The relationship between metropolitan labor demand and urban poverty has received considerable attention in light of recent concern about the urban underclass. Current theory focuses on mismatches between the location and skills of the urban poor on the one hand and the location and skills of metropolitan area jobs on the other. An overall approach to labor market conditions suggests that changes in both labor demand and labor supply have a direct effect on labor market conditions for the urban poor. This project will further an understanding of urban poverty by estimating how metropolitan labor demand affects an individual's probability of suffering persistent poverty. These effects will be examined for different groups of the poor and non-poor: welfare mothers, long-term jobless adult men, children from welfare dependent families, and the working poor. Data for the project will come from the 1968-87 individual file of the Panel Survey on Income Dynamics and will be used to estimate how metropolitan labor demand shifts affect the earnings, employment activity, and wages of poor and non-poor residents and how demand shocks affect an individual's probability of being poor. The research will follow the same individuals over time, examining how their incomes and poverty status change in response to changes in local labor demand. A variety of labor demand and supply shocks will be considered, such as overall metropolitan area employment change, change in employment by industry, and the geographical distribution of employment within metropolitan areas. This project should provide important information about how regional labor demand conditions affect poor individuals. The research should indicate whether anti-poverty policies should include efforts to increase demand for the labor of the poor or whether other anti-poverty policies should receive greater emphasis. This project will be the first to follow the same set of individuals over time, and it is the first to focus on how metropolitan employment demand shocks affect the poor. The results should provide sophisticated analyses of labor demand effects on distinct groups of the poor. As such the project results should form the basis for policy prescriptions targeted to meet the needs of specific segments of the urban poor.
