.
The potential
impact of this program, however, has recently been reduced
as a result of implementation of the 100 hour rule for
ADC-U fathers.

Under terms of the rule, if ADC-U fathers

6^The crucial question is for how long they re­
mained employed, but that unfortunately is unknown.

184
were enrolled in the program at 32 hours per week they
would lose all public assistance and be forced to exist
on $51 per week

(32 x $1.60}.

In addition to Operation Mainstream, the only other
training and work experience services available are a few
occasional on-the-job training slots provided by the
Department of Vocational Rehabilitation and the possi­
bilities for employment of welfare clients with Emergency
Employment Act funds, neither of which offers significant
possibilities at the present time.

It bears noting at

this point, however, that efforts are underway to establish
a WIN team

(Work Incentive Program)

in Allegan County.

This

program is designed specifically for ADC recipients and
would offer a wide range of employment services.
Supportive services now provided include day care,
arranging for medical exams, and trying to remove barriers
to accepting employment as they develop.

These are the

responsibility of DSS, and, for the most part, they are
able to provide the needed day care arrangements and
medical care.

With respect to other needs such as trans­

portation, there is very little that they are able to do
at the present time.
In total, the employment services available for
welfare recipients in Allegan County are extremely limited
given the apparent need.

M.E.S.C. provides placement

services but does not have the resources for one-to-one

185
job development acltivities.

The Department of Social

Services assesses the employability of ADC clients, refers
them accordingly, provides supportive services, and aids
M.E.S.C. in work registration and placement, but most of
their resources are employed in determining eligibility
for assistance and in providing services in meeting day-today crises, e.g., housing, fraud, support payment collec­
tion, etc.

CAP provides a significant number of Operation

Mainstream positions, but few other training or trainingrelated services are provided.

Clearly, the results of

this study indicate that some changes are in order.
B.

Needed Changes in Resource
Allocation
Issues of resource allocation involve two aspects:

reallocation between functions or programs, but within the
same basic objective or problem area; and reallocation
between objectives, e.g., welfare and crime control.

Con­

sideration of the latter, however, requires knowledge of
needs other than welfare or at least rate of return esti­
mates

and, thus, is not considered here.
In essence, the question of reallocation between

functions involves asking what potential gains could be
had in terms of increased earned income for welfare clients
and reduced welfare costs from changing the emphasis placed
on particular approaches to the problem.

From the earlier

analysis, it appears that four functions merit greater

186
relative emphasis than they currently receive:

job

development activities* programs which provide on-the-job
training and experience* public employment* and transpor­
tation provisions.
As discussed earlier* job development means more
than job information.

It also includes efforts to encourage

employers to hire particular individuals they would not
hire on the basis of standard indicators of capability
and a concerted attempt to identify available jobs.

To

some extent, job development also involves working with
employers to get them to restructure their labor require­
ments more in line with available manpower.

Currently,

very little is being done in the way of job development
other than conventional placement services.

It would

seem that with the number of job vacancies for which
welfare recipients appear to be qualified* plus a seeming
willingness on the part of employers to participate in
programs involving the disadvantaged, that increased
emphasis on finding jobs for and placing particular
people would be appropriate.

It needs to be emphasized,

however* that there is little indication that an increase
in job information per se would be very useful.

What is

needed is efforts to get employers to offer limited skilled
people opportunities with a future* efforts to get employers
to restructure their needs according to available manpower*
and associated efforts to get clients to accept those
positions.

187
Related to the job development aspect Is the
matter of on-the-job training and experience.

Given the

number of job vacancies where some experience is a require­
ment for hiring and the importance of work experience as
a determinant of earning potential, it would seem that
more emphasis should be placed on providing appropriate
job training and experience for welfare clients.

To some

extent this can be accomplished through intensive job
development activities, but for those not sufficiently
job ready special programs are needed.

At the present

time, the only such program i B Operation Mainstream, which
is not only limited in capacity but also excludes ADC-U
clients from participation.
Due to both the absence of jobs and the need to
provide relevant work experience, a public employment
program merits considerable emphasis, but currently no
such program exists in Allegan County with the exception
of an occastional EEA slot for which a welfare recipient
is able to qualify.
The fourth function that merits greater emphasis,
i.e., transportation provisions, is an important support­
ing function for both job development and on-the-job
training programs.

It was earlier observed that lack of

transportation is a significant barrier to employment,
but at the present time efforts to solve this problem are
limited to informal attempts to arrange car pools and the

188
like.

This is a difficult problem to solve, but perhaps

a loan program such as that suggested in Chapter VI would
be a proper direction to investigate further.
Increased resources devoted to these four functions
means fewer elsewhere unless more funds are to be allocated
to the welfare problem.

From within the agencies involved

it is difficult to identify where the reductions might
occur.

A prime candidate, however, would be to change

the current package of administrative rules which force
the DSS to devote much of its resources to determining
eligibility for assistance and enforcing regulations as
opposed to working on solutions to the need for welfare
assistance.

If eligibility requirements were simplified

and financial incentives as opposed to work requirements
used to encourage employment, a substantial portion of DSS
resources could be devoted to work training and experience
programs and other activities directed at removing the
need for assistance as opposed to just providing it.

62

Such a change would also free M.E.S.C. resources for in­
tensive job development activities.

At the present time

employable welfare recipients must report once monthly to
M.E.S.C. and secure verification that they are seeking
employment.

If more emphasis was placed on work incentives

and less on enforcing work requirements, this would be
unnecessary.
®20ne of the more attractive features of a guaranteed
income plan is that it would facilitate this change.

189
C.

Suggestions for Institutional
Reorganization
Proper institutional arrangements are crucial for

efficient and effective delivery of needed public services
irrespective of the type of service involved.

They d e ­

termine not only how well a particular program is delivered
but also what programs are used to address a particular
need or problem.

With a welfare system as complex and

bureaucratic as the current one, there are innumerable
institutional issues that could be addressed here.

There

are two, however, which particularly merit attention.

The

first is the need for increased integration of those m a n ­
power services directly involving welfare clients, and the
second is the need for regionalization with respect to
certain social welfare functions.
Regarding manpower services for welfare clients,
it is the opinion of this author that such services could
be delivered more effectively and efficiently if the
current responsibilities of DSS were expanded to in­
corporate the work registration, job development, and
training functions now performed for welfare clients by
M.E.S.C. or other agencies.

Under the current system

where particular services are the domain of particular
agencies, the focus is on measures of how much of that
service is provided as opposed to asking what the welfare
clients need.

In other words, the role of M.E.S.C. is to

register clients, identify jobs, and make appropriate

190
referrals; the job of DSS is to provide supporting services,
e.g., medical exams and child care; and the job of the
Operation Mainstream staff is to provide work training
slots.

But, the role of identifying the "real" needs of

welfare clients and the relative importance of each of the
functions does not rest with any single agency.
Another reason for centralization is that the
effectiveness of, for example, finding an individual a job
often depends on supporting services such as day care being
provided and, thus, coordination is critical.
there

Although

is now significant interagency cooperation, this

approach often works well only as along as both agencies
attach similar priorities to the services involved and
the proposed action does not threaten the size of the pie
belonging to one or more of the agencies involved.

There­

fore, it would seem that greater centralization of authority
and responsibility for these services may be worthy of
consideration.
The current Work Incentive Program (WIN), which is
operating in some Michigan counties but not yet in Allegan,
does in fact provide greater centralization of manpower
services for welfare clients and may be an appropriate
route to follow.

However, WIN is not administered as

part of DSS and thus does not possess the potential ad­
vantages of having the same agency who is responsible for
welfare payments also responsible for the services directed
at reducing those costs.

191
The second institutional issue of interest is the
appropriateness of focusing on larger geographic units
(regionalization) for delivering welfare services.

There

has been a trend in this direction for some time, and the
question is whether it should continue and, if so, in what
manner or in what areas.
At the present time there exists significant
regionalization with respect to delivery of vocational
rehabilitation programs and other assorted manpower
services.

Also, there is substantial cooperation between

individual county social service departments regarding the
operation of day-to-day programs.

Given the presence of

scale economics and the fact that functional labor market
areas and

other socio-economic conditions overlay county

boundaries, this would seem to be most appropriate.

What

is missing, however, is well coordinated regional activity
for problem diagnosis and program design.
Earlier in this study it was observed that the
characteristics of the welfare population vary signifi­
cantly between areas and also that economic conditions are
dynamic and vary from region to region.

In addition, it

was observed that very little was known at the county or
regional level about the characteristics and needs of their
particular welfare clientele.

Thus, there would appear to

be a distinct need for sub-state level efforts to identify
needs and design programs on a relatively continuous basis.

192
For the above reasons, the possibilities for
establishing regional "diagnostic units" within DSS should
be given serious consideration.

They would be responsible

for monitoring the welfare needs of a region and providing
an input into improved resource allocation and welfare
program administration.

They would draw upon and coordi­

nate their efforts with other agencies and groups interested
in similar aspects of the same domain, e . g . , economic de­
velopment organizations and manpower planning groups.
D.

Needed Research
Although a number of policy implications and con­

clusions have been drawn, this study, as it was designed
to be, is more explorative than conclusive.

A major purpose

of the study was to identify those aspects of the "welfare
problem" which most merit further investigation.

This is

in addition to the usual range of unanswered questions and
uncertainties

which flow from any major study.

Given what has been learned about the relative
importance of the problem parameters, the following major
research topics are suggested:
1.

Cost-benefit evaluation of the feasibility of a
public employment program directed at welfare
recipients, including consideration of the number
of productive positions for low skilled people
which could be created and estimates of the net
social value product that would be produced.

193
There are indications that a public employment
program offers considerable potential for both increasing
the productivity of welfare recipients and simultaneously
meeting some of the pressing needs for increased public
goods and services.

The basic research question involves

the extent of this potential in terms of net social gain.
2.

Development of procedures for administering a
public employment program.
One of the crucial barriers to effective use of

the public employment option is the difficulty in allo­
cating the employment slots to various public agencies in
a manner that will maximize social gain.

With the cost to

the hiring agency being very low, each agency will seek
additional employees even if they are of little value to
them.

Unless some procedure is worked out to counter this

problem, the result will be that the most effective bureau­
crats will get the most positions, which will not likely
be consistent with maximizing social value product.
3.

A cost-benefit study of a program emphasizing
one-to-one job development efforts.
It has been observed that there exists considerable

potential for increasing earned income of welfare recipi­
ents through efforts to encourage employers to hire par­
ticular individuals or, said differently, by helping
clients sell themselves.

The crucial unanswered question

is whether the costs of such a program are prohibitively

194
high relative to the gains.

Efforts of this type are part

of the WIN program in some counties a n d , t h u s , a complete
analysis of such a program may be quite feasible.
4.

An in-depth study of transportation as a barrier
to employment in rural a r e a s , including consider­
ation of alternative methods for alleviating the
barrier and the attendant costs of those methods.
It is known at this point that transportation is

a significant determinant of the earned income potential
of welfare recipients in rural areas.

A fledging attempt

was made in this study to assess the gains associated with
a program that would alleviate this problem, but more
attention needs to be given to this aspect, and program
costs need to be considered.
5.

An estimation of projected manpower requirements
for selected rural areas.
Although there is little evidence of skilled m a n ­

power shortages in Allegan County at the present time,
there have been and will likely continue to be changes in
labor requirements.

To the extent that one can predict

these changes, it may be possible to encourage appropri­
ately different career choices for area residents and,
thus, prevent a future situation where the individual is
unable to adjust to changes in labor demand and becomes a
welfare client.

Furthermore, it would facilitate identi­

fication of needed education and training programs for the
general population and for welfare clients.

195
These five projects would likely yield the highest
research payoffs with reference to current information needs
associated with the design and administration of programs
directed at increasing the earned income of welfare recipi­
ents.

There are other research needs, however, which merit

some attention.

They are:

(1) estimation of probably re­

sponses to financial incentives to work;

(2) feasibility of

vocational rehabilitation for those welfare clientB with
certain types of medical problems; and

(3) analysis of the

effects a guaranteed income would have on rural communities,
particularly those which are relatively depressed.

CHAPTER VIII
SUMMARY AND CONCLUSIONS

A useful summarization procedure to follow is to
reiterate what has been found or concluded with respect to
each of the stated objectives of the study.
Regarding the first objective, which was to describe
the ADC clientele and the Allegan County low skills labor
market, several points merit enumeration.

With respect to

the characteristics of ADC clients, it was found that:
1.

The ADC clients are relatively young, mean age of
thirty-three; have for the most part less than ten
years of education; approximately 20 per cent have
a serious health problem; nearly 35 per cent do not
own an automobile; about one-fourth reside in the
country; and 12 per cent are from racial minorities.

2.

The Allegan County ADC population, although much
less qualified for employment than the general
population, is for the most part better qualified
than the total Michigan ADC population, which is
predominantly urban.

Although there was some

difference in education levels, the most signifi­
cant difference was with respect to work histories
and experience.

The employment histories of Allegan

ADC recipients revealed that a larger number of
196

197
clients have rather stable work histories and have
had higher skilled job experience than is charac­
teristic of the Michigan ADC clientele in general.
Regarding the county labor market, the following
significant observations were made:
1.

The Allegan County labor market is reasonably
diversified, but in recent years has been plagued
by high unemployment due somewhat to the closing of
major manufacturing plants.

2.

There are relatively few current job vacancies in
the county, but many of those which do exist are
relevant positions for welfare recipients.

The

greatest demand was for operatives, nonfarm laborers,
service workers, and craftsmen or foremen.

Nearly

60 per cent of the vacancies required less than a
high school education, but over 50 per cent re­
quired some training or experience.
3.

For the most part, employers did not appear to over
specify job requirements, and there was evidence of
willingness to make special efforts to hire the
disadvantaged.
With respect to the second objective, which was to

diagnose the obstacles to increasing earned income of ADC
recipients and assess their significance, the analysis
yielded some interesting results.

In attempting to d e ­

termine what client characteristics are important to earned
income potential, or conversely, what characteristics func­
tion as barriers to employment, it was observed that health,
age, and work experience were important determinants of

198
earning capability, and the absence of an automobile and
the presence of young children were significant barriers
to joining the work force.

The most interesting observation

was that years of education is quite unimportant over the
range that characterizes welfare clients.
The major constraining factor for all recipients,
however, was the availability of jobs.

There are few jobs

available, relative to the number of recipients, but of
those that do exist many would be suited to the capabilities
of welfare clients.

It was further observed that entry

wages are sufficient to permit self-support for many ADC
families.
The third objective was to suggest and evaluate
policy alternatives for increasing the earned .income of
welfare clients, i.e., remove the obstacles to employment.
Seven alternatives were considered:

elimination of the

100 hour rule for ADC-U fathers, reduction in the welfare
tax rate, transportation provisions, labor market infor­
mation, education and training, improved day care programs,
and public service jobs.

Of these alternatives, it was

concluded that a public service employment program offers
the greatest potential in that it would provide needed
j o b s , could easily provide a work training-experience
component, and would also contribute to the provision of
needed public service.

199
A second alternative offering considerable potential,
but limited in effectiveness by the availability of jobs, is
elimination of the 100 hour rule for ADC**U fathers.

If this

rule was eliminated it was estimated that work incentives
would increase an average of about $140 per month, resulting
in an increased income gain to clients of $11,794 per month
and a monthly saving in welfare costs of over ten thousand
dollars.
With respect to the other incentive proposal, it
was observed that a flat 50 per cent marginal tax rate
similar to that proposed in FAP would not have a signifi­
cant effect on incentives or, accordingly, on employment,
income, or welfare costs.
Regarding transportation, it was concluded that
improved transportation provisions had merit, but that it
would be difficult to implement a viable program, being
that private automobiles are the sole means of transpor­
tation in rural areas.

Assuming a "far out" guaranteed

loan program for the purchase of automobiles, it was
estimated that there would be an increase in income for
welfare clients of $3,140 per month and a similar saving
in welfare costs.
Consideration was given to the need for education
and training programs.

With due recognition that data on

labor demand projections and a larger geographic labor
market would be necessary to draw very meaningful

20 0

conclusions, it was concluded that neither formal education
or institutional training would contribute significantly
to the earned income possibilities open to county welfare
r ecipients, but that on-the-job training programs may con­
stitute an appropriate policy action.

On the assumption

that institutional training may be called for if future
labor needs and a larger market were considered, the
training capability of the welfare population was assessed
and it seemed that a large proportion of the welfare p o p u ­
lation could benefit from institutional training if there
were sufficient labor demand to warrant it.
In the case of job information, it was concluded
that little gain could be expected from improved job in­
formation per se, but that greater emphasis on one-to-one
job development activity was warranted.
With respect to day care, there was no evidence
that the provision of more or better day care facilities
would result in an increase in employment of ADC mothers.
The last objective of the study asked for infer­
ences regarding needed changes in public welfare policies
for rural areas.

Analysis of current welfare programs,

in light of what had been determined regarding the factors
which influence earnings potential and the probable impact
to be expected from various types of programs, revealed
that relatively more emphasis should be placed on public
employment, intensive job development, job training and

201
experience (OJT) , and transportation provisions.

In

addition, it was estimated that welfare clients would be
much better off and welfare costs lower if the 100 hour
rule for ADC-U fathers was eliminted.
With reference to administration of the welfare
system, it was suggested that manpower services for welfare
clients be centralized in DSS and that regional diagnostic
units be established for the purpose of monitoring welfare
needs and contributing to the design and evaluation of
welfare programs.
The overall objective of the study, as reflected
by the title, was to determine the potential for increasing
earned income of welfare recipients in rural areas.

Each

of the conclusions and recommendations has been made on
the basis of the situation in a single rural county, which
makes it difficult to draw valid inferences for rural areas
in general, but in the case of Allegan County alone it is
quite clear that considerable potential exists for in­
creasing earned income of welfare recipients if the proper
policies were implemented.

Although explicit consideration

was not given to the costs associated with such policies,
there is reason to believe that in most instances the gains
to welfare clients and the savings in welfare costs would
more than compensate for the program or policy in question.
There is little reason to suppose that the situation
is different for other rural areas in Michigan, but there
is some evidence that the potential and corresponding policy

202

needs in urban areas are somewhat different.

The most

significant difference appears to rest with the capabilities
of the welfare clients involved.

Rural area clients appear

to be more employment ready than their urban counterparts#
which means that less investment in training and related
activities is needed before they become employed.

To the

extent that rural recipients are more capable, programs
designed primarily for the job ready such as job develop­
ment and supporting services# and to a large extent public
employment# should be given greater relative emphasis in
rural areas, whereas in urban areas programs with a train­
ing focus may merit the emphasis.

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P overty, Rural Poverty in the United S t a t e s . W a s h ­
ington, D . C . : Government Printing O f f i c e , 1968.
Kesselman, J.
"Labor-Supply Effects of Income, Income Work,
and Wage Subsidles." Journal of Human Reso urces,
Summer, 1969.
Kurth, E. A.
"Social Implications of United States Manpower
Training Program."
Review of Social E c o n om i c s ,
March, 1968.
Levitan, Sar A.
Programs in Aid of the Poor for the 1 9 70's.
Baltimore's
The Johns Hopkins Press, 1969.
Michigan Department of Social Services.
Adaptation of the
Bureau of Labor Statistics' Lower Standard of Living
for Assistance Programs in Michi g a n , by Judith
L achman. Research Paper No. 4. L a n s i n g , M i c h i g a n ,
1971.
Michigan Department of Social Services.
Social Services
Board Orientation Handbook. Lansing, Michigan, 1971.
National Association of Counties.
NACO News and V i e w s ,
II, No. 11 (April 20, 1970).
Nichols, Jack L.
The Relocation of the Hard Core Unempl o y e d .
Minneapolis Rehabilitation Center, Incorporated,
February, 1968.
Poverty:

Four Approaches, Four Solutions. Proceedings of
the First Annual Conference on Social Issues at the
University of Oregon.
Published by the Associated
Students of the University of Oregon, Eugene,
Oregon, 1966.

207
Reich, Charles.
"Individual Rights and Social Welfare:
The
Emerging Legal Issues." Yale Law Jou r n a l , LXXIV
(1965).
Rossi, Peter H . , and Blum, Zahava S.
"Class, Status and
Poverty." On Understanding P o v e r t y . Edited by
Daniel P. Moyn i h a n . New York:
Basic Book Inc.,
1968.
Schultz, T. W.
"Investment in Human Capital." American
Economic R e v i e w , LI, No. 1 (March, 1961).
_

.

"Public Approaches to Minimize Poverty."
Poverty
Amid Affluence. Edited by Leo Fishman.
New Haven,
Connecticut:
Yale University Press, 1966.

Sheppard, Harold L.
The Nature of the Job Problem and the
Role of the New Public Service Employment!
Kalamazoo, Michigan:
The W. E. Upjohn Institute
for Employment Research, 1969.
Thurow, Lester C.
"The Causes of Poverty." Quarterly
Journal of Economics, LXXXI, No. 1 (February, 1967).
_

.

Poverty and Discrimination. Washington, D.C.:
The Brookings Institutions, 1969.

Tobin, James.
"The Case for an Income Guarantee."
Public Interest, Summer, 1966.

The

Tweeton, Luther G.
Rural Poverty:
Incidence, Causes and
C u r e s . Processed Series P-590R, Oklahoma State
University Experiment Station, Stillwater, Oklahoma,
July, 1968.
Ulmer, Melville J. The Welfare S t a t e .
Mifflin C o . , 1969.

Boston:

Houghton-

U.S. Department of Agriculture.
Economic Research Service.
The Role of Education in Alleviating Rural P o v e r t y ,
by Luther G. Tweeton.
Agricultural Economic Report
No. 114.
Washington, D.C.:
Government Printing
Office, 1967.
U.S. Department of Agriculture.
Economic Research Service.
Welfare Reform:
Benefits and Incentives in Rural
A r e a s , by Fred Hiner and Max Jordan.
No. 470.
Washington, D.C.:
Government Printing Office, 1971.
U.S. Department of Labor.
Rural Manpower Dilemmas. A re­
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Washington, D.C.: Government Printing Office.

208
Weisbrod, Burton A.
"Conceptual Issues in Evaluating
Training Programs." Monthly Labor Review, LXXXIX,
No. 10 (October, 1966).

APPENDICES

APPENDIX A
PROCEDURES FOR CALCULATING WELFARE
BUDGETS, ALLEGAN COUNTY

209
PROCEDURES FOR CALCULATING WELFARE
BUDGETS/ ALLEGAN COUNTY

Table A —1 displays the procedure used for
calculating welfare budgets for the categorical assistance
programs/ where the individual or family is assumed to have
no other income.

As an illustration, an ADC family of

four in Allegan County would receive $216 per month plus
a family type shelter allowance of actual cost to a maximum
of $80.

In addition, the family would be eligible for the

miscellaneous allowances indicated.
If the case involves outside income, the size of
the grant is reduced by 6 6 $ for every dollar earned, e x ­
cluding the first $30 plus work expenses.

210
TABLE A-l.— Monthly Welfare Assistance Allowances.
Household Needs
Number of Persons
in Sligible Group

Total
Needs

Personal
Needs

A (B + C)
One - Householder,
living alone
(Adult)

$

79.00

"f SJi "9

Utilities

C (D + B)

D

B

58.00

$ 21

$ 14

B

$

Household
Needs

$

7

One - Householder,
living with others,
no other grant
(Adult)

74.00

53.00

21

14

7

One - Householder, eating
in restaurant
(Adult)

92.00

71.00

21

14

7

One - Living with others,
personal needs only
(Adult)

e

e

53.00

*

e

e

•

e

e

One - With others,
personal needs,
eating in restaurant
(Adult)

e

e

71.00

e

e

e

•

•

e

One - With self-supporting
relatives
(ADC Child)
Legal dependent
(all categories)

60.75

e

e

e

•

e

e

e

e

46.00

•

e

e

e

e

e

e

«

Two

115.50

93.50

22

14

8

Three

165.25

140.25

25

15

10

Four

216.00

187.00

29

18

11

Five

263.75

233.75

30

18

12

Six

313.50

280.50

33

20

13

Seven or more

Add $46. 75 for each additional person.

Monthly (4.3 weeks) Shelter Maximuma
Board and Room

$ 105

All other family-type shelter

$

80

If heat or utilities or both are pro­
vided by landlord« add the appropriate
amount(e) from Columns D and B to the
shelter maximum above to determine
whether the total actual shelter cost
can be budgeted.
(Not applicable for
sleeping room or board and room.)
Revised as of December# 1971

Miscellaneous Allowances
Hospital sundries
Telephone, OAA, AB, AD
Speoial diet, OAA, AB, AD
Household operations (householder
only), OAA, AB, AD
Guide Dog, AB
Incidentals, ADC
Incidentals, adults, long-term
care
Incidentals, adults, room and
board, permit home, home for
aged, or residential care
facility

9.00
4.00
6,00
5.00
10.00
20.00
20.00

23.00

APPENDIX B
FOOD STAMP ALLOWANCES

211
FOOD STAMP ALLOWANCES

The food stamp program of the U.S. Department of
Agriculture is administered in Michigan by the State Depart­
ment of Social Services through county departments of social
services.
Under the food stamp plan eligible families exchange
their food money for food coupons of higher monetary value.
The bonus or free coupons, paid for by the federal govern­
ment, increase the purchasing power of the household.
Families can use the coupons to buy food at authorized
retail food stores at prevailing prices.
All families living in the county who are preparing
meals in the home and who meet the limitations on inome and
liquid assets, as shown in Table B-l, are eligible for food
coupons.

In addition, all recipients of public assistance

are automatically eligible.
Using a four-person household as an illustration,
non-assistance cases receive coupons according to the
schedule in Table B-2.
Public assistance cases receive coupons according
to the schedule in Table B-3.
Any food or food product for human consumption may
be purchased with coupons except mean and meat products
which are imported and other foods which are identified on
the package as being imported.

However, coffee, tea,

212
TABLE B-l.— Maximum Income and Liquid Assets Allowed for
Food Stamp Eligibility.
Maximum Income a
Per Month

Number in
Household
1
2

3
4
5
6

7
8

person
persons
persons
persons
persons
persons
persons
persons

Each additional
person add

Liquid b
Assets

$ 210
250
290
330
370
410
450
490

$ 1000
1500
1500
1500
1500
1500
1500
1500

$

$

40

0

aAdjustment of income may be made for unusual
expenses such as high shelter cost, child care, or medical
expenses.
Liquid assets include cash, bank accounts, savings
accounts, stocks, bonds, checks, money orders, or other
assets that can be promptly converted intoi cash.
TABLE B-2.— Food Stamp Schedule for Non-Assistance Cases:
Four-Person Household.
With Monthly
Income of
$ 140
150
170
190
210

230
250
270
290
310

-

149.99
169.99
189.99
209.99
229.99
249.99
269.99
289.99
309.99
330.00

Family
Pays

Total Coupons
Received

$ 37
42
48
54
60

$ 106
106
106
106
106
106
106
106
106
106

66

72
72
76
80

Free
Coupons

...

$ 69
64
58
52
46
40
34
34
30
26

aCoupons received for the indicated payment increase
approximately $28 for every additional family member.

213
TABLE B-3.— Food Stamp Schedule £or Public Assistance Cases.
Household
Size

Family
Pays

1
2

$ 16
31
45
60
73

Total
Coupons
Received

6

88

7
8

96
106

9

110

28
56
84
106
126
144
162
180
196

10

115

212

3
4
5

$

Free
Coupons
$ 12
25
39
46
53
56

97

bananas# and cocoa, although imported, can be purchased
w i th food coupons.

Coupons may not be used to purchase

non-food i t e m s , such as alcoholic bever a g e s , soaps and
detergents, tobacco products, pet food, vegetable seeds,
etc.

66

74
86

APPENDIX C
JOB VACANCY SURVEY QUESTIONNAIRE

214
JOB VACANCY SURVEY QUESTIONNAIRE

Employer Code __________
This information is collected by Allegan County Cooperative
Extension to be consolidated with other employer data for
use in career guidance and the development of training
opportunities.
This is not a job order to the Employment
Service or any other agency.
Type of
Industry

Descriptive job title, or a
description of a job which is
currently vacant and for
which outside applications
would be considered.
Circle if this job is

(permanent), (30 days or less)
(seasonal), or (under 35 hours/wk.)

Number of these vacancies which
you hope to fill in the next 30 days
Number of these vacancies which
have existed for the past 30 days
Minimum general education required for hiring:

(Check one)

□

None

□

Some College

□

Basic Literacy

□

Junior College Degree

□

Some High School

□

4-year College Degree

n

High School Equivalent

□

Advanced Degree

215
Minimum length of completed occupational or skill training
course work required for hiring:
(Check one)
7 to 12 months

None
Less than 4 weeks
(

t 4 to 8 weeks

I

_I 2 to 6 months

I

I 13 to 24 months

I

t More than 2 years

Is this usually from a:
i

I High School Vocational Course

I ~I Trade School or Skill Center
Would appropriate work experience
substitute for this training?
Minimum work experience in
this or a related occupation
as a requirement to be hired.

I~
C

fCommunity College
3 Apprenticeship
(Yes) or (No)

1 1 None
1 I Under 3 mos.
CZ3 3 to 12 mos.
I IMore than 1 year

Would you substitute your on-the-job
training for the above job qualifi­
cations if, your training costs were
reimbursed?
What salary would you expect to pay
a person with minimum acceptable
qualifications for this job?

(Yes) or (No)
(Hour)
(Month)
per (Year)
(Circle One)

Use the reverse side for any comments you want to make
about difficulties you have had in hiring or retaining
employees in this position.

This information will be treated as confidential research
data and will not identify your firml

APPENDIX D
ADC CASELOAD QUESTIONNAIRE

216
ADC CASELOAD QUESTIONNAIRE
INSTRUCTIONS FOR QUESTIONNAIRE
Purpose
The information requested by this questionnaire is
to be used for several purposes.
The most important are:
1.

To provide Allegan County social services employees
and other conerned individuals with a relatively
detailed description and analysis of the ADC case­
load.

2.

To facilitate diagnosing the problems which need to
be solved if unemployment or underemployment of ADC
clients is to be significantly reduced.
Specifi­
cally, we would like to know the relative importance
of, for example, insufficient labor market i n f o r ­
mation, lack of marketable skills, absence of child
care facilities, insufficient jobs, lack of access
to transportation and work incentives.

Instructions
Each of the questionnaires is identified by case
number and name of payee and also includes the load number
of the case worker to whom the case is assigned.
Each of
the cases involved was selected on a random basis (25 per
cent sample) from the total ADC caseload.
It is important to keep in mind that the emphasis
of the questionnaire is on those factors or characteristics
which relate directly or indirectly to issues of em p l o y ­
ability.
It is expected that much of the requested i n f o r ­
mation will not be available for many cases.
Please do the
best you can and leave the remainder blank.
If in doubt regarding how to respond to a particular
question, please pencil in an explanation.
The numbered instructions below correspond to
questions with the same number.
1.

Name.
Listed only for ease of identification of the
case in question.
Will be dropped once the information
is compiled.

217
2.

Address.
Location of people relative to jobs is
important.
Thus, please list complete addresses, in­
cluding R R # 's where applicable, etc.

3.

If client has lived in Allegan County intermittently,
respond in terms of the total time in residence, not
just the current continuous period.

4.

Give best estimate available, whether it be for the
most recent month or not.
For earned income, do not
subtract out disregards.

Questions 5, 6 , 7, 8 , 9, 10, 11, 12, & 13 are selfexplanatory.
14.

If there are more than 2 children 16 or over, use back
of questionnaire.

15.

Note that it may be appropriate to check more than one
box.
For example, if the Day Care Home is that of a
relative, both the box after Day Care Home and the box
after relatives should be checked.
"Other arrangements"
refers to those situations where some day care arrange­
ment is used, but the client is not enrolled in the DSS
child care program.

16.

Self-explanatory.

17 & 18. Note any disabilities that could be expected to
affect the employability of the client or spouse.
If
possible, note the magnitude of the disability with
respect to employability.
19.

Self-explanatory.

20.

Self-explanatory except for the category "actively
seeking work."
Indicate that the client is actively
seeking work if :
(1 ) she is unemployed but looking
for work? (2 ) she is employed part-time but would pre­
fer a full-time job; or (3) she is classified as having
no marketable skills but would like to work.

Questions 21, 22, & 23 are self-explanatory.
24 & 25. Formal education means general education at the
elementary, high school, or college levels. Vocational
education means occupationally oriented education or
training.
Hopefully, the questions on formal education
are self-explanatory.
Regarding the questions on v o ­
cational education, some clarification is in order.
If
the client received training of a vocational nature in
high s c h o o l , e.g., mechanics, carpentry, typing, or

218
shorthand, check the box and indicate type and extent
of training.
The same applies for the other types of
programs or curriculums. By OJT is meant the acquisi­
tion of marketable skills through job experience (it
may be a relatively formal program or simply relevant
job experience). Indicate military training only where
relevant "civilian" skills were acquired.
26 & 27.
By type of work is meant a very brief job descrip­
tion, e.g., sales clerk, gas station attendant, etc.
By type of industry is meant such things as dairy farm,
retail store, automobile repair, etc.
The other parts
of the question are hopefully self-explanatory.

219
Case number ______
1.

Name of payee

2.

Address _____

ADC case 1

(Number)
3.

Load No.
i or ADC-U case I

(Street)

(City)

Payee has lived in Allegan County for how long
necessarily at the same address)?
Less than

1 year

I

I

Less than 5 years

I

I

Less than

3 years 1

1

More than 5 years

I

I

1 No

I

Payee is from the migrant stream?
4.

(not

Income

Yes I

i

(estimate for most recent month):

Total requirements $________
Earned income $

Grant $____

Support ordered $_____

Other income $_____
5.
6

Payee:

Mother |

I

Father I

1

Other ____________

. Is second parent present in the home?
Yes *

1

No i

I If not present, ignore questions
with an asterisk.

7.

Age of payee _ _ _ _ _

9.

Race of payee ____________________

10.

*8 .

Age of second parent ___

Is family participating in the food stamp program?
Yes I

I

No I

I

Quantity of stamps $_________
Size of bonus $_________

11.

Length of time on ADC:

12.

Was client ever on ADC before?
For how long?

months
Yes I

_________ months

\

No I

I

\

220
Reason terminated:

Sufficient other incomeT

|

Other _______________________________
13.

Number of dependent children _____
Number less than age 6 _____
Number age 6 through 11 _____
Number age 12 through 15 _____
Number age 16 or over _____
Number of other legal dependents _____

14.

List below the name and requested data for each
dependent child age 16 or older:
(1)

Name _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Age ______
If not a

student, is

Yes

No

he

or she employed?

Unknown

Referred to M.E.S.C.? Yes
(2)

No

Name _ _ _ _ _ _ _ _ _ _ _ _ Age ______ Sex______
If not a
student, is he
or she employed?
Yes

No

Unknown

Referred to M.E.S.C.? Yes
15.

Sex___ __

No

Child care arrangements:
What child care arrangement is client currently using?
None

|

Day Care Aid
Day Care Center

|

Day Care Home

j

j

□

Relatives

1

I

C D

Other arrangements__ )___ j

Estimated monthly costs $ _________
Do any of the children have health problems or other
characteristics requiring more than normal care?
If
so, please specify the nature of the problem.

221
16.

Has family been referred to services in the last
90 days?
___
___
Yes 1
I
No I
I
Type of service:
Protective services
Housing services
Fraud
Support
Emergency assistance
Supplemental
Interpersonal family
relationships

j I
j— j
1— J
i I
I J
CH)

Other __________________________
17.

Physical or mental disabilities of payee: ___________
________________________________________________ None I

*18.

Physical or mental disabilities of second parent: __
_ _ _ _ _ _ _

19.

I

None

a

Status of father with respect to the family's
eligibility:
Death
Desertion
Divorce or legal separation
Institutionalized
Incapacitated
Unemployed
Step father case

I- ..i
i I
i -I
j ~i
1. i
i m
I >

Child has no legal father f"~~i
20.

Status of mother:
Death
Desertion
Divorce or legal separation
Institutionalized
Employed full-time
(at least 32 hours/week)
Employed part-time
Actively seeking work
No marketable skills
Incapacitated
Needed in home full time

•--- 1
r I
1
>
(
1
CZ3
I I

Care for small children
Care for large number of
children
Care for incapacitated
adult

QUO

If needed in home, why?

I 1
\ I
\ I

222
21.

Was payee referred to M.E.S.C.?

Yes d i

NodJ

22.

Was second parent referred to M.E.S.C.?

Yesd)

Nodi

23.

Does payee own a serviceable automobile?

YesdJ

Nodi

Does payee have access to a serviceable
automobile?

Yesd

Nodi

24.

Education of payee:
Formal education

(years completed) _________

Where completed (name and location of last institution
attended): ________________________________________________
Does payee have a high school
diploma?

Yes d J

Nodi

If no diploma, has client passed
the GED exam?

Yes Id]

Nodi

Other degrees or certificates of
educational achievement:

Vocational education received:
Program or curriculum:
High school
Post H.S. vocational schools
Institutional training programs
OJT
Operation Mainstream
DVR programs
Correspondence courses
Military

CD

CD
C dl
tzzi

a

CD
id)
CD

Type of training____________________
*25.

Education of second parent:
Formal education

(years completed)

Where completed (name and location of last institution
attended): _______________________________________________
Does client have a high school
diploma?

Yes L I No I— 1

If no diploma, has client passed
the GED exam?

__
Yes I— I No I— J

Other degrees or certificates of
educational achievement:

223

Vocational education received:
Program or curriculum:
High school
Post H.S. vocational schools
Institutional training programs
OJT
Operation Mainstream
DVR programs
Correspondence courses
Military

I

Type of training ___________________
26.

Work experience of payee:

None

Q

Employment history beginning with current or most
recent job:
Hourly wage $
1. Type of work
______________

2

.

3.

*27.

Type of industry

Est. monthly
earnings
$

Job location

Months on job

Reason for leaving

Date left

Type of work _____

Hourly wage $

Type of industry

Est. monthly
earnings
$

Job location

Months on job

Reason for leaving

Date left

Type of work _____

Hourly wage $

Type of industry

Est. monthly
earnings
$

Job location

Months on job

Reason for leaving

Date left

Work experience of second parent:

None CZl

Employment history beginning with current or most
recent job:
1.

Type of work

Hourly wage $

224

2.

3.

Type of industry _

Est. monthly
earnings
$

Job location _____

Months on job

Reason for leaving

Date left

Type of work _____

Hourly wage $

Type of industry

Est. monthly
earnings
$

Job location _____

Months on job

Reason for leaving

Date left

Type of work _____

Hourly wage $

Type of industry __

Est. monthly
earnings
$

Job location _____

Months on job

Reason for leaving

Date left

General comments:

__

__