Is there any literature on how public assistance affects wage rates of low rung jobs?

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Employers are forced to pay more because the dole is essentially "competing" with the employer over the potential employee. If the employer doesn't pay at or above the pay of public benefits, he won't get the employee.

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I agree that this is a problem with welfare vs low income employment.

This is a low wage subsidy vs welfare, but its not entirely what you are looking for.

Columbia Study

Human Events gives a great perspective

Let's say there was a nationwide moratorium on welfare payments

Wouldn't the influx of workers drive down wage rates in unskilled markets?

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Let's say there was a nationwide moratorium on welfare payments

Wouldn't the influx of workers drive down wage rates in unskilled markets?

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God y'all are cute.

No....take away public subsidies and wages go up.....unless of course you also eliminate things like zoning laws and public health regulations. We could easily live like they do in India but as soon as folks start shitting in the street because they gotta shite and there ain't no where else to shite but the street sensible folks are going to regulate where folks shite and the cost of production is going to go up.........

Labor is not a commodity because a commodity can't produce itself. If there is no market for iron ore it can lie in the ground and never cause a minutes problem....people, on the other hand, will eventually have to shite whether they are working or not

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Wouldn't the influx of workers drive down wage rates in unskilled markets?

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I assume you mean that those not currently working due to subsidies would enter the labor market. The issue is that those who currently receive welfare may work or not work, so you'd need to determine how many are working and how much they work.

Under the welfare regime, we can start with workers who do not receive any then implement the regime so that they do. Their budget constraints shift up by some amount, but not necessarily in parallel fashion--it depends on how welfare is implemented, e.g. is there any benefit reduction as income increases?--to the original budget constraint.

Welfare recipients, who are working are likely to find their total income increase, but their earned income decrease from their pre-welfare state. The reason this happens is because of the income and substitution effects I alluded to in my previous post. In the standard labor-leisure model, workers treat leisure as a normal good and will "purchase" more of it as their income increases. With welfare artificially boosting their income, they begin consuming more leisure, so the income effect causes a reduction in hours worked. The reason I brought up benefit reduction earlier was due to the substitution effect. If there is benefit reduction as more hours are worked, then the worker will notice that it is relatively cheaper to substitute away from work towards leisure.

Since both the income effect and substitution effect are negative, we actually see workers working less while on welfare than when not being on welfare. This means that we are more likely to see less work and less workers.

Having said all that...

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Wouldn't the influx of workers drive down wage rates in unskilled markets?

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It's very possible. Since workers are more likely to work with no income maintenance, then you'd likely see an increase in the supply of labor. Assuming no demand changes, this will cause the wage rate to fall. The question then becomes: what are the reservation wages for those who now enter the market or increase their hours of work?

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Supply and demand would say yes but you still have a shitty pool of unreliable workers to pull from so it's probably neutral.

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The other thing to consider is the elasticity of labor demand. In the quintessential low income job--fast food--labor demand is likely to be elastic meaning that the firm will be more responsive to wage changes. For example, if, for some reason, wages rose by some percent then we'd expect to see worker hours fall by more than that percent--the Seattle minimum wage may be useful here.

However, the influx of low wage workers should still increase the labor supply curve and cause a decrease in the wage rate. What we should then see is a much greater increase in worker hours--assuming elastic labor demand.

There is an interesting parallel between this and illegal immigration. The common argument is that immigrants take jobs Americans don't want, and most of these jobs are low paying. Further, the influx of illegals reduces the wage rate. While the first part is true, why is it true? Is it because welfare has caused total income to increase and thus kept these people from working too much at a lower wage rate? I'd say probably so.