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Unemployment and Welfare Reform in Rural California

Recent welfare reforms, designed to move adult welfare recipients into employment, promise to add 10 to 15 percent to labor forces in rural and agricultural areas of California with average annual unemployment rates of 12 to 20 percent. This paper develops and estimates a simultaneous-equation model to test the hypothesis that high unemployment and seasonality endemic to rural and agricultural industries promote welfare dependence and limit the potential to channel welfare recipients into gainful employment. If unemployment rates are not reduced, current welfare recipients in rural and agricultural areas may have lower incomes after reforms are fully implemented or else be induced to migrate to areas with jobs.