Remaining off welfare in the 1990s: the influence of public policy and economic conditions

Abstract

Using data from the Panel Study of Income Dynamics, this paper evaluates the role of the economy and cash assistance policies implemented by states in the early to mid-1990s in maintaining long-term exits from AFDC. The probability of returning to AFDC in the 1990s was similar to that in the 1980s; about half returned to cash assistance within 2 years. Working or having a working partner was associated with a lower return rate. Cash assistance benefit levels affected return rates during this period; former recipients were more likely to return in states that provided higher AFDC benefits. Of the many welfare reform policies implemented prior to 1996, only restricting exemptions to the work requirement for having young children was associated with a higher return rate. This latter finding, in conjunction with the fact that mothers of children under three were more likely to return to AFDC than those with only older children and that those who were employed at exit had initially higher return rates, documents the difficulty of increasing the self-sufficiency of young mothers. The effects of the economy were consistently strong and significant; higher state unemployment rates were associated with a higher likelihood of returning to AFDC. This supports the contention that, while public policies may help mothers leave welfare, favorable economic conditions are critical for their continuing self-sufficiency.