Trends in AFDC Participation Rates: The Implications for Welfare Reform

Abstract

Congress justified the recent reform of federal welfare policy in part by citing the increase in the AFDC caseload since the late 1960s. The caseload, i.e., the number of families using AFDC, is determined by the number of families eligible to participate and by the proportion of these families who use the program. Yet the debate over reforming welfare rarely paid attention to the latter—the participation rates among female heads of families. While the number of cases changed little during the early to mid-1980s, the percentage of families with single female heads who used AFDC declined. During the late 1980s and early 1990s, both caseloads and participation rates increased. This paper documents the changes in participation rates since the mid-1980s, racial and ethnic differences in participation rates, and factors that might be associated with these changes. The only major trend that consistently parallels the changes in participation rates is the trend in unemployment. Existing data do not permit us to conclude that unemployment is the major determinant of participation rates. If unemployment drives participation rates, however, the recent changes in welfare legislation may create serious problems for many female heads of families in periods of high unemployment.