Policy options for increasing the earnings of the young welfare recipients were explored by analyzing the incomes of nearly 12,000 young women in Baltimore, Maryland, whose 19th birthday fell between April 1, 1985, and March 31, 1989, and who had at least one spell of welfare dependency between their 19th and 29th birthdays. An analysis of the earnings of 24 subpopulations (based on race and short-term, cyclic, or long-term welfare receipt) established that, as a group, the welfare recipients have demonstrated an ability and willingness to work at least some of the time. However, a reasonable estimate of how much they would earn if they devoted more time to work, without factoring in accumulation of and reward for additional human capital, indicated that most would fall short of a full-time federal minimum wage benchmark. The following welfare policy changes were recommended: (1) abandon job entry as a performance indicator; (2) stop overuse of the career ladder for the crafting of advice to those who seek to enter or advance in the labor market and substitute a "climbing wall" metaphor; and (3) revisit the off-the-books earnings issue to gain a better understanding of how it affects the incidence and distribution of employee benefits coverage. (Contains 17 references.) (MN)