Workforce investments and poverty dynamics

Abstract

A dynamic economic simulation model is developed to assess the potential for a workforce investment program to reduce household poverty. The program provides income to previously unemployed individuals, but when the program is administered to large numbers of persons, the aggregate effect is to increase the supply of labor and lower wages of currently employed workers slightly. The net effect on poverty depends on the number of new workers, the responsiveness of exports to changes in costs of production, and the responsiveness of the poverty rate to wage rate changes. The model results suggest that workforce investment strategies, by themselves, have only a modest impact on the poverty rate.