Welfare Transitions in the 1990s: The Economy, Welfare Policy, and the EITC

The rapid decline in the welfare caseload remains a subject of keen interest to both policymakers and researchers. In this paper, I use data from the Survey of Income and Program Participation spanning the period from 1986 to 1999 to analyze how the economy, welfare reform, the Earned Income Tax Credit, and other factors influenced welfare entries and exits, which in turn affect the caseload. I find that the decline in the welfare caseload resulted from both increases in exits and decreases in entries. Entries were most significantly affected by the economy, the decline in the real value of welfare benefits, and the expansion of the EITC. The EITC had substantial effects on initial entries onto welfare. Exits were most significantly affected by the economy and federal welfare reform. Federal reform had its greatest effects on longer-term spells of the type generally experienced by more disadvantaged recipients. Some out-of-sample predictions help explain the otherwise puzzling observation that, despite substantial increases in the unemployment rate since 2000, caseloads have remained roughly constant.

Markov Forecasting Methods for Welfare Caseloads

Forecasting welfare caseloads, particularly turning points, has become more important than ever. Since welfare reform, welfare has been funded via a block grant, which means that unforeseen changes in caseloads can have important fiscal implications for states. In this paper I develop forecasts based on the theory of Markov chains. Since today's caseload is a function of the past caseload, the caseload exhibits inertia. The method exploits that inertia, basing forecasts of the future caseload on past functions of entry and exit rates. In an application to California welfare data, the method accurately predicted the late-2003 turning point roughly one year in advance.

The Effects of Work-Conditioned Transfers on Marriage and Child Well-Being: A Review

Transfer payments to poor families are increasingly conditioned on work, either via wage subsidies available only to workers or via work requirements in more traditional welfare programs. Although the effects of such programs on employment are fairly well understood, relatively little is known about their effects on marriage or child well-being. We review a small number of studies that provide such information here. Our discussion of marriage is couched in terms of a theoretical model that draws from the efficient-household literature. The model is consistent with the wide range of effects that we observe and suggests an explanation for some of the observed differences. The theoretical framework in which we couch our review of results on children is likewise consistent with the observed variation between programs and among children of different ages.

Parental Medicaid Expansions and Health Insurance Coverage

During the 1990s many states extended Medicaid eligibility to low-income parents who were not receiving welfare. We evaluate the effects of those expansions on health insurance coverage. To account for unobservable differences between expansion states and non-expansion states that may be correlated with both policy decisions and insurance coverage, we employ a within-state difference-in-difference technique that makes use of data only from expansion states. We find that the parental eligibility expansions increased Medicaid coverage of mothers with only small effects on private coverage. The expansions also increased the coverage of children, presumably by raising the benefit to the family of applying for coverage. We find substantial racial and ethnic differences in the effects of the expansions. As a result, the expansions help reduce racial and ethnic gaps in insurance coverage, particularly for adults.

Welfare Reform, Work and Wages: A Summary of the US Experience

Workfare, Wohlfahrtstheorie, Arbeit, Lohn, Vereinigte Staaten, Welfare economics, Labour, Wages, United States

The Effects of Time Limits and Other Policy Changes on Welfare Use, Work, and Income Among Female-Headed Families

Of all of the welfare reforms that were implemented during the 1990's, time limits may represent the single greatest break from past policy. This paper expands on what is known about this important welfare reform measure by exploiting the predictions from Grogger and Michalopoulos (1999) to estimate the effects of time limits on welfare use, employment, labor supply, earnings, and income among female-headed families. Results based on data from the March Current Population Survey suggest that time limits have had important effects on welfare use and work, accounting for about one-eighth of the decline in welfare use and about 7 percent of the rise in employment since 1993. They have had no significant effect on earnings or income, however. The analysis also shows that the collective effects of other reforms have had important impacts on employment and labor supply. Furthermore, it identifies the Earned Income Tax Credit (EITC) as a particularly important contributor to both the recent decrease in welfare use and the recent increase in employment, labor supply, and earnings.

Welfare Reform, Returns to Experience, and Wages: Using Reservation Wages to Account for Sample Selection Bias

Work was one of the central motivations for welfare reform during the 1990s. One important rationale for work was based on human capital theory: work today should raise experience tomorrow, which in turn should raise future wage offers and reduce dependency on aid. Despite the importance of the this notion, few studies have estimated the effect of welfare reform on wages. Furthermore, several recent analyses suggest that low-skill workers, such as welfare recipients, enjoy only meager returns to experience, undermining the link between welfare reform and wages. An important analytical obstacle is the sample selection problem. Since non-employment levels are high and workers are unlikely to represent a random sample from the population of former recipients, estimates that fail to account for sample selection could be seriously biased. In this paper, I propose a method to solve the selection problem based on the use of reservation wage data. Reservation wage data allow one to solve the problem using censored regression methods. Furthermore, the use of reservation wage data obviates the need for the controversial exclusion restrictions sometimes used to identify familiar two-step sample selection estimators. Correcting for sample selection bias matters a great deal empirically. Estimates from models that lack such corrections suggest that welfare recipients gain little from work experience. Estimates based on the reservation wage approach suggest that they enjoy returns similar to those estimated from other samples of workers. They also suggest that the particular reform program that I analyze may have raised wages modestly.

Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks

The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly. This paper examines the relation between immigration and these trends in black employment and incarceration. Using data drawn from the 1960-2000 U.S. Censuses, we find a strong correlation between immigration, black wages, black employment rates, and black incarceration rates. As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose. Our analysis suggests that a 10-percent immigrant-induced increase in the supply of a particular skill group reduced the black wage by 4.0 percent, lowered the employment rate of black men by 3.5 percentage points, and increased the incarceration rate of blacks by almost a full percentage point.

Medicaid Expansions and Welfare Contractions: Offsetting Effects on Prenatal Care and Infant Health?

Evaluations of changes to the Medicaid program have focused on increases in the generosity of income cutoffs for Medicaid eligibility. Previous research shows that despite dramatic increases in the number of births paid for by the Medicaid program, women often enroll in Medicaid at the point of birth rather than before. States have addressed this problem by adopting administrative measures designed to simplify the Medicaid application process and encourage the use of prenatal care. At the same time, recent declines in welfare caseloads may effectively increasing administrative barriers to obtaining care. We examine the effects of these three types of policies (changes in income eligibility, administrative reforms, and changes in welfare caseloads) on the use of prenatal care and infant health using data from birth certificates covering all U.S. births between 1990 and 1996. We find that increases in income cutoffs increased the use of prenatal care, while decreases in welfare caseloads reduced the use of prenatal care, especially among blacks. The administrative reforms we consider had little effect. The changes in the utilization of prenatal care that were induced by increases in income eligibility cutoffs and decreases in welfare rates led to small but statistically significant reductions in the incidence of very low birthweight among whites.

Comparing conventional and machine-learning approaches to risk assessment in domestic abuse cases

We compare predictions from a conventional protocol-based approach to risk assessment with those based on a machine-learning approach. We first show that the conventional predictions are less accurate than, and have similar rates of negative prediction error as, a simple Bayes classifier that makes use only of the base failure rate. A random forest based on the underlying risk assessment questionnaire does better under the assumption that negative prediction errors are more costly than positive prediction errors. A random forest based on two-year criminal histories does better still. Indeed, adding the protocol-based features to the criminal histories adds almost nothing to the predictive adequacy of the model. We suggest using the predictions based on criminal histories to prioritize incoming calls for service, and devising a more sensitive instrument to distinguish true from false positives that result from this initial screening