William McEachern

English

Research Papers in Economics

12 The Connecticut Economy Spring 2003
By William A. McEachern
Emerson said, “The years teach us much that the days never
know.” As The Connecticut Economy begins its second decade,
we might ask what we learned about the economy during that
first decade.  What were the most important economic develop-
ments in Connecticut?  First, a roundup of the usual suspects, and
then I will focus on some other developments that could have last-
ing impacts on Connecticut’s standard of living and way of life.  
◆ Connecticut’s Great Recession of the early 1990s slashed
jobs in the state by 9.2%. 
◆ State budget gaps bracketed the decade, creating fiscal tur-
moil both times.
◆ The new State income tax bridged the first budget gap, then
became the state’s primary revenue engine. But the new tax also
fueled revenue instability, as state government became more
dependent on the fortunes of the more fortunate. 
◆ Two new casinos generated thousands of jobs and hundreds
of millions in state revenue. 
◆ Connecticut regained the jobs lost during the Great
Recession, but the job mix continued to shift away from manu-
facturing. Still, manufacturing’s share of output has held its own
due to growing labor productivity in the sector.
◆ The stock market bubble popped, costing state stockholders
billions. 
Other developments are less straightforward but potentially
more significant for the longer term.  
Welfare Reform
Nationally and in the state, welfare rolls swelled during the
1980s and first half of the 1990s. The total number of recipients
climbed in Connecticut to 170,719 in 1995, accounting for 5.1%
of the state’s population.  Nationally, welfare rolls topped out at
5.5% of the population. Critics of the system felt that welfare
had become a way of life rather than a temporary bridge over a
rough patch.  
Reformers here and in the nation sought to encourage work
and reduce welfare dependency.  Measures introduced in 1996
imposed time limits on welfare benefits along with work require-
ments.  To encourage work, Connecticut allowed welfare recipi-
ents who found jobs to keep all their earnings up to the federal
poverty level with no reductions in benefits. Measures were also
introduced to promote marriage and discourage unmarried
teenagers from having babies. For example, minors who gave
birth had to live with a parent or in some other adult-supervised
living arrangement. 
The decline in the welfare rolls has been dramatic. The num-
ber of welfare recipients in Connecticut fell to 63,589 by 2000, a
63% drop from the 1995 total.  As a share of the state’s popula-
tion, welfare recipients plunged from 5.1% in 1995 to 1.9% in
2000.  Put another way, about 1 of 20 state residents were on
welfare in 1995, but only about 1 in 50 were on welfare in 2000. 
Nationally, the number of welfare recipients fell 60% between
1995 and 2000, and they dropped to 2.1% of the U.S. popula-
tion. Fortunately, the reforms were introduced during an expand-
ing economy with low unemployment. But welfare rolls declined
both in good economies, such as Wisconsin, and in lagging
economies, such as New York City.  
Poverty Rates
Did welfare reform simply move people off welfare into pover-
ty? What happened to the state’s poverty rates during the reform
years? Certainly other development besides welfare reform were
unfolding, including an economic recovery. To add some per-
spective, the line graph below shows Connecticut’s poverty rate
and unemployment rate over the last two decades. As you can
see, the poverty rate fell during the 1980s along with the state’s
unemployment rate.  Both bottomed out and began to climb
around the turn of the decade. 
The unemployment rate peaked in 1993, but the poverty rate
continued to rise until 1996, when it reached 10.7%. So poverty
in Connecticut peaked the year that welfare reform was intro-
duced, then trended downward during the reform years.  The
7.4% figure in 2001 was among the lowest rates in the country.
Nationally poverty fell from a high of 15.1% in 1993 to 11.7% in
2001. 
Unmarried Mothers 
In 1992, births to unmarried mothers accounted for 29% of all
Connecticut births. The national average that year was 30%.
Connecticut ranked 23rd highest.  Both figures had been increas-
ing for decades. No question, there have been many success sto-
ries among families headed by unmarried mothers. But the odds
are stacked against children born to unmarried mothers, espe-
cially those in their teens. Did welfare reform discourage unmar-
ried motherhood?  
In 2001, births to unmarried Connecticut mothers remained at
29%, the same as in 1992.  In contrast, the national average rose
to 33%, up from 30% in 1992. Connecticut ranked 35th from the
top in 2001.  So in our state, the share of births to unmarried
mothers held steady during the last decade, after rising during
preceding decades.  
Because
there are sub-
stantial differ-
ences in child-
bearing pat-
terns based on
the race and
ethnicity of the
mother, the
government
reports birth
rates separately
for different
groups.  Births
to unmarried
women in
Connecticut
accounted for
We Didn’t Know How Bad 
We Had It Back Then
0
10
20
30
40
50
60
70
80
U.S. 
CT
Hispanic Black Non-Hispanic 
White 
2%
4%
6%
8%
10%
12%
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
Poverty rate
Unemployment Rate
Percent of Births to Unmarried
Mothers, 2001
U
n
m
a
r
r
i
e
d
 
B
i
r
t
h
s
 
a
s
 
a
 
%
 
o
f
 
A
l
l
 
B
i
r
t
h
s
Source: The author, based on data from  the National Vital Statistics
Reports, Vol. 51 No.2, December 16 2002, Table 19.
Poverty Rates and Unemployment Rates in
Connecticut: 1982 to 2001
Source: The author, based on estimates from the Connecticut Department of
Labor and the U.S. Census Bureau.13 The Connecticut Economy Spring 2003
16% of all births to non-Hispanic whites in 2001, 66% of births
to blacks, and 62% of births to Hispanics.  Nationally, compara-
ble figures were 22% for non-Hispanic whites, 68% for blacks,
and 42% for Hispanics (bar chart on facing page).  The share of
births to unmarried mothers in 2001 ranked Connecticut 48th
nationally among non-Hispanic whites, 26th among blacks, but
first among Hispanics. Some of these differences are no doubt
linked more to income than to race or Hispanic ethnicity, but the
government doesn’t report figures based on income.
Risks are greatest to children born to unmarried teens.
Nationally, four of five teen mothers are unmarried. In 2001,
Connecticut’s teen birth rate was 36% below the national aver-
age and 27% below where it had been a decade earlier.
Nationally, the teen birth rate declined 26%. Connecticut ranked
45th in the nation in 2001, the same as in 1991. 
No indicator of a community’s economic turmoil may be more
reliable than the share of births accounted for by teen mothers.
The five Connecticut towns with the highest share of births to
teens in 1999 were Hartford, New Britain, Bridgeport, New
Haven, and Waterbury.  Four of these five towns also experi-
enced the greatest drop in median property values between 1990
and 2000 (Bridgeport, the exception, ranked sixth in its property
decline).  Teen births and births to unmarried mothers of all
ages continue to impose severe stress on some Connecticut
towns. 
Crime Rates
Though not necessarily related to welfare reform, another
promising development during the last decade has been the drop
in the Connecticut crime rate. Between 1990 and 2000, the vio-
lent crime rate (murder, rape, robbery, and aggravated assault)
fell 41% in Connecticut, compared with a national drop of 31%
(see the top bar chart at right). Connecticut’s violent crime rate
in 2000 was 36% below the national average. The drop from
1990 to 2000 reversed a jump during the 1980s both in
Connecticut and in the nation.  
Connecticut’s
property crime
rate (burglary,
larceny, and
motor vehicle
theft) fell 40%
between 1990
and 2000, com-
pared with a
national drop of
29% (see the
bottom bar
chart).  The
state’s property
crime rate in
2000 was 20%
below the
national aver-
age.  The
decline during
the last decade
accelerated a
drop that began
in the 1980s. 
The reduction in crime has been a remarkable development,
one that benefits us all directly or indirectly. Your chances of
being robbed, having your home burgled, or having your car
stolen were only half as great in 2000 as they were a decade ear-
lier.  In the average Connecticut town, there was nearly one
fewer violent crime committed each week in 2000 than in 1990.
And there was nearly one fewer property crime committed each
day.  That’s progress.
William A. McEachern is Editor Emeritus of The Connecticut
Economy and author of Economics: A Contemporary
Introduction, now in its sixth edition. 
0
200
400
600
800
US 
CT
2000 1990 1980
0
1000
2000
3000
4000
5000
6000
2000 1990 1980
Violent Crime Rates Dropped More
in CT than in the U.S. During the
Last Decade ...
... And so Did Property Crime Rates
P
e
r
 
1
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0
,
0
0
0
 
R
e
s
i
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t
s
P
e
r
 
1
0
0
,
0
0
0
 
R
e
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i
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Source: The author, based on the FBI Uniform Crime Reports. 
Yet 1993 differed in fundamental respects from 2003.  Then,
the country was at peace, and defense spending was being cut,
as the significance of the end of the Cold War in 1989-1990
began to sink in.  The spike in oil prices from the relatively
small conflict in the Persian Gulf had receded.  And the long
economic boom that Rip had slumbered through was about to
kick in, spurred in no small part by stable expectations.
In stark contrast, now Rip found economic conditions of the
most unpredictable variety. The country was again at war in the
Persian Gulf—this time with far fewer partners than in 1991—
and (as surely as night follows day) oil prices had spiked again.
Even a short war would not remove the longer-term threat of
further war driven by terrorism.  The resulting uncertainty, ever
the enemy of investment, was very high.  Even consumer confi-
dence, which had held up well into the slump, had fallen to a
ten-year low.  Conditions did not look much like the precursors
of a sustained economic boom.
Rip was disheartened. He saw the national economy perhaps
caught in an internal contradiction of soaring defense spending
and ever-larger tax cuts.  Could near-deflationary price stability
survive in the face of mounting Federal deficits and (in the worst
case) high energy prices?  When would the uncertainty abate
and investment spending resume with anything like the vigor of
the 1990s?
How could the Connecticut economy escape the fallout from
such national developments?  State budget deficits will be with
us for a while, as tax revenues continue to fall short of expecta-
tions, or even hopes, despite tax increases and spending cuts.  In
the past, Connecticut benefited from increases in defense spend-
ing. Will the benefits to the state’s economy from higher spend-
ing to restock the nation’s arsenal be less this time because of
the long-term decline in the manufacturing sector?  Employment
in this sector is down by more than 140,000 from the level 15
years ago, and the trend continues.  Manufacturing jobs sank by
3,400 in 2002-Q4 alone. 
Not Nap Time
Rip felt like a nap.  During his last one, he missed a decade
that saw some really good (if probably too exciting) times.  The
coming decade promised to be more turbulent (but just as excit-
ing).  Clearly the state’s economy was being hammered.  That
the nation’s deepening economic problems did not appear to be
on the front burner of policy makers troubled him deeply.  What
was that slogan from the Presidential campaign right before Rip
went to sleep?  “It’s the economy, stupid.”
Perhaps, then, it would be more…well, prudent not to take
another nap.  Yes, he’d stay awake, stick more money in his
index fund, and send out his resume, stressing how he had spent
the last decade remaining calm in the face of rapid change.
Ray Beauregard is Editor Emeritus of The Connecticut
Economy and was Corporate Economist for Northeast Utilities
until his retirement in 1990.
The Economy After a Snooze
Continued from page 9

We Didn't Know How Bad We Had It Back Then

http://cteconomy.uconn.edu/articles/WM_S2003.pdf

We Didn't Know How Bad We Had It Back Then

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