Duration of Public Assistance Receipt : Is Welfare a Trap ? Gary

This paper uses data from the National Longitudinal Survey of Youth to answer two questions about the effects of the Aid to Families with Dependent Children (AFDC) program: (1) Does the length of time that one receives AFDC affect the likelihood of permanently leaving AFDC? (2) What personal and family characteristics are associated with the long-term receipt of AFDC? The answer to the first question is that the likelihood of permanently leaving AFDC decreases with the length of time that individuals receive benefits, after adjustments for other measured and unmeasured attributes of individuals and their families. The answer to the second question is that not having a high school diploma, never having married, having more than two children, and having little work experience are associated with long-term receipt. Many of the recipients who will reach the five-year limit imposed by the new federal legislation are in situations that make it difficult for them to support themselves and their families without public assistance. Duration of Public Assistance Receipt: Is Welfare a Trap? The country has heatedly debated welfare programs and reforming welfare programs during the past several years. Most of this discussion has focused on the Aid to Families with Dependent Children program (AFDC), the major cash assistance program for the poor. The 1996 federal welfare reform legislation replaced AFDC with Temporary Assistance for Needy Families (TANF), which provides states with block grants and more flexibility on how to deliver aid to poor families with children. Critics of AFDC focused on the rise in the number of families receiving AFDC during the past few decades and the concern that some families used AFDC for very long periods of time. Further, critics argued that AFDC promoted out-of-wedlock childbearing and single-parent families, and that AFDC inhibited labor force participation. Some argued that welfare could become a “trap,” i.e., participants could become dependent on welfare, unable to leave the system and take advantage of other opportunities to support themselves and their families (Congressional Record, July 30, 1996). The federal Personal Responsibility and Work Opportunity Reconciliation Act, and many state waivers that preceded the passage of the federal legislation, were explicitly designed to deal with this possibility. These federal and state reforms attempt to prevent welfare from becoming a trap by, among other things, limiting the amount of time that individuals can receive welfare benefits. The federal legislation, for example, establishes a life-time limit of five years of financial assistance and a limit of two years of assistance without engaging in work activity (Congressional Record, July 30, 1996). States are free to establish more restrictive limits if they desire to do so. As with many other contentious public policy discussions, the discussions of whether welfare is a trap have primarily involved moral and political posturing. Supporters of the “trap” thesis argued that an entitlement to public assistance encourages the creation and continuation of single-parent families and enables withdrawal from the labor market. Critics of the trap thesis argued that most recipients would prefer to work and be married if these were realistic possibilities. 2 In order to understand whether or not welfare may be a trap, it is important to go beyond the political and moral posturing prevalent on both sides and look more carefully at why some recipients use welfare for long periods of time. One possible explanation of long-term use of AFDC is that the ability or willingness to survive economically without welfare declines with the amount of time that individuals use AFDC. A second possible explanation is that the many long-term recipients of AFDC are individuals and families who have no real alternatives for supporting themselves without welfare. These explanations are not contradictory. In this paper, we assess these two possible explanations by addressing two basic questions: (1) Does the likelihood of leaving AFDC decline with the length of time that individuals and families receive AFDC, after controlling for other measured and unmeasured characteristics of the family? and (2) What characteristics of individuals and families are associated with long-term receipt of AFDC? We address these questions by looking at the participation in the AFDC program of individuals during the period from late adolescence to young adulthood, following a group from ages 14–21 through ages 28–35. During this period, individuals are especially vulnerable to experiencing periods of poverty and to using public assistance programs. Young women are making transitions, e.g., leaving home, starting families, and beginning labor market activities, that make them particularly vulnerable to becoming poor and/or using public assistance programs.