For helpful comments on earlier drafts, we thank, without implicating, Moses Abramovitz, Yves Balcer, John Bishop, Alan Blinder, Richard Burkhauser, Michael Darby, Irwin Garfinkel, Alan Gustman, Daniel Hamermesh, Martin Holmer, George Jakubson, Robert Lampman, Paul Menchik, Robert Moffitt, Michael Murray, Joseph Quinn, Timothy Smeeding, Eugene Smolensky, Barbara Wolfe and two anonymous referees.

President Nixon's 1969 proposal for a Family Assistance Plan (FAP) established welfare reform as a major social policy goal. In his first year in office, President Carter also placed welfare reform-the Program for Better Jobs and Income (PBJI)-high on his legislative agenda. The FAP and PBJI were both variants of the negative income tax. They shared several common elements, including a national minimum income guarantee, an extension of benefits to persons who were categorically ineligible under existing programs, a concern with maintaining work incentives by keeping marginal benefit reduction rates on earnings well below 100 percent, and a belief that a reformed welfare system could control the growth in costs and case loads. Both also generated fatal political opposition and harsh criticism from welfare analysts who pointed out that the triangle-the tradeoffs among income guarantees, work incentives, and total costs-made their goals mutually inconsistent. President Reagan also placed welfare reform at the center of his social policy agenda in his first year in office. Unlike his predecessors' plans, his reform was successful. By October 1981, a drastic fiscal retrenchment had been proposed, legislated, and implemented in the largest cash welfare program, Aid to Families with Dependent Children (AFDC). The Reagan reform, incorporated in the Omnibus Budget Reconciliation Act of 1981 (OBRA), does not confront the iron triangle of negative income tax plans like FAP or PBJI. It does not attempt to reduce poverty by altering income guarantees or extending eligibility. It does not attempt to encourage work effort by lowering marginal tax rates on recipients. Supply-side logic notwithstanding, it reduces costs and case loads by raising the tax rate on welfare recipients' earnings to 100 percent and by establishing more restrictive gross income limits. President Reagan has reformed welfare by cutting the budget. He has clearly reduced welfare dependency in the short run, as the number of AFDC recipients has declined in most states by between 10 and 15 percent in the last year. A complete evaluation of the long-run effects of the OBRA reforms on the economic well-being and work effort of welfare recipients must await data on behavioral responses that have only recently been induced. Nonetheless, an analysis of the redistributive effects of welfare in recent years can provide a basis for estimating how reduced welfare dependency will affect economic well-being in the short run.

William J. Wilson (1978, 1985, 1986) has hypothesized that the combination of increased spatial concentration and increased inequality of income among blacks has caused adverse behavioral consequences for poor blacks and contributed to the development of an underclass. Lessening segregation and the general rise in black economic well-being in the postwar period enabled middle-income blacks to move out of segregated inner-city neighborhoods. As a result, low-income blacks in these areas now rarely come in contact with middle-class blacks, who had previously influenced social organizations and community institutions, and provided role models of economic and social success. Wilson hypothesizes that poor blacks have changed their labor force and family behaviors because of the social and economic consequences of this selective outmigration. Wilson's hypothesis has both an empirical and a causal component. In this paper we focus primarily on the former. In the first two sections, we review changes in the level and distribution of male earnings, and in the spatial concentration of poverty. The trends for blacks are compared to those for whites. The third section discusses the links between the empirical evidence and the causal component-did these changes lead to behavioral responses that contributed to the development of an underclass?

We analyze the impact of recent immigration on the employment and wages of less educated workers during the 1990s, a period of heightened geographic diffusion of immigrants across the nation. We focus on men residing in metropolitan areas, who are between the ages of 25 and 62 and are from the three major racial/ ethnic groups: white non-Hispanic, black nonHispanic, and Latino (hereafter referred to as race groups). Theory predicts that immigration will increase the wages of native workers who are complements to immigrants and decrease the wages of natives who are substitutes. Because immigrants have low education relative to natives, low-educated natives are likely to be substitutes, and high-educated natives are likely to be complements. We find negative effects of recent immigration on the employment, and especially the wages, of low-skilled workers. The wage effects are largest for Latinos, followed by blacks.